EDITORIAL: India's backward power grid ( Archived) (6)

"Aug 04, 2012 (The Kansas City Star - McClatchy-Tribune Information Services viaCOMTEX) -- It wasn't long ago that India was one of the rising stars of the world's emerging markets. But in recent months the picture has radically changed. The economy is faltering, inflation is rising and Standard & Poor's recently wondered whether India might be the first emerging market "fallen angel." The Great Blackout of 2012 will only reinforce perceptions that India's capacity to overcome its problems was exaggerated. The massive power failure, affecting 670 million people, has highlighted the country's entrenched energy problems. The situation has been bad for so long that major companies like Tata Motors must build their own power plants, creating "energy islands" apart from the nation's dilapidated power grid. Despite enactment of a new Electricity Act in 2003, nearly 80 percent of the power generation comes from sluggish government-owned entities, many of which are essentially bankrupt. Losses are heavy because of widespread electricity theft. Revenues are squeezed by policies requiring heavily subsidized prices for favored sectors, such as agriculture. At least one state, Gujarat, has shown progress by dealing forcefully with power theft and reforming prices by rolling back subsidies. Gujarat's economy is now one of the country's best performing. The International Energy Agency estimates that India will need to invest more than $630 Billion in its power grid to meet the needs of its population by 2035. For India's governing class, the Great Blackout was more than a warning call. It was a whack on the head with a two-by-four."

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