Power grids collapse: Five reforms that the sector urgently needs

A second consecutive day of Northern grid failure, coupled with the collapse of Eastern and North-Estern grids has brought in stark light, the need for reforms in India's power sector.

In what is being called as the biggest ever power failure in India, half of of the country was without electricity supply on Tuesday afternoon.

This affected hundreds of trains and lakhs of households and establishments as the grid that connects generating stations with customers collapsed for the second time in two days, highlighting the precarious state of the power sector in the country. The failure has raised concerns about the power sector.

Here is a look at five reforms that the power sector urgently needs.

1) Fuel. Scrap coal nationalisation, till that happens, allow all those holding coal mines to produce as much coal as they can, the incentive being permission to sell at the best price possible. Tax away supernormal profits.

2) Mandate regulators to allow pass-through of fuel costs and state grids to permit open-access. At least those who can afford to buy power at the market price will not be starved of power.

3) Stamp out power theft and subsidised power. No industry can survive if close to 40% of what it produces is not paid for, for some reason or the other. All subsidies should be transferred as income support, leaving the market for power functional.

4) Deploy information technology in the grid. Smart grids can them be programmed to maintain grid discipline - cut off states drawing excess power and generators supplying excess power. Shift discipline from compliance by humans to algorithms determined by policy.

5) Invest massively in generation, transmission and distribution, so as to meet latent demand in rural areas. This will trigger structural diversification in the rural economy, create new incomes and boost overall economic growth