India’s blackout
Skip to content
Aug 8, 2012

India’s blackout

By Tim De Chant

India's power grid

Last week's massive blackout in India put the spotlight on one of the country’s open secrets—its infrastructure is antiquated and crumbling. Over 600 million people in India were without power for days—that’s nearly 1 in 10 people on the planet.

“The fundamental cause is a supply-demand problem. Too much demand, not enough supply, and an inefficient and creaky distribution system,” said Lakshman Krishnamurthi, a professor of marketing.

Rolling blackouts are unfortunately common throughout India. Power grids are built with giant circuit breakers that can be thrown to isolate sections where surging demand could drag down the rest of the grid. The problem in India was, those breakers weren’t thrown. Many people suspect corruption caused this blackout—captured regulators and bureaucrats didn’t intervene when they should have, allowing various constituencies to draw too much power. Apparently this happens all the time in India, just not on this scale. But the ailing grid is ultimately to blame because without its underlying problems, such unscrupulous behavior wouldn’t have had as big of an impact.

The massive blackout has underlined concerns about India’s grid and its ability to effectively manage it. The grid’s unreliability has created massive headaches for businesses. “Most companies operate with backup power supply from diesel generators” not just to deal with blackouts, but frequent power shortages, said Sunil Chopra, a professor of managerial economics and decision science. While that means many companies were relatively unaffected by the blackout (save for employees unable to get to work because of the gridlock), it doesn’t mean electricity shortages haven’t taken their toll. Having to invest in expensive infrastructure like generators “often raises the cost of doing business,” Chopra pointed out.

Though Indian companies have long had to contend with electricity shortages, this blackout will undoubtedly pose new challenges. Investors may shy away from the country, fearing the unreliability of its grid. “In the short-term it will definitely be a negative,” Chopra said. “The long-term impact will depend on the response of the government, which currently controls most of the generation capacity.”

But, he added, “If this event serves as a wakeup call, it could be good in the long-term.”

India’s grid may ultimately become a bottleneck for growth. “To achieve sustained growth rates of 8% over the next 10 years, the country’s infrastructure problems have to be addressed,” Krishnamurthi said. “Energy is the prime driver of economic growth.”

What’s driving the supply shortage is multifarious. Transmission and distribution losses in India are over 20 percent, Krishnamurthi said. For reference, losses in the U.S. grid are about 7 percent. India’s estimated losses might be on the conservative side, too. Electricity theft by households and business is not uncommon, he added. Plus, India is heavily reliant on hydroelectric power, and the north has not received much rain this year. Coal-fired plants haven’t been able to make up the difference because of coal production shortages, Chopra and Krishnamurthi both pointed out.

“In the long-term, the solution is to increase supply,” Chopra said. “In the short-term, demand has to be managed with supply being rationed.”

Photo by daviddumas.

Trending

Editor’s Picks

A mentor puts capes on proteges.
Careers

Podcast: How to Be a Great Mentor

Plus, some valuable career advice that applies to just about everyone.

Kids decide whether to buy water or soda.
Marketing

A New Way to Persuade Kids to Drink More Water and Less Soda

Getting children to make healthy choices is tricky—and the wrong message can backfire.

Computational Social Scientists discuss solutions.
Innovation

How Can Social Science Become More Solutions-Oriented?

A conversation between researchers at Kellogg and Microsoft explores how behavioral science can best be applied.

An entrepreneur enters an established company.
Innovation

Buying a Company for Its Talent? Beware of Hidden Legal Risks.

Acquiring another firm’s trade secrets—even unintentionally—could prove costly.

Careers

Take 5: Tips for Widening—and Improving—Your Candidate Pool

Common biases can cause companies to overlook a wealth of top talent.

Drug innovation at a pharmaceutical company
Innovation

Everyone Wants Pharmaceutical Breakthroughs. What Drives Drug Companies to Pursue Them?

A new study suggests that firms are at their most innovative after a financial windfall.

Careers

4 Key Steps to Preparing for a Business Presentation

Don’t let a lack of prep work sabotage your great ideas.

Healthcare workers meet in a hospital corridor.
Healthcare

Video: How Open Lines of Communication Can Improve Healthcare Outcomes

Training physicians to be better communicators builds trust with patients and their loved ones.

A man tries to improve OR scheduling.
Operations

Here’s a Better Way to Schedule Surgeries

A new tool could drive savings of 20 percent while still keeping surgeons happy.

Voters who do not trust each other.
Politics & Elections

Why Economic Crises Trigger Political Turnover in Some Countries but Not Others

The fallout can hinge on how much a country’s people trust each other.

A clerk scans brand trademarks.
Marketing

Building Strong Brands: The Inside Scoop on Branding in the Real World

Tim Calkins’s blog draws lessons from brand missteps and triumphs.

two coffee growers harvest beans
Economics

How the Coffee Industry Is Building a Sustainable Supply Chain in an Unstable Region

Three experts discuss the challenges and rewards of sourcing coffee from the Democratic Republic of Congo.