India’s very political power crisis
August 3rd, 2012
11:17 AM ET

India’s very political power crisis

By Milan Vaishnav, Special to CNN

Editor’s note: Milan Vaishnav is an associate in the South Asia program at the Carnegie Endowment for International Peace. The views expressed are his own.

An estimated more than 600 million Indians spent their Tuesday without electricity as the country experienced a second day of record power outages, further deepening the crisis that began on Monday when 300 million were left powerless. The “Great Power Outage”—described as the biggest blackout in history—had an immediate impact on the lives of Indians across more than twenty states.

India’s rail system, one of the largest in the world, ground to a halt. Mine workers were trapped underground when the outages struck. Government offices across northern and eastern India were shuttered. And the fallout from the blackout could have been even worse except for the fact that millions of Indians, long frustrated by the country’s endemic power cuts, have invested in their own diesel-operated generators to keep the lights on when the grid fails.

While it’s easy to dwell on the crisis at hand, Indians across the country face an endemic power crisis on a daily basis: one third of India’s 1.2 billion lack access to electricity even at the best of times. This prompted the satirical newspaper, The Onion, to run with the headline: “300 Million without Electricity in India after Restoration of Power Grid.”

Yet as the blame game between the center, the states, and India’s citizens plays out over the proximate cause of the crisis, we shouldn’t lose sight of the big picture. There are deep roots to the current crisis – and there can be little doubt that India’s politics deserve a share of the blame.

The formula is simple. Indian voters, 70 percent of whom live in rural areas and half of whom are engaged in agrarian pursuits, have a healthy (and growing) appetite for energy. Politicians, in turn, have an enduring appetite for winning elections. For decades, politicians have been all too happy to provide free or heavily subsidized electricity to farmers with the hope of reaping the rewards at the ballot box. This also happens in urban areas where local politicians have showered vote banks with free electricity in exchange for political support.

Once we acknowledge this underlying reality of India’s power dilemma—cheap electricity for votes—it becomes easy to understand why the governance of India’s power sector, and electricity in particular, is in such dire straits.

Subsidized (or free) electricity means consumer prices are below market rates, and firms involved in the distribution of energy are forced to operate at a loss, disincentivizing private investment. On the production side, India remains heavily reliant on coal for fueling its power supply and the state-owned enterprise, Coal India, dominates the marketplace. With a virtual monopoly on coal supply, and faced with high prices for imported coal, private firms are reluctant to engage on the production side. Coal India itself is required to sell coal at a heavily discounted price, so it too has very little liquidity to invest in new capacity or technology.

Politics, however, plays out in even more perverse ways than this. Take, for instance, the fact that India regularly loses around 30 percent of the power it produces due to “line loss”—the technical term for waste, fraud, and abuse. While line loss is in part due to systemic inefficiencies, poor infrastructure, and illegal power connections, many believe that politicians engage in “politically-motivated theft.” A recent study by researchers at the University of California, Los Angeles and University of Michigan shows that line losses operate on an electoral cycle in Uttar Pradesh, the country’s most populous state, with more than 200 million residents. Put simply, politicians condone more electricity theft around elections.

Politics also plays a role in allowing states to draw more electricity than they are entitled to. In an era of coalition government, the center is powerless to discipline states that violate “grid discipline”—punishing wayward state politicians whose support you rely on is a surefire way of sending them into the arms of your rivals.

While problems with India’s electricity infrastructure are clearly not new, the timing of the “Great Power Outage of 2012” couldn’t be worse. The Indian economy is reeling from a marked slowdown in the pace of economic growth, falling from an average of over 8 percent between 2004 and 2011 to 5.3 percent in the first quarter of 2012. While most advanced industrial countries can only dream of 5 percent growth, India needs faster rates to keep up with population growth and to continue lifting citizens out of poverty. Fading economic growth coupled with a declining rupee, stubborn inflation, and widening deficits, prompted Standard & Poor to warn in June that India could soon lose its investment grade rating.

India’s economic malaise has led to a growing crisis of confidence in the government. Prime Minister Manmohan Singh had promised weeks before the blackouts to redouble his government’s efforts to kick start the economy, unleashing its “animal spirits.” The current power crisis threatens to further undermine his government’s credibility. To add insult to injury, the power minister Sushilkumar Shinde was promoted amid the current crisis to the position of home minister (although it should be noted that this move was reportedly already in the works). Nevertheless, it has many Indians fuming at a government promising to press the reset button on its economic agenda.

India’s endemic power crisis is, of course, directly linked to the current economic situation. Private investors, both domestic and foreign, have repeatedly voiced their concerns about the state of India’s infrastructure, with many singling out India’s power sector as a leading factor inhibiting new investment.

Looking ahead, the agenda for reforming India’s power sector reads like a laundry list: upgrade outmoded infrastructure, privatize coal production, and reduce distributional inefficiencies. But all of these fixes won’t be truly effective unless politicians take steps to undo the bargain of cheap electricity in exchange for political support.

It’s easy to be pessimistic about the prospects for changing this fundamental dynamic, but there are at least two reasons for hope. First, the political payoffs of the current quid pro quo aren’t immediately obvious. Unlike the United States, India’s elected politicians are actually faced with an incumbency disadvantage—that is, elected representatives are just as likely to lose elections as they are to get re-elected. If politicians perceive the provision of free power to voters as yielding massive political pay-offs, it certainly hasn’t worked out that way in practice. Second, India’s federal system provides ample opportunity for states to engage in their own methods of experimentation if the central government is unwilling or unable to act. The western state of Gujarat, for instance, has recently experimented with providing rural farmers with the option of paying for electricity in exchange for guaranteeing quality connections without service interruptions.

It’s too soon to know whether this and similar experiments will ultimately prove successful, but they offer a potential path for politicians in India looking to break with the shackles of the past.

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Topics: Energy • India

soundoff (38 Responses)
  1. Hahahahahahahahahahaha

    Hey look at all those workers that the GOP (like Mitt Robme) like to off-shore to. I wonder how much money Mitt is hiding in off-shore accounts that's evading taxed. Where's your tax returns Mitt!!! Put up of STFU Mitt!!!!!!!!!!!! Hahahahahahahaha

    August 3, 2012 at 11:54 am | Reply
  2. VK

    There are many problem dimensions with India. It is basically a corrupt and lawless country.Fixing the economy or electricity is a way off thing, there are many internal problems even to the extent that, it is highly doubtful even if the union of India will survive though it is not immediately imminent, but it is highly likely to happen.India is next to the brink of extinction/disaster with its weak political and economy system.

    August 3, 2012 at 11:58 am | Reply
    • Gaurav Singh

      Like Pakistan Or Burma or China.???????....Basically India doesnt use its Army in every small problem....and its the Only Post World War 2 nation where democracy has succeeded....So you have the leverage of passing judgements..........When it comes to Union....India always has meant business.....There are 3 times the troops in kashmir than there US forces in Afghanistan...so go learn some political science.....A country that is surrounded by a Failed Islamic State and a world largest Stalinist State both Nuke armed and has held 15 successful general elections when rest of the Neighbouring countries have not been able to have even 5.....Elections which have almost 1.5 times high turn out than United States so its likely that US can fail as a democracy but not India...

      August 3, 2012 at 12:12 pm | Reply
      • Rohit

        Good one bro, that so true!
        However, no denying that curropt politicians allow and / or encourage misuse of state resources (like water, electricity, etc.) to gain votes. That is something we need to take care of to make our country better.

        August 3, 2012 at 1:15 pm |
      • VK

        'India doesn’t use its force' even when you’re ripped apart in numerous terrorist attacks, it’s just an excuse and doesn’t make it a saint. You’re instead called weak and coward by the terrorists around the world. I am not arguing for use of force as the answer but it never per sued justice to any victims of its terrorist attacks. You could never insist pakistan to bring culprits to justice of any terrorist attack and all of them are at loose in safe heavens since last 2 decades. 11/28 Mumbai attacks for example... You weren't able to get any justice nor will you to any martyrs/victims instead you abate a terrorist in your custody for politics. India uses its army only for internal political scores, not in its defense. I am not sure even if its army still remembers how to fight their enemies.
        You call it a success of a system, even when all 3 estates of the government, in the entire country, at all levels are non-functional and corrupt. It’s hard to believe if this is not a perfect blend to be the brink of extension. Even in the globalised world India is still not interface with many global economies, hence the immunity to it from recent recession, but that’s no sign of it strength and potential of economy.

        August 3, 2012 at 1:56 pm |
      • Gaurav Singh

        @VK
        If you are American you should be the Last Person to teach India Democracy and responsiveness...

        1.First take care of your own soldiers who are being slaughtered in Afghanistan by your MAJOR NON-NATO ally....
        We had 1 mumbai 10 Mumbai attacks are foiled every month unfortunately they are reported as Footnotes...

        2.It took America 250 Years to realise that womens should vote and 300 Years to give blacks the right to vote...So DONT TEACH INDIA DEMOCRACY....After 60 years of independence....Half the United States had rebelled..

        INDIA has the 1st generation of Politicians as of Now who joined politics POST 1947 they will take some time to fade away.....Dont expect Miracles...Democracies are pathetically slow funtioning Systems and those who dont like it can PLEASE Emigrate to China if the Red dogs allow em....
        DEMOCRACY MAY BE THE WORST FORM OF GOVERNANANCE BUT IT IS THE BEST AVAILABLE...after 1977,1993...2005 state elections and 2010 state elections India has nothing to prove that it is a vibrant democracy...

        August 3, 2012 at 2:36 pm |
    • J. James Mcgregor

      India is a cowardly nation. Its leader Gandhi was Jerry Sandusky. Phucking boys and underage girls. Its army is scared of Pakistan and Talibans.

      August 3, 2012 at 6:21 pm | Reply
      • VK

        If Gandhi, so are your Jefferson, Washington, Lincoln and Roosevelt...Habe some manners you dick head.

        August 4, 2012 at 11:28 am |
    • Raj

      Such ignorance......do you paki's practice ?

      India has as much chance of "failing" as NY has of abdicating from the union. People like you have been betting that India would fail since WW2 and despite the poverty, corruption, wars and riots India today is stronger than ever before in its history. India is home to not only Indian citizens but millions of refugees from the surrounding region who want to escape poverty, oppression or persecution despite it being a "third world nation"!

      Save your "analysis" for people who are even more ignorant than you are!

      August 4, 2012 at 9:20 am | Reply
      • Cut to the Chase

        AN INDIAN SAGA
        HUMPTY DUMPTY: Had a great fall
        India is pretty much done. The bubble has burst. India is sliding downhill at supersonic speed. GDP growth has disappeared...the only growth left is the hair between their legs. Inflation is in the clouds and India has asked Pakistan to help out. Pakistan has opened up Wagah Border to help Indians with food/goods etc. The Indian Rupee has collapsed against US $. US owns India financially now. As of last week the Indian bourse also collapsed.

        August 4, 2012 at 11:03 am |
      • Krishnamurthy

        that "Experimental Democracy" has failed in India. An experiment that was being shoved down India's throat by western countries too eager to propagate their own values on a country that was trying to decolonize itself while trying to shed the communist skin of being a Soviet ally. India was thus trapped. What has become evident now is that this "Experimental Democracy" has marginalized the country. The marginalized groups of the country – Dalits and ‘backward’ castes/classes, indigenous ‘tribal’ people and religious minorities have been disenfranchised.

        August 4, 2012 at 11:04 am |
  3. Noodles

    India is gradually fading away into oblivion. Implosion is imminent. Take your money out of Indian banks people before it is too late. Don't say you were not mad aware.

    August 3, 2012 at 12:24 pm | Reply
    • Cut to the Chase

      Noods.... I couldn't agree with you more. U da man !

      August 3, 2012 at 6:22 pm | Reply
  4. sujay aggarwal

    there is no doubt that india is facing a political crisis at leadership front.but this is the beauty of indian democracy inspite of the above said fact it is still surviving. economic front has showen its resistance when the whole world is sinking.there need of some reforms to occur in both political and economic front but india is still thriving to shine and it will one day.

    August 3, 2012 at 1:00 pm | Reply
    • Dina

      keep on smoking the indian gangja

      August 3, 2012 at 9:02 pm | Reply
      • Raj

        With pleasure! Indian ganja is "endemic" to India and it's quality is unsurpassed anywhere in the world.

        Indian ganja is better than Afghani opium sold by terrorists to fund sucide bombers against your troops! Or the Mexican gang's cheap amphetamines which they sell in your country to poison your people!

        It's strange that a country like India where marijuana grows wild all over has less of a drug problem than Western countries where it does not!

        August 4, 2012 at 9:25 am |
      • Lance

        Over 50% of India's population are drug addicts.
        In India people are dying of hunger. Why are these low caste Hindus prohibited from eating beef? In India cow meat is cheaper than other available meats. Instead of these Brahmins taking care of the low caste peoples of India they are doing their best to save their “holy” cows. According to Valmith’s Ramayana, God Rama “ATE” meat. Why then have these Brahmins given up beef-eating? Come on guys, feed the low caste in India with some steaks !!!

        Hinduism is a band of dung worshippers.

        August 4, 2012 at 11:22 am |
  5. j. von hettlingen

    The power failure has shed a bad light on India's ability to stay on its economic course. The country's industrial output has only just started to recover. Growth is crucial for development and prosperity. Energy supply is as vital as blood in veins. Unfortunately the dated infrastructure can't cope with the economic expansion and population increase. The government has to invest in this sector and improve the supply system, or else India's goal for 2012: Power for All – might just as well be a dream.

    August 3, 2012 at 4:44 pm | Reply
  6. J. James Mcgregor

    India is history. Done. Cults seldom survive even with CNN PR cover ups.

    August 3, 2012 at 6:18 pm | Reply
    • Raj

      James McGregor is a nice name for a paki troll, it almost convinces people that you are a legitimate poster, almost....

      August 4, 2012 at 9:36 am | Reply
      • Lance

        You need to look in the mirror and the face the stark and dark reality re: India instead of always blaming Pakistan.
        Pakistan is our friend and ally and we don't need you to get in the midst. Now vamoose.

        August 4, 2012 at 11:25 am |
  7. USingh

    the funniest part of this is that all of this is true – and yet like the kid in a Satyajit Ray movie – India doesn't even care...

    August 3, 2012 at 7:27 pm | Reply
    • Raj

      Well with all the fuss being made in the West I think Indians are confident to leave the "worrying" and "caring" to the West, while they move on!
      If India teaches its people one thing, it is to expect problems and to adapt to inconveniences. If every Indian kept "worrying" about all the things that are went wrong, they could never leave home to do anything else.

      August 4, 2012 at 9:35 am | Reply
      • Butch

        This is what india teaches Indians. Shame on you hindus for lying and misleading the world.
        you cannot fool the world all the time.

        ARE INDIANS UBER TERRORISTS OR WHAT???? Forget the GDP, focus on these murder statistics.
        In India, millions of girls are strangled, slowly starved or simply tossed in the trash. Moreover, in India, at least 1,370 girls are aborted every day. As a comparison, some 250 Indians die every day in road accidents. Terrorists killed about six people, on an average, every day in 2009. In the last two decades of economic progress, 10 million girls have died as such in India.
        SHAME ON INDIA AND ITS BARBARIC AND MEDIEVAL CULTURE !!!
        Indians have killed more human beings (girls particularly) than Al Qaeda and Talibans put together.

        August 4, 2012 at 11:16 am |
  8. Coleen

    I have read with interest the thesis presented on CNN that "less is more" in a political context as applied to India. Although Mies van Der Rohe adopted this in an architectural context, its economic and political connotations are indeed powerful. Empowering subjugated minorities in India by splitting it into smaller states would trigger uber economic demand for western nations who have given so much financial and technology aid to India with no return to show for the investment. I concur with this approach and with economic background find the premise to be on solid footing. Central Asian States (CAS) are a case in point on this successful approach. We need to understand that India has an unmanageable large population mired in poverty and we are spinning our wheels trying to feed it. It is also too big of a geographical unit to govern. Again, we saw how a few teenage talibans were able to invade it with a few BB guns. Even the CIA/Mossad were not able to stop it.

    August 4, 2012 at 11:13 am | Reply
    • Cory M

      Right on the money, Coleen. Bravo !

      August 4, 2012 at 3:36 pm | Reply
    • Jesus' Santiago

      Excellante' expose....chin chin !

      August 4, 2012 at 6:54 pm | Reply
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    I am a useless piece of camel dung. I post anti American, anti GB, anti semite, anti India, anti modern anything because I am a good moooooslem. I steal people's monikers because I am so ashamed of myself and post the most stupid comment. When people get angry with me, I claim insanity. I am the same guy.

    August 18, 2012 at 9:09 am | Reply
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