India counts the cost of state power struggle

Indian households and factories have endured power shortages for years as a result of troubled finances for state-owned power company. Samanth Subramanian reports from New Delhi

NEW DELHI // When G Chandrasekaran was compiling the accounts of his two garment factories last year, the item that caused him most grief was not the expense of yarn or a new loom.

Instead, it was the purchase of 70 generators, each burning seven litres of diesel an hour just to keep his factories in the city of Tirupur, in Tamil Nadu, running for 12 hours a day.

Mr Chandrasekaran's company, Balaji Garments, earns revenues of nearly 250 million rupees (Dh17.1m) a year from making children's clothes and nightwear for European retailers such as Auchan in France, and FRM Group in Italy.

But his margins have been eroded, he says, as a result of Tamil Nadu's power crisis.

"Last year, we didn't have power for eight hours during the daytime," he said. "For a couple of months, it was even worse - we had power cuts for 14 or 15 hours a day."

Factories are operating below capacity, running their equipment using power from generators.

In Chennai, the state capital, every household faces a daily scheduled two-hour power cut, and many homes experience further unscheduled disruptions.

The government of J Jayalalithaa, the chief minister, inherited the power crisis from the previous regime but it has worsened during her 18-month rule, said Peer Mohamed, a Chennai-based political analyst.

"The fact that she has not been able to solve the problem has hurt her politically," he said. "It has been her biggest challenge."

The state-owned power utility, Tangedco, is in troubled fiscal waters. Last year, it lost nearly 82 billion rupees, and its liabilities at the end of the last financial year stood at 244.2bn rupees, according to government data.

As a result of these debts, progress in the construction of some power plants has slowed.

In addition, transmission losses because of outdated equipment are steep - between 10 and 18 per cent - and farmers get free power, a time-honoured strategy to retain their votes.

Ms Jayalalithaa is struggling to restructure the finances of her power utilities.

She has also appealed unsuccessfully to the federal government to feed surplus power from the northern grid into Tamil Nadu's power system.

"But voters won't understand these details, and they won't understand that she inherited the power crisis," said Mr Mohamed. "For them, it's basically: 'I voted for you, believing that you could solve such problems, and you haven't'."

Tirupur, a city of about a million people, is one of the industrial powerhouses of the state.

About 500,000 people work in its garment factories, making clothes for western brands such as Banana Republic, Victoria's Secret and JC Penney.

Tirupur clocks up 120bn rupees-worth of garment exports every year.

Tamil Nadu's power crisis, said A Sundar, the assistant director of the Apparel Export Promotion Council, a nationwide industry body, had hit the town hard.

"Every manufacturer is trying to manage the increased costs," he said. "Some have even shut down. People have told us: 'We couldn't afford to run the factory'."

Adding to the power crisis, he pointed out, was the rise in the price of diesel, which makes generators more expensive to run. In Chennai, the price of a litre had increased from 40.16 rupees in May 2011 to 50.68 rupees today.

Mr Sunder said he could not quantify the losses suffered by Tirupur's garment industry, but described the situation as "very bad".

Other industrial sectors have faced similar problems.

A survey by the central government's ministry of micro, small and medium enterprises, found that industrial production in Tamil Nadu had dropped from 15bn rupees a day in 2011 to 6bn rupees a day in 2012.

Although the survey did not attribute this drop exclusively to the power crisis, industrialists believe it to be the primary reason.

Ms Jayalalithaa's government has promised that the power deficit would be halved by the middle of this year and eliminated entirely by the end of the year.

The financial restructuring of Tangedco is already under way and Ms Jayalalithaa is also pinning her hopes on two 1,000-megawatt nuclear plants that have been commissioned for the seaside town of Kudankulam.

Ms Jayalalithaa said she understood the wait has seemed to be a long one.

"Wait for one more year," she told the state legislature in October last year. "It may not even take one year. Wait till June 2013, and bear with me."

But Mr Mohamed remains sceptical. Reducing the power deficit, he said, "may be possible to some extent. But I don't think the problem can be fully solved by the end of the year."

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