Singh’s $400 Billion Power Plan Gains Urgency as Grid Collapses

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Worst India Blackout in Decade Stops Trains, Snarls Traffic
A man works on a power transmission cable in Tezpur, India. Photographer: Adeel Halim/Bloomberg

India’s worst power-grid failure in a decade exposed the urgency behind Prime Minister Manmohan Singh’s bid to attract $400 billion in investment and ease an electricity deficit that is holding back economic growth.

Seven states that are home to more than 360 million people were plunged into darkness early yesterday as power networks collapsed, possibly after too many provinces simultaneously purchased electricity beyond their scheduled allowance, Power Grid Corp. of India Chairman R.N. Nayak told reporters. It took about 15 hours for 80 percent of services to be resumed.

The blackout “was a fairly large breakdown that exposed major technical faults in India’s grid system,” Subhranshu Patnaik, a Gurgaon-based senior director at Deloitte Touche Tohmatsu India Pvt., said yesterday. “If this were a simple demand-supply problem, the grid operator would have intervened to strike a balance. Something went terribly wrong which caused the backup safety systems to fail.”

Businesses and households across much of Delhi, Haryana, Punjab, Himachal Pradesh, Uttar Pradesh, Jammu and Kashmir, and Rajasthan states had to turn to generators, while services on New Delhi’s metro and Indian railways were suspended for several hours. Traffic signals failed, jamming roads for morning commuters.

“Power supply has been restored to all states and the situation is near normal now,” Power Grid’s projects director, I.S. Jha, said by phone yesterday. “We will have complete normalcy once thermal plants resume complete generation.” Jha said Power Grid, the world’s largest transmission utility by capacity, had brought electricity from the eastern and western regions to reconnect services.

$400 Billion

Prime Minister Manmohan Singh is seeking to secure $400 billion of investment in the power industry in the next five years as he targets an additional 76,000 megawatts in generation by 2017. India has missed every annual target to add electricity production capacity since 1951.

Power cuts are common across swathes of India as the country battles an average 9 percent shortfall in meeting peak power demand that the government says shaves about 1.2 percentage points off annual economic growth. The affected states are responsible for about 37 percent of electricity consumption, according to the Central Electricity Authority.

“This again highlights how poor infrastructure remains the biggest drag on the Indian economy,” said D.H. Pai Panandiker, president of RPG Foundation, an economic policy group based in New Delhi. “The power sector remains too over-regulated. Unless private companies are allowed greater involvement, the problems are going to remain.”

Inflation Driver

Improving infrastructure, which the World Economic Forum says is a major obstacle to doing business in India, is among the toughest challenges facing Singh as he bids to revive expansion in Asia’s third-largest economy that slid to a nine-year low of 5.3 percent in the first quarter.

Tussles over policy making with allies in the ruling coalition, corruption allegations and defeats in regional elections have weakened Singh’s government since late 2010.

The Reserve Bank of India has blamed infrastructure bottlenecks for contributing to the nation’s price pressures. Most analysts forecast the central bank will refrain from cutting rates in today’s monetary policy decision. Indian consumer-price inflation was 10.02 percent in June, the fastest among the Group of 20 major economies, while the benchmark wholesale-price measure is more than 7 percent.

The grid failure occurred at 2:32 a.m. local time yesterday, Nayak told reporters. Nayak will lead a government committee to investigate the cause of the disruption and will report in 15 days, Power Minister Sushil Kumar Shinde said.

Trains Halted

The failure is “a prime example of India’s infrastructure not being up to the mark,” said Mumbai-based analyst Rohit Singh at IDBI Capital Markets Services Ltd. “India needs to get to the point where one failure to the grid doesn’t take down an entire region. That should be the goal.”

About 150 trains were delayed across northern India, according to Neeraj Sharma, spokesman for the region. New Delhi’s airport didn’t have to cancel any flights as it switched to back-up power supplies, spokesman Kapil Sabharwal said.

Yesterday’s outage was India’s biggest power failure since 2001 when the same northern grid collapsed leaving homes and businesses without electricity for 12 hours. The Confederation of Indian Industry, the country’s largest association of companies, estimated that blackout cost companies $107.5 million.

Indian Oil Corp. Ltd.’s refineries in north India were unaffected by the outage as they have their own power stations and distribution lines, refineries director R.K. Ghosh said by telephone. Indian Oil, the nation’s biggest refiner, has crude processing plants in Haryana and Uttar Pradesh states in north India.

Reactors Trip

Nuclear Power Corp. of India Ltd.’s five units in Rajasthan tripped this morning after the outage, G. Nageswara Rao, director of operations, said.

It will take up to 36 hours to restore the units, Rao said in a phone interview from Gujarat, adding that the company’s two units in Narora in Uttar Pradesh were working after they faced some disturbance earlier.

“We need to find out exactly what happened so that we can make India’s grid safer and more secure,” Gopal Saxena, chief executive officer at BSES Rajdhani Power Ltd., a unit of Reliance Infrastructure Ltd. that supplies western and southern parts of the capital with electricity, said in an interview.

“When one or two states draw too much power at the same time, the grid breaches its transaction frequency, which is what may have happened,” said Power Grid’s Nayak.

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