India's Electric Power Crisis: Why Do the Lights Go Out?

Abstract

In May 1991 the respected British publication, The Economist, called India a caged tiger waiting to be released so that India could fulfill its potential-an economic miracle waiting to happen.' A few months later, the new government of P. V. Narasimha Rao began the process of unlocking the cage by initiating changes in India's restrictive foreign investment policies, slashing elaborate permit and licensing systems, proposing a reduction in the massive subsidies, and starting privatization of the large and inefficient public enterprise system. The new initiatives are intended to attract more investment by multinational companies, increase the slow economic growth rate of the previous decades, and launch India into the world trade system in the same league as the newly industrialized countries (NICs) and the emerging NICs of China, Malaysia, and Thailand. However, one factor-the availability of electric power-will influence both foreign investment and the pace of India's economic reform and development. The growth of electric power capacity closely correlates with increases in GNP, and an adequate power supply is a prime infrastructural priority for countries seeking to attract and hold foreign investment and sustain rapid economic growth. India has endured a crisis in electricity supply for over 20 years, and the problems for the country could become more severe in the future. This article will explain the nature of the power crisis and how it came about, then evaluate attempts to alleviate it. While electric power in many developing nations is a scarce commodity and a number of other Asian nations also suffer serious shortfalls, India has devoted a large portion of its planning outlays to the power sector. Moreover, electricity production and distribution is not a frontier technol-