Powered, empowered, or powerless?

India’s production of electricity, its topsy-turvy pricing policy that charges industrial electricity more than domestic, and its terrible N-electricity production reputation,
have dropped it to the bottom of the global heap

By Amarjit Singh

Probably no one doubts that electricity for power is a fundamental infrastructure item when it comes to industrial growth. The Economic Times reported that electricity generation was 10 per cent of the economy of India in 2004, which goes to show how important a chunk it is. However, what should be very clear, as the International Energy Agency (IEA) reveals (graph 1), in the case of China, is that the rate of growth of power is an integral part of the growth in GDP, such that the two are intrinsically correlated. While China has taken serious measures to propel itself into the light of industrialisation and defence production that require electric power, India, relatively speaking, still ploughs in the dark.

In 1951, India and China were newly emerged countries, with identical per capita incomes. By the time Mao Zedong died in 1976, China’s Great Leap Forward and Cultural Revolution had left China frayed and frazzled. As history tells us, when China awoke after Mao’s death, it did so with a vengeance. In fact, China had fallen so much behind India by 1976 that it took China till 1991 to catch up with India’s per capita income. Consequently, China sustained double digit GDP growth over much of two-and-a-half decades, and today, China produces three times more electricity than India for a population that is equivalent to India’s.

As per World Development Indicators of 2004, China’s industrial juggernaut is powered by 1,800 billion Kilowatt Hours (kwh) of electricity compared to India’s 600 billion kwh, amounting to a per capita consumption of electricity for China of 1,500 kwh per year, compared to India’s 600 kwh per year (graph 2)—a differential of two-and-a-half times. India thinks it has done well in electricity production given the obstacles it faces, but we must remember that all nations face obstacles of some type or another. Thus, we see that while India’s electricity production between 1980 and 2003 has been at an internally impressive but externally uncompetitive rate of 7 per cent, China’s has been doing better at 8.4 per cent.

An interesting feature is that while China’s installed electricity production capacity in 2003 was 350 gw compared to India’s 140 gw as per the CIA Factbook—a differential, again, of two-and-a-half times—China’s overall electricity consumption was actually three times. But, why should this difference be? The reason: India’s transmission and distribution efficiency stands at an astonishing low of 73 per cent according to the IEA—the worst performance in the world where average is 91per cent—while China’s efficiency is 94 per cent. There are two further reasons for this—one, our engineering is dismal and getting relatively worse; and, second, we have the ill-repute of being a nation with enormous electricity theft. India has reached the top in precisely what it shouldn’t; for the sake of electricity we are a nation of thieves, and this thievery is often condoned by politicians.

As if that wasn’t bad enough, the World Energy Investment Outlook of 2002 recorded that India’s residential sector electricity consumption per capita was not only among the lowest in the world, but less than the whole aggregate of Africa. Is this where India sought to reach—below backward Africa? Remaining shut and embroiled within its own troubled confines, India has failed to see what the rest of the world has been achieving.

India has the dubious distinction of being the only nation whose electricity rates for industries are up to 100 per cent more than for residences. Only one other major nation charges more for industrial electricity than residential—Indonesia—but their differential is only 33 per cent. Whatever the arguments anybody in India may have for this trend, the fact is that high electricity rates for industries negate industrial expansion and foment inflation. Contrast India to the United Kingdom, where the complete inverse is true: industrial electricity rates are half that of residential rates. All developed nations charge less for industry than residential. What is it we do not see that we have uch topsy-turvy electricity rates?

To top it all, the IEA observed that India’s revenues and return on capital from all its State Electricity Boards (SEB’s) has steadily gone down between 1992 and 2004 from 80 per cent of cost to 60 per cent, which is as bad as it is anytime costs outstrip revenue. In addition, the return on capital has not only been negative throughout that period, but gone further down from -15 per cent to -50 per cent. Rather than doing better as the years go by and as improved technology becomes available, our SEB’s are slipping from bad to worse. Is it any surprise, then, that our public sector debt has magnified from 60 per cent of GDP in 1998 to 80 per cent of GDP in 2004, inasmuch as the government fiscal balance has gotten worse from -8 per cent to -11 per cent in the same period (RBI data).

India was the first country in Asia to use nuclear energy to produce electricity. China didn’t wisen up on nuclear electricity till the early 1980s when Deng Xiaoping opened China. The United States Department of Energy (UDSDOE) ays that India was leading China in nuclear energy till as recently as 1995 (graph 3). However, India has squandered even that lead. In 2004, China had 4.6 gw of installed nuclear energy capacity, compared to India’s 2.8 gw. Today, China has 30 new nuclear plants under construction, with another 15 planned, while India has had to close down reactors instead of adding new ones, leaving India out in the cold, thus adding to its heat.

In hydropower, China’s production was twice that of India in 1980, but in 2004 was more than thrice, 85 gw vs 25 gw (USDOE data). There is no major engineering endeavour, such as automobiles, aircraft or submarine production, in which China is behind India. What is it that India can’t do that others can?

India’s slow development of thorium as a source of nuclear fuel has led it to desperation. Thankgoodness the US-nuclear deal is in the offing, else the mismanagement by the Department of Atomic Energy (DAE) was catastrophic. KAPS, our best atomic power station, was reported as having three times more radiation leakage than the international standard in 2002. As per IAEA data (1996), four of the six least reliable reactors in the world belonged to India, including three of the newest. India’s reactors were reliable only 41 per cent of the time (Ukraine’s were 67 per cent). The DAE’s secrecy is totally unwarranted and absolutely debilitating. Any common physicist or nuclear engineer can estimate how much spent fuel we have produced with the number of nuclear plants we have, and how many bombs we can potentially make out of them (1,000 of tiny Hiroshima size), so what secrecy is DAE talking about?

Furthermore, the DAE undertakes all nuclear energy training inhouse, which teaches old technology gone stale. Yet, with all this hype about being a nuclear power, India offers not one nuclear engineering degree, where the US, for instance, has dozens of universities doing so. Thus, we end up with proud riffraff running our nuclear establishments. These are not the signs of a nation that knows what to do.

The Electricity Production Research Institute of the US recently reported: “The current power infrastructure structure (the electric grid) in India is as incompatible with the future as horse trails were to automobiles.” Well, this has been known in India for ever, with little done. What can we hope for anymore?

India has not woken and not delivered. Solutions have run out. I don’t see easy remedies, given that the percentage of Indians living below poverty has been steadily increasing, and that the current economic “uplift” can be attributed to only 50 million Indians. Pareto’s law of 95 per cent of the money being held by 5 per cent of the population could never be truer than in the Indian sense.

Yet, a resurgence in atomic power and wind power is plausible. The nuclear share of India’s electricity generation as per the IAEA is 4 per cent compared to Slovakia’s 55 per cent and Spain’s 25 per cent, so there is a case for increasing nuclear energy on this account. Nuclear power, which is expensive, can most easily be harnessed through privatisation via an open international market, though our swadeshi politicians may find that difficult to digest.

But the most attractive prospect appears to be wind power. Our preliminary analysis and calculations at the University of Hawaii showed that India has immense potential in offshore coastal wind power, which it can develop to raise the average per capita production of electricity to 4,400 kwh per person per year at only a present worth of US$ 40 billion for the whole country.

No alternative is cheaper. I’d wager we have no better choice. And, leave aside horse trails as far as the electric grid and SEB’s go; the Indianeconomy and engineering industry are, quite frankly, demonstrating the relative performance of a mule among well-bred horses.

Amarjit Singh is a professor at the University of Hawaii, US