No longer an island

If Tata Power and Reliance Energy manage to pull off the impossible and are able to source another 200 Mw of power on a sustained basis, it is possible that Mumbai will continue to be one of the few big cities in the country not to be plagued by power cuts. But the odds are not in favour of the city. Between April 2006 and February 2007, while the country as a whole suffered from a power shortage of 14.2 per cent, the western region's shortfall was by far the greatest, at 26.3 per cent (against the demand of 36,453 Mw, supply was a mere 26,882 Mw). All other regions too were short, including the south. In such a situation, it is hard to see from where the Tata/Reliance duo can draw more power, especially when other parts of Maharashtra are already reeling under power cuts. And so it is that India's vaunted commercial capital, which has had reliable power supply for decades, joins the national mainstream in suffering from the country's single-biggest infrastructure failure.

Since power cuts are endemic and indeed getting worse, it should be self-evident that fundamental factors stand in the way of investment in fresh capacity. Some of the problems include the high levels of power theft, and the absence of payment security mechanisms for power suppliers. As it happens, Mumbai has a better record than anyone else. For instance, it has among the lowest levels of distribution losses in the country, and its power distribution system works well financially too. Despite this, if the city faces a crisis today, it is because of the appalling lack of generating capacity. For the country as a whole, power generation rose by 8.4 per cent per annum in the 1980s, but this decelerated to 6.7 per cent in the 1990s and slowed further to a mere 4.7 per cent in the first five years of the current decade. In the case of Mumbai, not a single new power plant has been added for more than a decade. Apart from the seemingly endless problems associated with the Dabhol power plant, there are several projects that continue to remain on paper years after bids were first invited. In one infamous case, both Reliance Energy and Tata Power find they have been allotted the same piece of land for their respective power plants for the city!

No matter what strings the city's politicians and bureaucrats are able to pull now in order to browbeat other parts of the region to bail out the city, there is no solution other than increased capacity. It is in this context that the concept of "open access" becomes important, since it allows power producers to set up fresh capacity and service only those long-term buyers who have a credible payment record. Mumbai does have such a record and would benefit from open access, as perhaps would all of Maharashtra. But the strange rules by which the electricity sector are governed are such that rational solutions start becoming viewed as political suicide; and politicians would prefer to have millions of people and thousands of industries and companies suffer from power black-outs than commit political hara-kiri by following economic logic.