World’s Greatest Power Thieves Keep 400 Million Indians in Dark

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Photographer: Prashanth Vishwanathan/Bloomberg

Power cables hang above market stalls in the Old Delhi area of New Delhi.

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Photographer: Prashanth Vishwanathan/Bloomberg

Power cables hang above market stalls in the Old Delhi area of New Delhi. Close

Power cables hang above market stalls in the Old Delhi area of New Delhi.

Photographer: Prashanth Vishwanathan/Bloomberg

Power cables hang above market stalls in the Old Delhi area of New Delhi. Close

Power cables hang above market stalls in the Old Delhi area of New Delhi.

Photographer: Prashanth Vishwanathan/Bloomberg

A laborer is seen through power cables hanging in the Old Delhi area of New Delhi. Close

A laborer is seen through power cables hanging in the Old Delhi area of New Delhi.

Photographer: Prashanth Vishwanathan/Bloomberg

Power cables hang above a street vendor in the Old Delhi area of New Delhi. Close

Power cables hang above a street vendor in the Old Delhi area of New Delhi.

Photographer: Prashanth Vishwanathan/Bloomberg

Power cables hang above a slum area in New Delhi. Close

Power cables hang above a slum area in New Delhi.

To run his fan, lamp and small television, Sikander strings a homemade wire hook over power cables outside his one-room New Delhi house, helping perpetrate the world’s biggest energy heist.

“The cables are right there, it’s really easy to take it,” said Sikander, 26, who uses only one name and earns less than $2 a day cleaning people’s ears on the streets of the Indian capital. “You have to be very careful when it rains because you can get electrocuted tying the wires together.”

About one-third of the 174 gigawatts of electricity generated in India annually is either stolen or dissipates in the conductors and transmission equipment that form the country’s distribution grid, Power Secretary P. Uma Shankar said in an interview. That’s more than any other nation, according to a 2010 report by Deloitte LLP analysts that also estimated India’s losses at 32 percent. In China the rate was 8 percent.

The pilfering of almost enough power to charge California for a year lowers the annual income of Indian distribution companies by $16 billion and cuts output by 1.2 percent in the $1.3 trillion economy, India’s Planning Commission says.

Losses hamper work to bring grid electricity to an estimated 400 million people living without it and contribute to what the Central Electricity Authority says is a 10 percent shortfall in meeting peak power demand.

Reliance, Tata

Now the government is asking companies, including Reliance Power Ltd. (RPWR) and Tata Power Ltd., to run more of the network that connects homes, offices and factories with substations. The goal, Shankar said, is to halve losses by 2013 in a country where blackouts leave Indians sweating in summer temperatures of up to 46 degrees Celsius (115 degrees Fahrenheit).

“Electricity theft drags down not just the power sector but the entire Indian economy,” said Michael Parker, a Hong Kong-based senior analyst at securities and research company Sanford C. Bernstein & Co. “Keeping the lights on is fundamental to economic growth. Failure to do that guarantees sub-par performance.”

Tata Power and Reliance Power subsidiaries have reduced by two-thirds the amount of power stolen in the New Delhi network that they have jointly run since 2002. That hasn’t made them profitable. BSES Rajdhani Power Ltd., the unit of Reliance Power that supplies western and southern parts of the capital, says it is losing $2 million a day due to theft and low government- imposed rates.

Shares Fall

Shares of Reliance Power, owned by billionaire Anil Ambani, have fallen 25 percent this year amid a probe by the Central Bureau of Investigation into the 2008 sale of mobile-phone permits. The CBI charged three companies, including one controlled by Ambani’s group. All three deny wrongdoing.

Tata Power’s 9.8 percent drop in the period matched the decline in India’s benchmark stock index.

“If state electricity boards or private distribution companies are not able to recover the money, it will result in them having to default on loans,” Gopal Saxena, BSES Rajdhani’s chief executive officer, said in an interview. “The credibility of the entire sector comes into question and new power projects will not be approved.”

Enforcement officers have stepped up raids across the capital and cheaters have been offered amnesty if they agree to install new meters that are harder to tamper with. Still, illegal cables remain coiled around pylons providing power to shacks in Sikander’s East Patel Nagar neighborhood, competing for space with open sewage channels and piles of trash.

“In a government-owned company there can be corruption, which interferes with the task of reducing theft” as officials take bribes not to report thieves, power secretary Shankar said. “Private companies tend to have much better governance and have very clear targets.”

City Grids

State-run electricity boards deliver 85 percent of India’s power 19 years after the first private supplier, a subsidiary of now-defunct Enron Corp., took over distribution in western Maharashtra state, home to Mumbai. Grids in cities including Gurgaon, outside Delhi, and Nagpur may be handed to private companies in the next year, according to Shankar.

“Delhi clearly demonstrates that privatization is the only way to arrest losses and bring companies into a stage of financial viability,” said Saxena.

Companies such as Lanco Infratech Ltd. (LANCI) and Torrent Power Ltd. (TPW) say they want to bid on lease contracts, which enable them to operate distribution systems without having to buy land and infrastructure. That model is already used in the city of Agra, 200 kilometers (125 miles) south of New Delhi.

Growth Threat

Prime Minister Manmohan Singh is seeking to secure $400 billion of investment in the power sector in the next five years as he targets an additional 120,000 megawatts in generation by 2017. India has missed every annual target to add electricity- production capacity since 1951.

Failure to supply enough power could curb expansion in India’s economy, Asia’s third-largest, which the International Monetary Fund estimates may grow 8.2 percent in 2011 from 10.4 percent in the prior 12 months.

Electricity shortages mean the work of BSES Rajdhani’s Akbar Basha, a 30-year-old enforcement officer who patrols parts of western Delhi, is needed to help keep lights burning and air- conditioning units humming.

Basha uses computer software that detects irregular patterns of power use. For example, a nighttime surge may indicate a factory operating illegally in a residential area.

It’s dangerous work. In the last three years, he says he has been accused of sexual assault by a woman whose house he attempted to inspect and had his car keys stolen and clothes ripped while confronting power thieves.

On April 29 Basha’s team visited an apartment owned by Abhay Dev, 57, a hospital technician, where wires and a lump of metal had been used to bypass the meter. Dev will be fined $340, twice his annual bill, unless the company accepts his claim this was done by earlier tenants, Basha said.

“No one ever admits that they were stealing, there’s always an excuse,” Basha said on the street outside Dev’s apartment. “People are very smart and always come up with new technology. It’s a constant game of cat and mouse.”

To contact the reporters on this story: Andrew MacAskill in New Delhi at amacaskill@bloomberg.net; Kartikay Mehrotra in New Delhi at kmehrotra2@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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