Mumbai’s power cuts threaten India's financial centre

A bright-red Virgin Atlantic airlines billboard along the main road in India's financial capital beckons residents of one of the world's most crowded cities to escape into luxury.
"Now every Mumbaite (Bombay resident) will be pampered like a superstar," says the sign high above the Bandra Highway.

But residents of the busy city may miss the offer during the prime hours of 6 to 10 pm because the lights are out in this part of Mumbai, formerly known as Bombay.
"Oh... the diesel in the generator has run out. I need to put some more diesel in to get the machine going for another two hours, otherwise the billboard will be unseen," says 23-year-old Akhtar Hussain who is stationed at the billboard to operate a generator when the lights go out.

The scene at the Virgin billboard is repeated throughout Mumbai as India's most important city braces for rolling blackouts this summer because of a severe power shortage. For advertisers in this finger-shaped peninsula jutting into the Arabian Sea used to glittering neon signs and steady power -- it signals that a city billed as the next Shanghai needs some help.
A leading advertising company says the need to hire people and generators to provide billboards with power is a bad signal to investors the federal government wants to encourage as part of an effort to rebuild the city's crumbling infrastructure.

"It is bad for the city. We are talking of Bombay as the next Shanghai and here were are faced with possibilities of blackouts," says Manish Jain, general manager of Bright Advertising, a leading outdoor advertising agency.
"The billboards that give a colourful picture to an outsider entering the metropolis are without illumination. They make the skyline of this island city and give it an international look." For advertisers like Jain, a four-hour power cut means a loss of nearly 30 % in revenues for his 250 mm rupees ($ 6 mm) agency which manages nearly 500 billboards in the city.
"No doubt our electricity cost will come down, but the key is the loss in business volume and the look of the city," he tells.

The western state of Maharashtra, home to Bombay, shocked residents of the city recently by imposing a four-hour blackout daily for the summer. The state electricity board said there is a shortage of 3,700 MW of power and that is expected to rise to 7,765 MW in five years triggering "intolerable load shedding".
Power blackouts are common throughout India with causes ranging from widespread theft by companies and consumers, antiquated plants and equipment, and policies by several state governments to give power free to farmers without reimbursing state electricity boards for the cost.

To fill the gap, the government needs investment for electricity projects of 8 tn rupees ($ 186 bn) for an extra 100,000 MW of power by 2012 to keep the economy growing by 7 %, according to the Centre for Monitoring the Indian Economy.
But Mumbai, a city of almost 20 mm people that attracts migrant job seekers from across the country, was supposed to remain a beacon of light despite the power shortage. Maharashtra is India's most industrialised state and its capital is home to many top companies, the two largest stock markets, the central bank and the Bollywood film industry. Official data shows the city contributes one-third of India's total tax collection and generates 5 % of gross domestic product.

Experts trace the power deficit in the city to the collapse of the controversial Dabhol power project built by now bankrupt US energy giant Enron in the 1990s.
"The ghost of Enron has returned to haunt the state and the city," says A.D. Golandas, a senior official with the Maharashtra State Electricity Board, which was the sole buyer of the electricity produced by Enron.
Enron, the only power project set up by the state in the last decade, was forced to close in 2001 after the state electricity board fell behind on payments amid a dispute over rates. It was India's largest ever foreign investment project at $ 3 bn.

The 2,184 MW plant is now the subject of an intense legal dispute involving Indian and foreign lenders, the US and Indian governments which guaranteed part of the project and several large companies, including General Electric and Bechtel, which own the majority of the project.
To help tackle the power crunch, the western Indian state of Maharashtra asked a consortium to revive the mothballed power plant built by Enron and decided to cut free power to 2.5 mm farmers from June.

Analysts say Mumbai is still better placed than rest of the state as the city gets electricity from power plants operated by the Tata group and the Reliance group who are licensed to sell their entire production to the city. Regions outside Mumbai that get electricity from power stations run by the state electricity board face blackouts of nearly ten hours daily.
An industry lobby group, the Confederation of Indian Industry, fears that the state could be less appealing to new investments if the power shortage continues.
"If the situation does not improve the state will not only be less appealing to new investments, but even existing manufacturers could contemplate moving out," the industry group said.

Meanwhile, the city's new shopping malls and cinema multiplexes continue to be lit and air conditioned, but the question is for how long.
"As of now malls and multiplexes have uninterrupted power supply," says Ravi, an official with a popular department store at the spacious and air conditioned "Lifestyle" mall in central Bombay. "But how long we can't say. One thing is clear... Bombay needs to be protected. It is the true reflection of the new India."