India Blackouts Cost Business
By Ravi Nessman 2 August 2012
GHAZIABAD, India—Work making potato chip display racks at Jayraj Kumar’s factory barely paused when much of India’s power grid collapsed.
The backup generators kicked in automatically and the electric saws, presses and welding machines kept running, just like they do during the five-hour power cuts the factory in suburban Delhi suffers nearly every day.
India’s unreliable power system has forced businesses to create a workaround electricity system of noisy, dirty diesel generators that prepared them well when the world’s worst blackout hit the country Tuesday.
But the trouble has also vastly increased businesses’ expenses, dragged down their productivity and hampered economic growth in the country.
“Running a factory is very tough here,” Kumar said.
Power Minister Veerappa Moily said on Wednesday the government would not allow a recurrence of the massive power outages. On Monday, 370 million people lost power for hours when the northern grid collapsed. On Tuesday, 620 million had no electricity after the grid collapsed again, dragging down two neighboring grids.
Moily said an investigation had begun and while he said he didn’t want to cast blame yet, he cautioned states not to take more than their allotted power.
“If they overdraw, this is the result. They can see for themselves. The entire grid will go black,” he said.
The government needed to investigate ways to resolve the disparity between supply and demand, perhaps with congestion pricing, plugging leaks in the distribution system and bringing more power plants on line, he said.
Hundreds of millions of Indians have no access to electricity anyway. Many who do were insulated from the blackouts’ effect by the coping systems they use to handle the smaller power cuts that are routine across the country.
The private Max Hospital in New Delhi said its generators were set up to fully power the facility. “The electrical system is so designed that patients do not feel even a flicker of power disruption at any point of time,” the hospital said in a statement.
Microtek, an Indian company that specializes in selling power backup inverters, claims to have 100 million “satisfied customers.”
“Every year in the summer months demand peaks and there are power failures, so most middle-class families purchase an inverter. That’s why we’re in business,” said Manoj Jain, vice president at Microtek.
According to World Bank statistics, India lost 6.6 percent of sales due to power outages in 2006, the last year statistics were available. By contrast China’s losses were 1.3 percent in 2003, the latest data available.
Kumar, 56, started his business turning metal wire into display racks 23 years ago with just three employees.
Now his company, The Rhino, runs a factory of 200 workers that churns out 1,500 red racks a day for clients from PepsiCo to Nestle that are ubiquitous in markets across India.
When the company opened its new factory in this Delhi suburb three years ago, “we knew that power would be a problem,” he said.
“From the very first day, whenever we start an office or factory we immediately think of having a decent power backup,” he said.
Behind the cavernous whitewashed factory, lined with workers operating spot welding machines and kicking up sparks as they saw through metal, stands a large, green 80 megawatt generator on a brick foundation. In a corner on the ground floor is another generator rigged with a truck ignition that starts with a belch of gray smoke. Nearby, two more generators are hooked up, and, taking no chances, Kumar bought a fifth one on Wednesday.
The factory runs 16 hours a day, at least five of them on generator power, he said.
This backup system comes at a huge price for Kumar’s business.
“Generators are meant for emergencies, they aren’t meant for production purposes,” he said.
Each generator costs one million rupees (US $18,000) and has to be replaced every three years. The four full-time generator operators cost him another 1.2 million rupees ($21,600) in salaries. He pays 4 million rupees ($72,000) in diesel bills. In all, he estimates the generator power costs him 10 times as much per unit as the grid power and adds 20 percent to his overall costs.
And the fluctuating voltage from the generators wreaks havoc with his equipment. The welding and grinding machines work unpredictably on generator power, vastly slowing down production and reducing the quality of his racks. He is forced to pay an extra 6 million rupees ($108,000) to repair equipment the unstable voltage damages every year.
“You cannot plan your production, your commitments are gone,” Kumar said.
He must use the most basic, labor intensive machines, because generator power would destroy computerized equipment.
When he tempted fate by importing two 5 million rupee ($90,000) machines that printed large format ads to adorn the racks, they both stopped working within a week, he said.
He can’t export his products because their quality is too low, but he can’t get the machines that would make them better either, he said.
With reliable power, he would instantly increase his output by 30 to 40 percent, he said.
His work in China has left him jealous of the infrastructure there. Smaller countries such as Vietnam and the Philippines have surpassed India and he laughed about a one-minute power outage he once experienced in Singapore that turned into a major news story.
“I’m ashamed actually,” Kumar said. “What are we doing, such a huge country, so many natural resources here?”