India’s Grid Failure Cost Businesses ‘Hundreds of Millions of Dollars’

by | Aug 1, 2012

Two days of blackouts in India left 640 million people without power Tuesday, forcing thousands of factories and hospitals to rely on generators and costing businesses an estimated hundreds of millions of dollars, the Wall Street Journal reported.

Power has now been restored in all areas, according to Bloomberg. But the blackouts caused widespread disruption, halting telecommunications operations and commuter services. Train operator Delhi Metro Rail Corp. had to evacuate passengers, coal miners were temporarily trapped underground and NTPC, the biggest power generator in India, shut down 36 percent of its capacity as a precaution.

The power outages, which affected half of India’s 1.2 billion people, may have been triggered by states using more power than they are allowed to draw from the national grid, Bloomberg reported. Nearly two dozen states in east and northeast India, which together account for about 40 percent of the country’s total electricity generating capacity, were affected by the blackouts.

Blackouts are a common occurrence throughout the country’s main cities, according to the Energy Information Administration. As a result, businesses and farmers often have backup diesel-run generators on hand.

Still, Tuesday’s power failure, the worst in northern India in more than a decade, was colossal compared to typical blackouts in the country, prompting the government to extend a deadline for filing of income-tax returns by a month to Aug. 31, the WSJ reported.

The grid failure, which highlights India’s weak infrastructure, comes as electricity demand continues to rise. The EIA’s International Energy Outlook 2011 projects electricity consumption in India will grow at an average rate of 3.3 percent a year through 2035. To meet this growth, India will have to expand its current generation capacity by 234 GW, the agency said.

Attempts to add capacity have failed to meet targets, due to insufficient investment in the sector, and difficulty in obtaining environmental approval and funding for hydropower and nuclear projects, the EIA said. The problem has been compounded by shortages of feedstocks, such as coal, which have forced power plants to run below capacity.

Indian Prime Minister Manmohan Singh is trying to secure $400 billion of investment in the power industry in the next five years in an effort to add 76,000 MW of generation capacity by 2017, Bloomberg reported. To date, the country has failed to hit electricity capacity goals. It was only able to meet 64 percent of its target of adding 78,000 MW of electricity generation in the five years through 2012, the WSJ reported.

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