“There is a lot of political interference,” inspector Ved Prakash Agrawal said during a raid on the outskirts of the northern town of Modinagar. “The local politicians say, ‘I will have you killed, I will have you suspended, I will have you transferred.’ They complain to our higher-ups. It is very difficult.”
In India, about a quarter of all power generated is either stolen or lost in transmission, five times the figure for China. Still more is given away to farmers, while the rest is sold to consumers at a loss, pushing state electricity companies toward bankruptcy and resulting in the rolling blackouts that afflict almost the entire nation every day and undermine its economic prospects.
“Successive governments in India at the central and state levels have considered populism — the promise of cheap or subsidized power — an effective strategy,” Arvind Subramanian of the Peterson Institute for International Economics in Washington recently wrote. “But the consequence has been either no power or highly interrupted power for a vast majority of Indians.”
At its worst, India’s power sector is the perfect example of populism and patronage trumping sound economics, analysts say. Power symbolizes the way Indian democracy often fails to meet the most basic aspirations of voters for transparent government, jobs, empowerment and opportunity.
“Power is often an important source of the struggle between the politics of patronage and the politics of aspiration,” said Ashish Khanna, senior energy specialist at the World Bank in India. “The question is whether a credible promise of improved power delivery can be turned into a new narrative that meets those aspirations and reaps political dividends.”
India’s state electricity companies have run up losses of $46 billion, or 2 percent of national income, largely financed by lending from public-sector banks, straining the country’s financial system. As a result, the companies have little money to invest in equipment or pay salaries, or even to pay for the electricity they are receiving from newly built private-sector power plants.
Aware that this liquidity crisis was threatening the solvency of the power sector, the Indian cabinet last week approved a debt restructuring package for the state electricity boards — relief based on whether they improve their performance, do more to stem losses and strengthen regulation at the state level.
While the package has given the sector some breathing space, analysts said there was no guarantee that states would stick to their promises and undertake the fundamental reforms required to produce lasting benefits.