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Power Shortages Loom as India's Economy Grows

A linesman repairs electric cables in Allahabad, India
India is grappling with acute power shortages as its economy grows steadily. Upgrading the country's infrastructure is one of the biggest challenges facing the government.

Across large parts of India, blackouts in the hot summer months have been taken for granted for years. The lights go out, often for hours at a stretch, because the total power output in the country falls short of demand by 15 to 20 percent.

But alarm bells rang last month when Bombay, India's financial capital, was plunged into prolonged blackouts. The city houses the country's stock markets and some of its top companies.

Protests from businesses and consumers brought the lights back on, at the expense of surrounding rural areas, which now face up to nine hours of power cuts a day.

In fact, most businesses in India stopped relying on power supplied by the government more than a decade ago. A study last year by the World Bank and Confederation of Indian Industry said that nearly two-thirds of companies run their own power generators to compensate for failures in state-supplied electricity. Those forced to rely on their own back-ups range from small shop owners to large industries.

Energy experts say the crisis has been brought on because cash-strapped state governments have failed to build new power plants to meet the demands of a growing population and an economy that has expanded by seven or more percent in each of the last two fiscal years.

An energy analyst with the Confederation of Indian Industries, V. Raghuraman, says the federal government is now encouraging private investors to establish new electricity plants. But he says socialist policies in states that give subsidized power to farmers and consumers are hampering private investment in the sector.

"We are not finding the investments really rolling out as they are intended, because there is a big capacity shortage. Private sector will only get in when we get bankable offers, and bankable projects, which means collecting affordable tariffs," he noted.

Mr. Raghuraman says the situation is likely to improve in about five years, because the government has approved about $12 billion worth of state and private investment.

Meanwhile, businesses say the power crunch is hitting them hard. They complain that relying on their own power is often expensive, and adds to the cost of services and products in an increasingly competitive global environment.

The farm sector is also being affected. It may get free or subsidized power, but many farmers complain that blackouts force them to run their pumps for shorter hours.

Economists say the problems in the power sector are symbolic of India's need to upgrade its run-down infrastructure across the board, if it wants to bill itself legitimately as one of the world's fastest-growing economies, and become more attractive to foreign investors.