India's acute electricity shortage, at sharp odds to its booming economy, is a focus at the Hanover Industrial Fair this week. Delhi wants to drum up more German investment in the sector.
India's hopelessly tangled electricity sector is in urgent need of a fix
The crisis started four years ago, remembers Satish Krishna Ambekar. "We started facing load-shedding for four hours daily," said the 57-year-old entrepreneur, referring to the cutting off the electric current on certain lines when the demand becomes greater than the supply.
Ambekar, who runs a factory making confectionary cartons in Pune, close to Bombay, said the impact was ruinous: "My workers sat idle, we couldn't meet our business commitments. The production losses were catastrophic." Like much of the manufacturing and corporate sector in India long used to the failings of the national grid, Ambekar invested in setting up his own "captive" electricity generating plant in order to survive.
Millions in India live without adequate electricity supply
By one estimate, peak demand in India today exceeds electricity supply by 14 percent. The countryside, where more than two-thirds of India's 1.2 billion people live, accounts for no more than 13 percent of electricity consumption and some 40 percent of the country's electricity supply is lost due to theft.
In an expert report, the Indian government reckons it would need a capacity addition of 100 gigawatts by 2012 if it is to meet an ambitious "power for all by 2012" goal.
German investment sought at Hanover
It may sound like an insurmountable problem, but Delhi is trying to tackle it by opening up the hitherto state-owned electricity sector and inviting foreign investment. The topic is set to be a focus at the ongoing Hanover industrial fair, where India hopes to attract more German investment in its power sector during an Indo-German energy symposium.
"Hopefully German companies will have a lot of interest," said R.V. Shahi, secretary in the Indian Energy Ministry, speaking to journalists recently in Delhi. "The opportunities for them will be threefold: power projects, coal mines and supplying parts and machinery."
Germany eyeing coal, technology transfer
The Indians can count on a receptive audience when they come to Hanover this week.
The Indian Railways alone is a huge energy-guzzler
"India's hunger for energy is so huge that German firms will surely be interested in feeding it," said Achim Rodewald of the Indo-German Chamber of Commerce in Mumbai. He pointed out that, ironically, private industry provides the most growth potential for German firms in the sector. "Companies in India just don't have much faith in the national grid and often the quality of electricity is so poor that it routinely wrecks machinery," said Rodewald. "That's why so many are eager to build their own electricity-generating plants."
A few big German companies already play a prominent role in the Indian electricity and power segment. Siemens technology reportedly already accounts for about 35 percent of India's installed electricity capacity.
Herdan Thorsten, head of The Association of German Machinery and Plant Construction (VDMA) in Frankfurt said that Germany could play an increased role in supplying machinery for all types of power plants. "I think the Indians will be particularly interested in German technology whether it's in turbines, compressors or pumps," he said.
And India has just confirmed it plans to talk nuclear energy with Germany at the Hanover fair. Nuclear energy makes up 2 percent of India's energy supplies. Germany is in the middle of a nuclear phase-out at home.
However, the coal industry, which has no big future in Germany, stands to gain from India's overtures. Coal fuels as much as 60 percent of India's electricity needs and Delhi has admitted that coal will continue to be India's "mainstay" fuel for years to come.
Germany has several coal-fired power plants
"Germany's a world leader when it comes to coal-fired power plants and machines used for efficient extraction of coal. So India's definitely interesting," said Thorsten.
Germany is known for its expertise in so-called "clean coal technology." This could be welcome in India, since its own coal reserves are of a low quality, with a high ash content and low calorific value.
Rodewald added that a delegation from Saarland, a coal-mining region in Germany, was in India recently to sniff out opportunities.
Renewable energy the winner?
But, according to some, it's Germany's renewable energy sector that stands to profit the most from India's spiraling electricity needs.
"Renewable energy will inevitably become more important given high oil prices and the limited reserves of fossil fuels and India's not going to be immune to it," Rodewald said.
Renewable energy currently fuels about five percent of India's electricity. Though that's not even a fraction of what's needed, it's steadily on the rise -- facilitated by tax breaks and other moves by the Indian government to attract foreign investment in the sector.
Wind energy is also catching on in India
Not surprisingly, those German companies who have already made the leap to India are reaping the benefits. A company specializing in wind energy, Suzlon, has even floated its shares on the stock market.
"Take a bet on India "
Some point out that there's only one way ahead for still-hesitant German companies eyeing India's massive electricity sector.
"You have to take a bet on India," said Montek Singh Ahluwalia, deputy head of India's State Planning Commission in Delhi. "If India's going to continue to grow at 8 percent, there's going to be a huge demand for electricity, if it isn't, there's no point investing in it. That's the key decision."