For the last several weeks, people in the rural areas of Maharashtra have had to endure nine hours of blackouts every day. Those living in the state's urban areas (Mumbai excluded) have been slightly more fortunate. They have had to cope with just four hours of load shedding every day. As for Mumbai, India's commercial capital, people have been urged-by no less than the state's Chief Minister Vilasrao Deshmukh and that too on the eve of Maharashtra Day on April 30-to consume power more sparingly. Elsewhere in the state, industry-ranging from automobile manufacturers like Tata Motors and Bajaj Auto to textile manufacturers like Padma Impex and Siyaram Silk-is bracing up for disruption in supplies and an increase in the cost of production. "When the lights go off in India's financial capital and production falters in the nation's most industrialised state, then there is truly a cause for concern," says Jayesh Desai, Director at Ernst & Young, a top consulting firm.

For a state that long boasted of having one of the best performing electricity boards (the Maharashtra State Electricity Board, MSEB) and almost no outages until 1996, the situation has rapidly deteriorated. The power deficit (mismatch between demand and supply) has soared to 3,800 mw, and the state has been reduced to borrowing electricity from the neighbouring states of Andhra Pradesh and Gujarat. The situation is so severe that the state government has taken the unthinkable step of pulling the plug on free electricity to farmers-a huge votebank for all political parties.

What's behind Maharashtra's power crisis? Apparently, the controversial Dabhol power project, promoted by now-bankrupt Enron Corp. The allegation is that ever since Dabhol started producing power in May 1999, the MSEB went on a holiday of sorts. Strategic planning was abandoned and the focus shifted away from new capacity addition in the belief that Dabhol's 2,100-mw capacity would be sufficient to meet the state's power requirements in the foreseeable future.

But, as it turned out, the Dabhol project proved to be a non-starter, and shut generation in January 2001, because of a stand-off with the MSEB over tariffs. In that time, of course, the demand for power had continued to soar. "Partly responsible for the shortage was the industrial revival in the state and partly, the decision to lower tariffs (by the MERC or the Maharashtra Electricity Regulatory Commission) and give 80,000 more agricultural connections last year alone," says Girish Sant, an energy expert working for Prayas, a Pune-based NGO.

Compounding the problem were losses in existing generation capacity. For example, MSEB's Uran plant has been operating at less than half its capacity of 900 mw, because of shortage of gas supplies from the Bombay High and high transmission and distribution (T&D) losses of 35 per cent. That alone knocked off 400 mw of the 900 mw that the state gets. In the last two months, the state government has gone into overdrive and sewed up as many as eight MoUs with private players for an additional 12,500 mw of power. The problem: It will take five years for that capacity to come on-stream.

Meanwhile, industries big and small in Maharashtra are suffering. Consider the powerloom sector in Bhiwandi, home to 6 lakh units of the 18 lakh in the country. The industrial town had already been facing five-to-six hours of power cuts every day, but that has now worsened to as much as 10 hours. For every one hour of lost production, the industry here loses Rs 42 crore in sales. Using diesel generator sets only pushes up the cost of electricity to Rs 7 or 8 per unit. Says M.Y. Momin, President of the Bhiwandi Powerloom Weavers Federation and the Powerloom Development and Export Promotion Council: "Since 60 per cent of the yarn produced in Bhiwandi is exported either directly or indirectly, the additional cost makes us uncompetitive, especially against China."

It isn't just the small players who are suffering. Even big manufacturers are getting hit because the small suppliers who feed into them with components and raw materials can't afford to set up captive power units of their own. Says Sanjiv Bajaj, Executive Director of Pune-based Bajaj Auto: "We haven't been affected so far largely due to our own internal generation capacity. But all of our component suppliers are in Maharashtra and they don't have any (power) backup as such, so it affects us indirectly."

While a captive power plant ensures supply, it also adds to the cost. Says Venugopal Dhoot, Chairman and Managing Director of the Videocon Group, which manufactures Rs 3,000-crore worth of consumer durables in Aurangabad (Maharashtra): "While there is load shedding, power is available at a higher cost. Basically, it's a penalty the company has to pay in order to use extra power. This increases the cost of electricity by about 10 percent per annum." Not all of that cost, of course, can be passed on.

Same Story Elsewhere

The energy crisis in Maharashtra is actually symptomatic of a nation-wide problem: that of growing demand and stagnant or, worse, shrinking supply. Take the national capital for example. Despite generating only 17 per cent of its power needs (peak demand in Delhi can soar to 3,450 mw per day), a Tata Power proposal for setting up a 1,000-mw plant in Bhawana in Delhi has been hanging fire for the last year-and-a-half. "That despite the fact that the new Electricity Act of 2003 allows private companies to set up generation units without any clearance from the state governments," notes Anil Kumar Sardana, CEO of Tata Power's North Delhi Power Ltd. The result: Delhi is at the mercy of neighbouring states for supplies.

The story isn't very different in Karnataka and Tamil Nadu, both important centres of it and automotive industries. A study done by the Karnataka Power Transmission Corporation shows that the current demand supply gap of 2,250 mw will jump to 3,450 mw by 2006-07 and 5,300 mw by 2011-12. In Tamil Nadu too, where TNEB, the state electricity board, generates 9,500 mw, there is a shortfall of 300 to 400 mw. This year, it plans to spend Rs 400 crore on upgrading its power infrastructure.

According to officials, TNEB has signed an MoU to set up two joint venture power plants: It will work with NTPC to set up a 1,000-mw plant at Ennore and with Neyvelli Lignite to set up another one of identical capacity at Thootakudi. In addition, the state power board will revive the 1,000-mw Jayamakondam Power Project that was put on the back-burner some time ago. While wind farms in Tamil Nadu already generate more than half of India's wind energy, the state government plans to add another 500 mw capacity this year. That apart, a 53 mw gas-based unit is to be commissioned in Ramanathapuram in the state.

Where Tamil Nadu seems to be dragging its feet is in overhauling its distribution system. The state, however, has focussed on enhancing its T&D infrastructure and improving services to customers in Chennai and other key areas. Its collections are already at around 99 per cent, and T&D losses stand at around 20 per cent, which is one of the lowest in the country.

The battle for power, say people like Sardana, has to be fought on two fronts. One is to add fresh capacity to match the growth in economy (according to some experts, every 1 per cent growth in GDP requires an additional 1.5 per cent of power supply). The other is to ensure that the existing capacity is operated at the optimal level. "But these aren't easy battles to win," says Sardana.

Especially when there are fuel shortages. For instance, at the end of February this year, 24 plants (with a total capacity of 23,000 mw) had coal stocks of less than seven days. Karnataka's Raichur Thermal Power Station is a classic example. The state-owned utility needs more than 21,000 tonnes of coal every day to fire all its seven units, but currently supply is restricted to below 5,000 tonnes. That means it can barely operate two units at a time.

According to a Central Electricity Authority study, of the 4,300 mw planned capacity in the 10th Plan, almost 2,800 mw is behind schedule because of coal supply constraints. On the whole, there is a shortfall of around 50 million tonnes of coal in India today. As far as the other fuels are concerned, LNG is far too expensive and gas is still a scarce commodity. In fact, that's something that could derail all the new gas-based private sector power plants that are coming up.

If, like Andhra and Orissa, other states have to get their act together, an investment of Rs 9,00,000 crore will be needed to add 212,000 mw of power that the country will need by 2012. And it's no more a question of whether India can rustle up that kind of investment. Rather, the question is how and when. Otherwise, the country runs a real risk of getting its growth story short-circuited.

-additional reporting by Rahul Sachitanand and E. Kumar Sharma