Last Tuesday's massive electrical blackout was an ordeal and an embarrassment for India. It may also prove to have been a blessing in disguise, helping galvanize one of the world's most high-potential economies to take action on a major barrier to its growth.
Although it remains to be seen what precisely caused hundreds of millions of people in the northern part of the country to be left in the dark, India's second power failure in two days had a feeling of inevitablity about it. Tellingly, it has been reported that some Indians barely even noticed it, because more localized blackouts are so common that those with the means to afford them have backup generators; an estimated 300 million, meanwhile, don't have power at the best of times. Such is the reality in a country where energy infrastructure has not kept pace with rising demand.
The shortcomings, which range from inadequate generation to excessive leakage from the transmission system, are not easy to fix. Squabbling between the federal government and the states makes planning and regulation difficult. Given the heavy reliance on coal, new power sources could have major environmental costs. Most of all, there is the matter of pricing. Partly because of India's high level of poverty, partly because of political convenience, energy prices have been kept far too low to enable much-needed investment.
In the short term, cheap power may be a boon to some industries. In the long run, it is a recipe for disaster. When they are unable to count on reliable power supply, companies are reluctant to build or expand operations. And as some Canadian provinces have discovered, delaying necessary investment in the system means eventually making up for lost time with sudden and dramatic spikes in prices, rather than more gradual and predictable ones – another danger likely to give businesses pause.
This conundrum calls for political leadership – to collect more from those who can afford to pay it, to crack down on theft of power that reportedly consumes as much as 30 per cent of available supply, and to speed up projects that have a tendency to drag on endlessly – which by most accounts has been sorely lacking to date. Perhaps the combination of domestic pressure and international bad press, after last week's events, will help spur it.