Grid Collapse in India Leaves 360 Million People Without Power

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India’s worst power-grid failure in a decade cut electricity supplies to almost 360 million people in seven northern states today, shutting transport networks, triggering commuter chaos and halting water supplies.

About 50 percent of the system has been restored and the remainder should resume in 3 to 4 hours after all generation plants start functioning, V.V. Sharma, a general manager with the systems operation unit of Power Grid Corp. (PWGR) of India, said by phone. The company is analyzing what went wrong, Sharma said.

Businesses across much of Delhi, Haryana, Punjab, Himachal Pradesh, Uttar Pradesh, Jammu and Kashmir and Rajasthan states had to turn to generators, while services on New Delhi’s metro and Indian railways were suspended for several hours. Traffic signals failed, jamming roads.

“This again highlights how poor infrastructure remains the biggest drag on the Indian economy,” said D.H. Pai Panandiker, president of RPG Foundation, an economic policy group based in New Delhi, who stayed home because his office doesn’t have any electricity. “The power sector remains too over-regulated. Unless private companies are allowed greater involvement, the problems are going to remain.”

Prime Minister Manmohan Singh is seeking to secure $400 billion of investment in the power industry in the next five years as he targets an additional 76,000 megawatts in generation by 2017. India has missed every annual target to add electricity production capacity since 1951.

Inflation Driver

Improving India’s infrastructure, which the World Economic Forum says is a major obstacle to doing business in the country, is among the main challenges facing Singh as he attempts to revive economic growth that slid to a nine-year low of 5.3 percent in the first quarter.

The Reserve Bank of India has blamed infrastructure bottlenecks for contributing to the nation’s price pressures. Most analysts forecast the central bank will refrain from cutting rates in tomorrow’s monetary policy decision. Indian consumer-price inflation was 10.02 percent in June, the fastest among the Group of 20 major economies, while the benchmark wholesale-price measure is more than 7 percent.

Power cuts are common across swathes of India, hurting industrial production, as the country battles an average 9 percent shortfall in meeting peak power demand, according to the Central Electricity Authority. The deficit shaves about 1.2 percentage points off annual growth in India’s $1.8 billion economy, according to the government’s Planning Commission.

Panel Probe

The grid failure occurred at 2:32 a.m. local time, and may have been the result of too many states simultaneously purchasing power beyond their scheduled allowance, Power Grid Chairman R.N. Nayak told reporters. Nayak will lead a government committee to investigate the cause of today’s disruption and will report in 15 days, Power Minister Sushil Kumar Shinde told reporters today.

“This is a prime example of India’s infrastructure not being up to the mark,” said Mumbai-based Rohit Singh of IDBI Capital Markets Services Ltd. “India needs to get to the point where one failure to the grid doesn’t take down an entire region. That should be the goal.”

About 150 trains were delayed in northern India, according to Neeraj Sharma, spokesman of the Northern Railways. New Delhi’s airport was operating on back-up power supplies, spokesman Kapil Sabharwal said, adding that no flight has been canceled.

The affected states are responsible for about 37 percent of the country’s peak electricity demand, according to the Central Electricity Authority.

2001 Failure

This is the country’s biggest power failure since January 2001 when the same northern grid collapsed leaving homes and businesses without electricity for 12 hours. The Confederation of Indian Industry, the country’s largest association of companies, estimated that blackout cost companies $107.5 million.

Indian Oil Corp. Ltd. (IOCL)’s refineries in north India are not affected by the outage because they have their own power stations and distribution lines, refineries director R.K. Ghosh said by telephone today. Indian Oil, the nation’s biggest refiner, has crude processing plants in Haryana and Uttar Pradesh states in north India.

Nuclear Power Corp. of India Ltd.’s five units in Rajasthan tripped this morning after the outage, G. Nageswara Rao, director of operations, said.

It will take up to 36 hours to restore the units, Rao said in a phone interview from Gujarat, adding that the company’s two units in Narora in Uttar Pradesh are working after it faced some disturbance earlier.

“We need to find out exactly what happened so that we can make India’s grid safer and more secure,” Gopal Saxena, chief executive officer at BSES Rajdhani, a unit of Reliance Infrastructure Ltd. (RELI) that supplies western and southern parts of the capital with electricity, said in an interview. “With power coming back online about 8 hours after such a major outage, it’s really a major achievement for India.”

 – Bloomberg