India has a power grid that is under incredible strain at the moment and has been having “back-to-back grid failures.” Due to this, there has been a surge of bad reputation for the country and businesses like “crematoriums…switched back to wood, tax authorities extended the deadline for filing returns, and stock analysts recommended shares for power equipment makers in anticipation of more investment in the grid.” Furthermore, grid failures have caused many multinationals such as GM who does some of its manufacturing in India to be fearful. Since the state “dominates power production” and the private sector accounts for only “27% of generation capacity” the question about whether the industry should be entirely privatized comes to my mind. If it were, the country would not be so dependent upon forces beyond its control such as rainfall shortages which decrease the ability of its hydroelectric power supply accounting for one-fifth of overall generation. Obviously there are also alternatives to privatization such as selecting different energy generation methods that are less susceptible to outside forces which is what the power ministry and Prime Minister Singh would like to do. His plan for $400 billion in power sector investment and intention of raising energy rates seems like a good short-term solution to the problem the country faces. However, many like S.L. Rao, former chairman of the Central electricity regulatory commission, think that this will be enough in the long run. I tend to think he’s right but I also believe that by privatizing the industry it opens the doors for potential environmental damage if the government cannot do a good job policing private energy generators. Since there is a great deal of corruption in the government already this is highly likely and so it might be in India’s best interest for the time being to continue having the government sponsor the energy industry while also setting long-term goals for transitioning it into the private sector.
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