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2012-08-07 11:39:38
Power cuts in India show that a lack of reform is beginning to hurt ordinary
people
Aug 4th 2012 | from the print edition
FOR an aspiring economic superpower, there can be few more chastening events
than electricity cuts as massive as those that struck northern and eastern
India this week. An area (including the capital, Delhi) in which more than 600m
people live faced blackouts over two days. Infrastructure, from traffic lights
to trains, stopped working. Hospitals, sanitation plants and offices ground to
a halt. Airports and factories had to rely on backup generators, often fuelled
by truckloads of diesel.
The impact on India s economy goes far beyond lost output. The blackout will
badly damage the country s reputation, and highlights the rotten infrastructure
that is hobbling its efforts to catch up with China.
Does anyone have a spare battery?
The cause of the blackouts is murky an overloading of the national network that
links together regional grids is the most likely explanation (see article). By
most accounts engineers did a heroic job of patching things up. But the power
industry, which must double its output roughly every decade if India is to grow
fast, has long been a disaster waiting to happen. A pile of private capital has
been attracted to build new power stations. But the rest of the supply chain is
a mess.
At one end, not enough cheap coal is being dug up and gasfields are sputtering.
At the other, the national transmission grid needs investment. Meanwhile the
last mile distribution companies, largely state-owned, that buy power and
deliver it to homes and firms, are financial zombies. Much of their power is
pinched or given away free. Local politicians put pressure on them to keep
tariffs low, which leads to huge losses. Squeezed between a shortage of fuel
and end-customers who are nearly bust, those private generating firms are now
cutting back on vital long-term investment in new plants.
The state of the power industry causes problems for the country not just
because electricity is in short supply. The distribution companies huge debts
weigh on the banks balance-sheets, threatening the health of the financial
sector as well.
The solution is to cut graft, tackle vested interests and allow markets to work
better. The coal monopoly needs to be broken up and local distribution firms
privatised. Yet despite the looming crisis, for a decade the government has
shirked doing what is clearly necessary, just as it has failed to implement key
tax reforms, cut public borrowing or open the retail sector to competition. It
has allowed corruption and red tape to damage other vital industries, such as
telecoms.
Politicians shirk these tasks because they fear offending powerful lobbies,
such as the farmers who receive subsidised electricity, while voters seem to
manifest little appetite for reform. No party has a clear majority in
parliament, and none was elected on a platform of change. The present
Congress-led coalition government has few people with a record of or an
instinct for reform, save perhaps the prime minister, Manmohan Singh, who has
now run out of zip. It relies on fickle regional parties to stay in power. The
opposition is no better and possibly worse.
Compared with a blacked-out India, China s economic star shines bright. But the
present failures of the Indian system are not an argument for adopting China s.
There are autocracies without enough electricity, and democracies with plenty
of it. Meanwhile, democratically elected governments are quite capable of
winning public consent for brave reforms as India s did two decades ago.
The government s reaction to the power cuts has been depressingly in line with
its more recent performance. During the blackouts it enacted a cabinet
reshuffle, and the power minister was promoted to a more senior post. Yet there
are some grounds for hoping that things may change. The very scale of the power
cuts may remind voters that bad economic policies are not just abstract
notions, but hurt people s lives by making jobs scarcer, roads more congested,
and food and phones more expensive. And that in turn may remind politicians of
the dangers of ignoring the economy.
India s great blackout is a consequence of rotten governance. Voters need to
understand that, and deliver the country s political class a different kind of
electric shock.
from the print edition | Leaders