Narendra Modi’s Power Problem

June 12 Main image

Peak demand for electricity in New Delhi is at 5,600MW yet Indian power companies are only able to deliver 5,150MW, creating widespread power outages.

It should come to no one as a surprise that it gets hot in India this time of year – very, very hot. Temperatures today reached a balmy 40C with anticipated highs between 40 and 45 well into next week. This massive heat wave has created a large peak in demand for electricity that has highlighted India’s nagging power issues. The entire region has long battled with a discrepancy between power generation and distribution to consumers – a question that has since become a political flashpoint as well as an indication of India’s development woes.

In a series of speeches this week, both the President and Prime Minister of India have pledged to bring about continuous electricity to the entire country by 2022 – a symbolic date marking 75 years since independence. New PM Narendra Modi has made electricity distribution a key focus of his administration appointing a new ‘super-ministry’ in charge of not only power distribution, but coal and renewable energy as well. The head of this new ministry, Piyush Goyal, has vowed to emulate the energy policies undertaken by Modi in Gujarat, which have given the state a surplus of electricity.

Yet, as Goyal asserted this week, the main problem in India is not one of power generation – indeed, India is more than able to meet its domestic demand. The crux of the problem lies in the disunity between state-run utility (note, state run does not mean federally or centrally run but rather by Indian states) companies and private power distribution agencies. As electricity becomes ever more politicized, politicians are hesitant to raise prices to avoid receiving the electoral backlash from such a decision. Thus, politicians and bureaucrats keep electricity prices artificially low, constraining utility and power supply companies and preventing them from making the investments necessary to develop the electrical grid. Furthermore, state-run utilities are under pressure from politicians to give preferential treatment to certain key consumers, in other words, to give better service to their voters.

India’s power problem is indicative of the larger issue the country faces: a bloated government, rampant corruption, poor coordination between the private and public sector, and an unwillingness to make difficult political decisions. As far as electricity is concerned, the fix is quite simple: raise electricity prices and take measures to weed out corruption. Yet, the political consequences of such an action have proven to be prohibitive in the past. Perhaps the election of Narendra Modi will change this political obstacle and prove to be the impetus for development, however that remains to be seen. In any event, for India to truly prosper and develop into the economic powerhouse that it can yet be, it must tackle these political problems that have vast repercussions on its economy and the welfare of it citizens.

For more on the statistic:

http://articles.economictimes.indiatimes.com/2014-06-09/news/50447969_1_tata-power-delhi-delhi-transco-surplus-power

Other relevant links:

http://www.firstpost.com/politics/pm-modi-faces-battle-with-states-to-fix-power-crisis-1554281.html

http://news.oneindia.in/india/narendra-modi-gift-to-andhra-pradesh-chandrababu-naidu-uninterrupted-electricity-1462465.html

http://timesofindia.indiatimes.com/city/delhi/Kejriwal-seeks-meeting-with-Modi-on-power/articleshow/36404497.cms

http://www.oecd.org/dev/partnerships-networks/46235043.pdf