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India's blackout carries heavy economic and political costs

For the 40 percent of poorer Indians with no electricity access, this week's blackout was nothing new. Economists say power cuts are a reminder of India's need to manage economic growth.

By Anu Anand HallContributor / August 1, 2012

A young Indian girl reads a book by candlelight during a regular load shedding in Mainakhurung on the outskirts of Gauhati, India, Wednesday, Aug. 1.

Anupam Nath/AP

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New Delhi

For Rahul Bose, who lives in Khonjonpur, an Indian village of 20 homes set in rice paddy fields, the world’s biggest power failure had little impact. 

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That’s because Mr. Bose and his wife, who run a nonprofit literacy project called Suchana, stopped relying on a steady supply of electricity years ago.

In Khonjonpur, 15-hour power cuts are frequent. So, like millions of Indians, Bose relies on expensive, diesel-powered generators when the lights go out. Once the generator’s four-hour backup is exhausted, he’s learned to live without.

“The worst was a 10-day power cut,” he said by telephone. “Our local government secondary school, which has 800 students, only got an electricity connection for the first time in May of this year.” 

So it was with some interest that Bose watched as two days of power cuts plunged fully half of India – 600 million people, or twice the population of the United States – into chaos. Suddenly, India’s urban elite were experiencing the blackouts that are a way of life for millions of rural Indians. And Bose knows he is fortunate. Up to 40 percent of India’s 1.2 billion people are not hooked up to the national grid at all. 

So far, the exact cause of the simultaneous collapse of three major Indian power grids is unknown. India’s outgoing power minister, Sushil Kumar Shinde, blamed it on excessive demand. Whatever the cause, the two-day blackout has once again put the spotlight on India’s unreliable infrastructure and the country’s inability to keep pace with economic growth. Apart from giving India’s image a black eye, the debacle has increased pressure on Prime Minister Manmohan Singh's government – criticized for stalled economic reforms and sluggish growth – to tackle infrastructure problems.

“If India is to grow at 8 percent, then its energy production has to keep pace,” according to Vivek Pandit, director and head of energy policy at the Federation of Indian Chambers of Commerce and Industry (FICCI). “Right now there is a double whammy. Indian coal production hasn’t increased significantly in the past three years and international coal prices have shot up. This blackout was just a preview. Until we reform the coal sector, this situation will be repeated.”

Financial losses

And the economic cost is considerable.

There are no exact figures on the financial losses, but it’s clear that frequent power cuts affect India’s bottom line. 

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