Power shortage cripples auto, textile industries in Tamil Nadu

Rapid industrialization has led to a surge in demand, triggering a crisis that could end in layoffs, lower output

Chennai/Mumbai: As if a slowing economy, sluggish consumer demand and volatile markets aren’t painful enough, industries in Tamil Nadu are reeling under a power crisis that is causing unscheduled, peak hour outages, bumping up costs and hurting output.

The southern state is home to the country’s largest textile export hub in Tirupur, and hosts factories of overseas companies such as Korean auto maker Hyundai Motor Co., French glass-maker Compagnie de Saint Gobain SA and Finnish mobile-phone manufacturer Nokia Oyj.

So bad is the power scarcity that the 6,000 textile units in Tirupur may have to lay off a combined 20,000 workers, according to the Tirupur Exporters’ Association. The industry, which employs about 350,000 workers, earned Rs9,950 crore from exports in 2007-08.

Foreign companies, drawn to Tamil Nadu by its promise of being a power-surplus state, have shielded themselves from power shortages by entering into pacts with the state government for assured, uninterrupted electricity supply. But they haven’t escaped unscathed because the manufacturing units that supply them raw materials and components have had to scale back output.

Some companies have no choice, but to depend on captive power, although the cost of electricity from captive generation facilities is three times the Rs5 per unit charged by the Tamil Nadu Electricity Board, or TNEB.

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Rapid industrialization in the past three years led to a surge in electricity demand, triggering the current crisis. Tamil Nadu’s investment pipeline increased to Rs3.49 trillion as of March from about Rs1.73 trillion in June 2006, according to data from the Centre for Monitoring Indian Economy, a private institution.

Demand for power in the state expanded from 7,228MW in 2004-05 to 9,500MW as of August 2008, but supply increased only to about 6,681.5MW from 5,234.5MW in this period, TNEB data shows.

“Demand can increase rapidly but power projects have long gestation periods, so there is a time lag,” a senior TNEB official said, adding that Tamil Nadu had not seen any significant additions to its power generation capacity in the past 10 years.
Typically, power generation and distribution plants take between two and two-and-a-half-years to start commercial operations, depending on capacity.

All major power projects under construction in Tamil Nadu are expected to be commissioned in the next two-three years, adding 1,245MW of capacity in 2009-10, 867MW in 2010-11 and 2,250MW in 2011-12, according to TNEB data.

This capacity addition may not necessarily ensure additional supply. Tamil Nadu’s total power generation capacity as of 31 March was 10,122MW, but not all of this is utilized.

The central power generating stations in the state, for instance, are supplying 1,000MW less than the 2,825MW they are expected to, the TNEB official said, asking not be named because she’s not authorized to speak with the media.