The grid collapse is a symptom of serious sickness in the power sector caused by technical deficiencies and political inefficiency

“The government restores connection between India and Bharat”, tweeted a well-known economist, tongue-in-cheek, on July 31 when the country was hit by a massive power outage in three major grids covering the north, east and north-eastern regions.

A large part of India indeed turned into Bharat as the outage affected an estimated 700 million people, which is about 10 per cent of the world’s population. Of course, many of them would have hardly felt the absence of power simply because they are not part of the electricity supply grid anyway.

The grid collapse is a symptom of serious sickness in the power sector caused by deficient capacity, inefficient transmission and distribution networks, state-owned utilities that are close to bankruptcy and a government that is simply not able to get its policy act together.

Before we analyse each of these, let’s understand what exactly happened on the two days, July 30 when the northern grid collapsed and July 31, when the eastern and north-eastern grids along with the northern grid collapsed.

Overload on the grid

The obvious cause was overdrawing by one or more States that are part of the grid — accusing fingers are being pointed at Uttar Pradesh. States draw more than their entitlement from the grid when their demand overshoots supply. But load dispatch centres, or LDCs, are supposed to prevent exactly what happened on July 30 and 31. There are five LDCs, one for each of the five grids, and a national LDC apart from similar bodies in each State.

The regional LDCs function under a subsidiary of Power Grid Corporation of India, a PSU vested with the responsibility of building and managing the national grid. The LDCs are autonomous bodies that have the right to cut a State off the grid after warnings if it continues to draw more than its entitlement.

The grid frequency in India is supposed to be 50 hertz but seldom is the grid in this state of equanimity. The frequency typically ranges between 49 and 50; when demand overshoots supply beyond manageable levels and States don’t resort to voluntary power cuts, the frequency can fall below 49, causing a grid collapse.

There are circuit-breakers that are supposed to cut off demand when the grid is overloaded to protect it but on July 30 and 31, these devices either failed or were tampered with to keep supply going even when the grid was overloaded. Investigations will establish the truth but we need to keep the focus on the larger ailment that led to the current pass.

Power scarcity

There is a serious demand-supply gap that worsens during summer and when the monsoon plays truant, as it is doing now. Demand typically exceeds supply by between 12-15 per cent during peak consumption hours in the morning and evening.

While successive Five-Year Plans have set ambitious targets, addition to generation capacity has been woefully small. Just about half of the planned capacity additions were achieved in the 8th, 9th and 10th plan periods. The story of underperformance continued in the 11th Plan (2007-12) despite a scaling down of the target. In effect, capacity addition has been abysmal in the last 20 years.

The policy confusion surrounding environmental clearances and land acquisition are obvious causes for the setback along with a stagnant output of coal, which powers more than 60 per cent of the generation capacity. Coal India, a monopoly, has struggled to push its output past the 430 million tonne mark in the last three years even as demand has been growing at 7.3 per cent. Fuel scarcity has also affected generation from existing stations; plant load factor, a measure of capacity utilisation, was just 72 per cent in the first nine months of 2011-12 according to the Economic Survey — lower than the 75 per cent in the previous year.

With gas output from the KG Basin fields of Reliance Industries dropping by more than half in the last year, gas-based stations are also struggling for fuel leading to lower generation, sometimes even zero.

Adding to the problems is the fact that a fourth of all power produced in the country is lost in transmission and distribution, mainly due to theft but also because of substandard equipment. These losses are among the highest experienced by any country.

Banquo’s ghost

And then, of course, there is the financial trouble that returns to haunt state utilities at periodic intervals like Banquo’s ghost. After the mess was cleaned up in the early part of the last decade by the NDA government, State electricity boards again find themselves in a financial mess; only this time it is deeper than ever before.

Crisil Research, the research arm of the ratings agency, has projected that the accumulated losses of all State utilities in 2011-12 will touch a record Rs.1.80 lakh crore, which is higher than the total income tax paid by citizens of this country last year! The net worth of these utilities will be a negative Rs.75,000 crore according to the agency, which means that banks will not touch them with even a bargepole.

Populist decisions to keep consumer tariffs at artificially low levels even as generation costs were rising has led to the current pass. Banks have been chary of lending to State utilities in the last year for fear of the loans turning into non-performing assets.

The government, meanwhile, has just not been able to get its policy act together; nor has it shown the required urgency. It has failed to clearly spell out its stand on environmental clearances for coal mining and clear hurdles for land acquisition. So how will new capacity come up?

Various committees were formed to study and suggest reform, the latest being the Shunglu committee that studied the financial position of the State utilities. But the recommendations are all in cold storage and the importance that the government attaches to the sector is evident from the fact that the Power Ministry will be an additional charge for Veerappa Moily.

Meanwhile, the sector will stumble along and it will be business as usual. Until the next grid collapse happens, that is.


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