India has electric power shortages

The government of Prime Minister Shri Atal Bihari Vajpayee proposed ambitious reforms for India's socialist economy; but unfortunately, it has failed to follow through. One result is that India continues to suffer from electric power shortages, including blackouts, and the power industry is in dire straits.

  • Currently, the average electric power shortfall at peak times is 13 percent – more electricity than the entire peak demand in more-industrialised Malaysia.

  • Most state electricity boards are bankrupt, despite a massive $2 billion in subsidies each year from the federal government, plus more from local authorities.

  • On average, it costs 3.04 rupees (R0.55) to generate one unit of power, but only 2.12 rupees are ever collected for every unit produced – a 30 percent loss.

  • Much of the power simply disappears through antiquated transmission and distribution networks – some 40 percent to 50 percent – and some is simply stolen.

    Many consumers pay little or nothing for electricity (when they get it); but polls show that most would be willing to pay more for reliable service.

    Source: Editorial, Lights On, Far Eastern Economic Review, October 11, 2001.

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    RSA Note:
    Governments continue to be involved in the delivery of essential services because their citizens have the illusion that if the “profit motive” is eliminated the services will be delivered at lower cost. The illusion continues despite ample evidence that governments run businesses very badly. They fail to supply much-needed capital to maintain and expand services; they grant monopoly protection to the businesses and deprive customers of the benefits of competition, they do not keep up with technological advances, and their real (unsubsidised) prices are higher than those of freely competing private services. In South Africa, Eskom is usually cited as an example of a highly efficient state industry – the truth is that Eskom is riding on the back of generating over-capacity created by the apartheid government at the height of its delusions about economic growth – paid for at the time at great cost to taxpayers and electricity consumers in pre-inflation rands. South Africa’s electricity business will return to harsh reality when new generating capacity has to be created through capital investment at current prices.

    Eustace Davie, Director, FMF.

    FMF\16 October 2001
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