NEW DELHI — The massive power outages in northern India late last month that caused damage of billions of rupees has global companies adding one more worry to their to-do list in India: not to be caught in the dark again.
A recent report by Standard & Poor’s noted that power capacity has increased about 41 percent over the past decade. “But while the government has increased funding allocations to the power sector in its recent five-year plans, it has consistently failed to meet its planned capacity expansions,” said the report, titled “Adequate Infrastructure Is Essential to Lighten India’s Power Woes.”
This is the first time such a massive failure has happened. So far, the stability of the nation’s electricity grid has been managed through rotating power cuts — a less-than-optimal solution, Rajiv Vishwanathan, credit analyst at Standard & Poor’s, observed.
The failure of two power grids, on two consecutive days on July 30 and 31, left 700 million people in the dark and a sense of frustration that is giving way to better planning and more preparedness for the future.
“The failure of the power grid had an impact on all sectors of the economy, including the industry, which would have to bear considerable losses due to production stoppage,” R.V. Kanoria, president of the Federation of Indian Chambers of Commerce and Industry said.
For many companies familiar with how things work in India, the blackout was worse than usual, but hardly anything they were unprepared for. Power cuts in most cities are common, and in summer months as the demand for electricity goes up, these often stretch into hours at a time.
“We are usually prepared for power cuts and plan a captive power unit,” said Dipak Agarwal, chief executive officer of DLF Brands, which is a subsidiary of real estate giant DLF Ltd., and has several retail outlets in collaboration with foreign brands such as Mango and Claire’s Accessories. “It definitely affected the retail situation at the time, but we managed to keep functioning at the peak hours.”
The factors responsible hardly seem likely to go away. The demand for power is growing while the supply is not. As the report from S&P noted: “The lack of fuel security is a major constraint to the growth of India’s power generation capacity, and the slow pace of tariff reforms is hindering infrastructure investment at the state level.”
It pointed out that India’s aggressive economic growth targets for the next five years would add to the already high demand for power.
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