Indian Grid Struggles: A clash between Political and Electric Power
Election Year in India, is always an exciting time to be around. Not considering the comic relief derived from watching supposed national leaders hurl the most creative of accusations at each other, it gives an opportunity to objectively assess the state of the country’s progress. Once every 5 years, it is during this time that the politician finally perceives the problems facing the lives of most people, and carefully crafts a list of promises, right in time for election day.
This list of promises, inevitably finds a mention of “access to electricity” every time. While it is unheard of, in developed nations, for this to even be a point of discussion, it remains intensely salient across most of the developing world, and especially, in rural and low-income parts of urban India, where, round-the-clock access to power appears to be an unfathomable luxury. In such neighborhoods, power shutdowns lasting days or even weeks on end have, in the past, been interrupted only by brief spells of access (especially as the election year approaches). Considering that water supply for basic needs including drinking is typically cut off by a shutdown is also essential in evaluating its impact. Even if most children living in such conditions somehow manage to get sufficient access to nutrition, healthcare and school education, some things, such as studying after sunset remain fantasy at best.
So, surely, a rapidly growing economy seeking to develop its vast human capital should be a massive market for power grid innovation, infrastructure investments and be showing signs of leapfrogging growth, right?
The power distribution companies, almost all of which are run by the government, are, at worst, bankrupt, and at best, spiraling headlong into insolvency, incapable of buying even a fraction of the vast surplus power available at the Indian Energy Exchange (creating a massive power deficit, thus necessitating scheduled power shutdowns). For all practical purposes, this rules out their investing in typically even vital grid innovation, infrastructure or technologies.
And as to how political forces drive all this, let’s consider the following:
In rural India, the scheduled shutdowns typically render irrigation impossible, leaving all farm output entirely at the disposal of the ever more unreliable climate/monsoon. For a nation with roughly a quarter billion people directly employed in the agricultural industry, this has two consequences: the macabre, 40 year long droughts driving the rampant farmer suicides, and the inevitable, vote-minded government efforts to address it. These efforts are typically as simple as scheduling longer shutdowns elsewhere to divert power for irrigation use, and in addition, subsidizing that irrigation power supply to the point that it is practically free to use (and abuse via overdrawing ground water and depleting reserves). The resulting revenues lost from these extreme subsidies are borne once again by the government run distribution companies.
There is a certain allure to government jobs in India, for many people. And it is not the pride from serving the nation, nor the paycheck, but the sweet kickbacks often exceeding the official paycheck by at least 5 times. Its parasitic effect on the already struggling distribution companies begins from the bottommost rungs of the organization. For instance:
- The typical lineman (based on a true account from a lineman in the state of Telangana), with a meagre salary decides that it is ok for a lot of end users to pilfer power from the grid as long as they slip him some Gandhis (below image). After he spends most of that money to retain his job by paying off his manager, he uses the rest to finance the construction of his new home or to outsource his actual work to 3 or 4 other menial workers.
- After talking to me passionately for about half an hour regarding new initiatives and infrastructure his company was investing in (to reduce power theft), a very energetic assistant engineer (a mid level employee) from the local distribution company stood up and left, at which point I was told that he is known to pocket about 6 times his salary by selling of new grid infrastructure instead of having it installed. It came as no surprise then that when a government bank (also in Telangana) began issuing loans to farmers to buy farm irrigation infrastructure, a local distribution company’s officials, fearing media attention, panicked, because as per official records, they had fully electrified those farmers’ village, while in reality, they had merely sold off the equipment and purloining the proceeds, rendering the village with no grid power to run most of the irrigation equipment that the farmers were now in the process of buying.
As we go up the company hierarchy, opportunities for such malpractices increase, as do the payoffs from the direct and indirect reports, as well as the payouts to superiors. And finally, at the top of these corruption food chains, typically, are the politicians: the government ministers in charge of the power industry, and/or the region’s elected representatives. As of 2019, the Indian Government claims that 100% of all villages in the nation have been electrified, leaving one to wonder just how grounded in reality that claim is.
Nevertheless, before it is too late, reforms (that actually achieve their targets, unlike the erstwhile efforts such as UDAY) are indispensable, to prevent a debt trap from engulfing the whole situation. And even if such a catastrophe is avoided, it will not be sufficient. For a nation with ambitions as enormous as India’s, unless all the population is guaranteed unceasing access to reliable power, the human capital will remain underdeveloped, laying waste to what will be the world’s largest chunk of working age population in the foreseeable future.
In conclusion, it is a fact that with the existing archaic grid monitoring infrastructure and billing systems, the Indian power distribution industry has much affinity for leapfrogging change. Given the high population density, Radio Frequency deployments could do very well in making obsolete the current error prone and shady practices of infrequently sending officials to the non-pilfering customers’ homes to obtain manual meter readings, and then applying marginal tariffs on that total consumption (which would obviously be larger, considering the longer time period between reads). Lastly, helping India solve its distribution companies’ financial crises may not even have to be motivated by altruism, but in fact, by purely capitalistic interests aimed at tapping into what could otherwise very well be the world’s largest market for smart grid technology, serving about a billion and half people.