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India Wants Electric Power

Daily Policy Digest

Regulatory Issues

Wednesday, October 10, 2001

The government of Prime Minister Shri Atal Bihari Vajpayee proposed ambitious reforms for India's socialist economy; but unfortunately, it has failed to follow through. One result is that India continues to suffer from electric power shortages, including blackouts, and the power industry is in dire straits.

  • Currently, the average electric power shortfall at peak times is 13 percent -- more electricity than the entire peak demand in more-industrialized Malaysia.
  • Most state electricity boards are bankrupt, despite a massive $2 billion in subsidies each year from the federal government, plus more from local authorities.
  • On average, it costs 3.04 rupees (6 U.S. cents) to generate one unit of power, but only 2.12 rupees are ever collected for every unit produced -- a 30 percent loss.
  • Much of the power simply disappears through antiquated transmission and distribution networks -- some 40 percent to 50 percent -- and some is simply stolen.
Many consumers pay little or nothing for electricity (when they get it); but polls show that most would be willing to pay more for reliable service.

Source: Editorial, "Lights On," Far Eastern Economic Review, October 11, 2001.

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