Mumbai battles against blackouts

FE Team | Published: June 23, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

Joe Leahy, FT Syndication Service
MUMBAI: The frustration in M.R. Khambete's voice is palpable as he describes life for a small business trying to cope with worsening power shortages in Thane, a suburb of Mumbai.
Random electricity outages mean that workers at small factories in Thane, many of which make forged metal components, plastics or chemicals, are forced to spend half their shifts sitting idly waiting for machinery to come back to life.
"This is not only costing us in terms of production; we are being forced to lay off workers," says Khambete, head of Thane's small-scale industries association.
Further south, Mumbai's business district has not suffered a blackout related to power shortages in decades. But this summer it came perilously close.
The city's private sector electricity providers, led by Tata Power, were forced to shop around the country to procure enough power to cover a 500-megawatt shortfall during peak demand.
The problems facing Mumbai, India's largest city, and its hinterland are symptomatic of the growing crisis in India's power industry. For years the financial capital was considered impregnable to blackouts, an island of reliability in a country where such problems are otherwise the norm.
But now there is simply no longer enough power-generating capacity in India to guarantee Mumbai immunity from the blackouts.
India's government planning commission projects that the country will need to increase generating capacity to 778,000MW by 2032 from 127,700MW at the end of 2006 to maintain 8 per cent economic growth.
Some believe even more ambitious targets are necessary, under which the country would need to double the capacity of its power-related infrastructure every five years, just to keep pace with demand. "If we are not ambitious, we'll never meet the demand-supply gap," says Vivek Pandit, head of the energy division at the Federation of Indian Chambers of Commerce and Industry (Ficci).
But so far, the country is struggling to meet even the modest targets it has set in the past. During the government's 10th five-year development plan, which ended in March, India completed less than half the new power projects it had planned. This has left the country with a power shortage of 14 per cent, according to a Ministry of Power working paper.
A concerted effort is under way to build more plants. The government is launching six so-called "ultra-mega power projects", under which the state acquires the land and the private sector builds the plant.
Assuming they are all completed, the mega plants would go some way towards meeting the tentative target in the ministry working paper of adding about 69,000MW capacity by 2012.
The rest of the gap could be met from other conventional plants as well as hydropower, nuclear power, wind energy and even clean coal technology plants, says Amit Mitra, the secretary-general of Ficci.
All this means, however, that relief for cities such as Mumbai and the surrounding region of Maharashtra, India's most industrialised state, is a long way off. It will take at least four years for the new capacity addition to begin to close the demand-supply gap.
In the meantime, things can only get worse, with new, power-hungry offices, malls and call centres mushrooming across the state.
"Each year as the load grows, unless you have additional supplies coming up, it becomes even more difficult to manage," says Anjan Ghosh, head of energy sector ratings at ICRA, the Indian affiliate of Moody's.
The situation should ease with the onset of the monsoon this month, when people turn off air-conditioners and farmers use less electricity for irrigation. But when the sun returns in October, so will the power shortages.
"Power procurement is very challenging in a country that is short of power," says an official at one of the private sector power companies. "The threat [of blackouts] has not gone away. It is always there."
That is bad news for the likes of Khambete. Most of his members, who typically employ fewer than 20 people, cannot afford generators, which cost twice as much to run as mains electricity.
"We have no option but to wait. We are too small to go to any other state."