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Elections, Politics

Amid mass power failure, Corporate India keeps the lights on

Posted: August 3, 2012 at 4:06 pm   /   by

“But who will build the roads?”

Perhaps the best rebuttal to the Elizabeth Warren-inspired campaign theme Democrats across the country have begun to adopt comes not from the factories of Ohio or sunbelt construction firms, but from overseas in India.  The state-owned power grid in India collapsed on July 31, knocking out power to 641 million people in the world’s largest democracy.

Meanwhile, private companies had insulated themselves from the underdeveloped public infrastructure by building their own — and kept the lights on.

From Bloomberg:

Truck production at the Tata Motors factory located in the city continued with minimal disruptions even as the state-owned national grid collapsed on July 31 knocking out supply to 640 million people.

About 1.6 trillion rupees ($29 billion) spent by companies including Tata Motors and billionaire Mukesh Ambani-led Reliance Industries Ltd. (RIL), to quarantine their plants from the national grid is shielding India’s biggest users of electricity from disruptions. Sixty years of missed investment targets, transmission losses and theft is prompting factories to build their own plants boosting costs in a nation that suffers from the fastest pace of inflation among BRIC nations.

“Large Indian companies have created their own islands as they can’t rely on a precarious state power network,” Juergen Maier, a fund manager in Vienna at Raiffeisen Capital Management, which oversees about $1.1 billion in emerging-market assets, including Indian stocks. “The outage this week will spur companies to make more investments to cushion themselves against such shocks.”

A handful of India’s largest companies generate nearly all of the power they use.  Meanwhile, the state lags behind, having missed every power capacity addition target since 1951.  Some 300 million people in India remain without any electricity, whether there is an outage or not.

The situation has spurred demand for private development of electricity infrastructure.  There’s an immense appetite for the product of electricity in India, if only someone would build the transmission lines and import the coal to keep the power plants running.  But it’s looking more and more like that someone will be private companies and not the government for many of India’s largest energy consumers.

This isn’t to say that Americans should start buying their own generators and making their own electricity, it’s merely proof that it is the private sector that creates the GDP growth and wealth needed for development.  When something is truly necessary — in this case, electricity — companies or individuals will find a way to provide it on the free market.  Solyndra and dozens of other green energy companies have failed in the U.S. where they have every advantage in the world.  What they have in common with the inadequate Indian power grid is huge amounts of government subsidies.  Tata Motors and other large Indian companies have taken a lot of their inspiration from America, but somehow it seems more likely that they were looking to emulate the success of Ford than the semi-permanent bankruptcy of GM.

Hannah Thoreson

Hannah Thoreson is a science and technology writer based in northern Virginia. She earned a physics degree from Arizona State University in 2012 and has been causing trouble ever since.

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Amid mass power failure, Corporate India keeps the lights on