An electricity engineer inspects the electricity meter of someone suspected… (Simon Denyer/THE WASHINGTON…)
MODINAGAR, INDIA — It is no fun being an honest inspector for a state electricity board in India.
All around you, consumers steal electricity on a massive scale. Businesses and ordinary people help themselves by hooking onto power lines illegally or bypassing meters. Vote-hungry local politicians protect the thieves, making any attempt to catch and punish the culprits a dangerous game.
“There is a lot of political interference,” inspector Ved Prakash Agrawal said during a raid on the outskirts of the northern town of Modinagar. “The local politicians say, ‘I will have you killed, I will have you suspended, I will have you transferred.’ They complain to our higher-ups. It is very difficult.”
In India, about a quarter of all power generated is either stolen or lost in transmission, five times the figure for China. Still more is given away to farmers, while the rest is sold to consumers at a loss, pushing state electricity companies toward bankruptcy and resulting in the rolling blackouts that afflict almost the entire nation every day and undermine its economic prospects.
“Successive governments in India at the central and state levels have considered populism — the promise of cheap or subsidized power — an effective strategy,” Arvind Subramanian of the Peterson Institute for International Economics in Washington recently wrote. “But the consequence has been either no power or highly interrupted power for a vast majority of Indians.”
At its worst, India’s power sector is the perfect example of populism and patronage trumping sound economics, analysts say. Power symbolizes the way Indian democracy often fails to meet the most basic aspirations of voters for transparent government, jobs, empowerment and opportunity.
“Power is often an important source of the struggle between the politics of patronage and the politics of aspiration,” said Ashish Khanna, senior energy specialist at the World Bank in India. “The question is whether a credible promise of improved power delivery can be turned into a new narrative that meets those aspirations and reaps political dividends.”
India’s state electricity companies have run up losses of $46 billion, or 2 percent of national income, largely financed by lending from public-sector banks, straining the country’s financial system. As a result, the companies have little money to invest in equipment or pay salaries, or even to pay for the electricity they are receiving from newly built private-sector power plants.
Aware that this liquidity crisis was threatening the solvency of the power sector, the Indian cabinet last week approved a debt restructuring package for the state electricity boards — relief based on whether they improve their performance, do more to stem losses and strengthen regulation at the state level.
While the package has given the sector some breathing space, analysts said there was no guarantee that states would stick to their promises and undertake the fundamental reforms required to produce lasting benefits.
“This is a bailout without any assurance that the underlying problem — people paying more for power, politicians stealing less, et cetera, et cetera — has been addressed,” Subramanian said.
The Uttar Pradesh problem
The scale of the problem is nowhere more apparent than in the vast northern state of Uttar Pradesh, home to 200 million people. It is a place that encapsulates the worst of Indian politics, where “strongmen” with long criminal records flourish and where voting is largely driven by caste and religious allegiance rather than by performance.
The state’s power sector is one of India’s least efficient and its economic growth rate among the nation’s lowest.
One of the main reasons for the massive blackout that affected half of India in late July was that Uttar Pradesh was drawing too much electricity from the national grid. That in turn was largely because powerful local politicians had forced the state electricity board to deliver uninterrupted power to key constituencies, a demand that drained the grid’s meager resources to the breaking point, power engineers say.
At the same time, the Uttar Pradesh Power Corp., the state enterprise that buys electricity from power plants and sells it to consumers, is virtually bankrupt.
The cost of the electricity it purchases is rising sharply, partly because India’s coal industry is stagnating and power stations are forced to import costly foreign coal. But political pressure ensures that the tariffs it charges simply cannot keep pace. Almost every year, local, state or national elections here provide another excuse for inaction.
Theft makes a bad situation significantly worse.
The power corporation has not recruited any new staff for the past 30 years, said R.S. Pandey, director of transmission. It used to employ about 100,000 people but now employs fewer than 40,000, while its customer base has risen tenfold, he added.