India's "Blackout Tuesday" Turns Into Largest Power Failure in Country's History

Yesterday (31 July), India suffered an electrical blackout of major proportions. While it remains unclear what the main reasons were for the massive failure to the country's power grid, according to some officials the blackout was based on excessive demand and overdrawing of power by individual states connected to the northern grid. Due to a failure in India's northern power grids on Monday, interconnected eastern and north-eastern grids extended the electrical blackout from India's eastern border with Myanmar to its western border with Pakistan, affecting 670 million people. According to the government's National Load Despatch Centre (NLDC), power was resumed to normal levels in the capital New Delhi and the north-eastern region today. However, "Blackout Tuesday" has revealed the difficulties that India faces on its path to becoming a major emerging power in Asia.

India is plagued by "power failures" on a number of different, yet, connected fronts; its political class is seen as indecisive and often powerless in reforming the energy sector and allowing a degree of privatisation that could result in better management of the individual power grids, which are run by bureaucratic state institutions. According to Prakash Javadekar, a spokesman for the opposition Bharatiya Janata Party, "it is a management failure as well as a failure of policy. It is policy paralysis in the power sector", as quoted in the New York Times. Rather than apologising for the electricity failure, India's power minister Sushilkumar Shinde blamed northern states for purchasing electricity beyond their allowances from the interconnected grids and failed to specify the cause of the breakdown. Furthermore, Shinde asked for the punishment of those responsible at the state level. However, a few hours later he was promoted to the office of home minister in a government reshuffle, a move that will most likely anger the public and the opposition (see Country Intelligence: India: 1 August 2012: Cabinet Reshuffle in India Sees New Finance, Home Ministers).

Moreover, the inadequate energy infrastructure in the country requires more power to fuel a growing economy. While limited power outages are common across India, which faces a peak-hour power deficit of around 12% according to the Central Energy Authority (CEA), this latest failure to the grid demonstrates the need to develop a management structure that oversees allowances to purchase electricity in individual states and the efficient overdrawing of power. The recurring electricity shortages are one of the obstacles to India's economic growth potential. The country's energy mix is heavily dependent on coal, imports of crude oil, and less than 3% of nuclear power, which the country hopes to raise to 25% of its energy balance by 2050. In addition, coal production has stagnated, and India has become more dependent on coal imports. Electricity prices have been kept artificially low given the unpopularity of political decisions to remove subsidies which would affect India's poor. In fact, more than 300 million people in India still do not have access to electricity. According to Shashank Joshi, research fellow at the Royal United Services Institute, "even if the grid had not failed, you still have a quarter of Indians without electricity…and an increasing supply-demand gap opening up over the next several years". Thus, the promotion of new power generating capacity is a pressing concern. The government was forced to revise down its 11th Five-Year Plan installed-capacity target as a consequence of slow progress in implementing projects, while India’s dismal track record on this front renders it unlikely that targets for the current 12th Five-Year Plan (2012-17) will be met. Electricity demand is forecast to increase from 968.6 terawatt hours (TWh) in 2011/12 to 1,392 TWh in 2016/17 (see India: 19 March 2012: India Announces Energy-Sector Reforms in 2012/13 Annual Budget).

Outlook and Implications

India’s infrastructure has always been the weak spot in the country's rise over the last decade to join the club of emerging powers (alongside Brazil, Russia, and China) but the management of resource allocation, regional rivalries, and the lack of efficient planning will remain obstacles for India to pursue its full potential. In fact, India's energy failure on Tuesday—which came only a day after another large-scale power failure—has left a major scratch on the country's image of becoming a global economic power. The world's largest blackout will force India's government to look into its power sector more seriously. If it fails to reform its power grid infrastructure and related regulations to avoid states from overdrawing power, further power failures might occur. Without major changes and improvements in India's political sector, any potential domestic or international investors in India’s economy may think twice before investing in an economy that has left almost 670 million in the dark for several hours.