03/20/2013 02:38 pm ET Updated May 20, 2013

India's Power Slipping Away?

Once in a blue moon, an Indian bureaucrat gets it right. R.V. Shahi, the federal power secretary in 2003, took on a backwater job that few wanted, and resurrected the country's electricity sector.

Fundamental to his initiative was setting up a regulatory regime for utilities, non-existent for 50 years. Utilities in India, called state electricity boards (SEBs), had hitherto operated mainly as dispensers of political largesse. Electricity was given away to vote banks like farmers, theft was unbridled, balance sheets were considered scraps of paper. No surprises then that SEBs would bleed to death, but a forgiving government would step in to wipe their slate clean. Good money followed bad, with the vicious cycle repeating ad nauseam.

Shahi took on a clueless political class, and brought up archaic issues to the forefront. Soon states like Gujarat, and even poorer ones like Orissa, set up regulatory commissions that set new tariffs and freed their SEBs, somewhat at least, from the stranglehold of the politicos. As the country's economy started growing, the politicians themselves realized that the electricity equation had changed.

No longer was there much dividend in doling out power. A growing middle class wanted consistent supply, and was willing to pay for it. Industry demanded power of better quality. If left unaddressed, India's power woes would put its growth in jeopardy.

When Manmohan Singh became prime minister in 2004, he realized India's need for more power. In 2005, he and George W. Bush stunned the world by announcing a nuclear deal. Consummating it consumed Singh. While the layman did not understand its contours, he trusted Singh was doing something about India's power situation, and re-elected him.

Shahi retired, unheralded and sans promotion, typifying India's bureaucracy in which careerism often trumps accomplishment. But he had converted the moribund power ministry into a hotspot, with pols and bureaucrats vying to plug in. Recent power minister, S.K. Shinde, was elevated to the home ministry. A new renewable energy ministry was created, headed by Farooq Abdullah.

Few expected much of him, but he announced that India will target 20 gigawatts of solar energy by 2020 from a base of 5 megawatts in 2009 (one gigawatt is 1,000 megawatts). A pipe dream it may well turn out to be, given the global downturn in the solar industry, but Abdullah is not known if not for grand gestures.

Utilities in Mumbai and Delhi have been privatized. With balance sheets coming in focus, they have had to curtail theft, which used to average around 30 percent.

India faces the same conundrum in electricity as in food. Much of its population does not have access to either, but the government claims a bounty of both and wants to export it.

The aforementioned nukes are slated to add generation of 15 gigawatts by 2020. How ironical that the Americans, prime movers of the initiative, are languishing with liability concerns, while free-riders France and Russia have forged ahead with reactor construction.

India ditched the gas pipeline from Iran ostensibly due to security concerns. In reality, discovery of large reserves of domestic gas by the private sector, as well as the lure of importing shale gas (a form of natural gas) from the U.S., which has been touted to be cheaper than the traditional Iranian gas, seems to have made the Indians balk.

Oft derided as the dirtiest resource, coal is the cornerstone of India's generation. The country is the world's third-largest producer, as well as consumer of coal. Steep demand for electricity trumps climatic concerns.

Wind energy is an area in which India has thrived, with close to 20 gigawatts of installed capacity. An Indian company, Suzlon Energy, is the world's fifth-largest wind turbine supplier. Another success story is to be found in smart meters, where Secure Meters has beaten the likes of General Electric to sell hundreds of thousands of smart meters to western markets.

To meet projected demand, India must double its current power generation of 200 gigawatts by 2035. It is in danger of falling well short. Electricity theft is still rampant across the country, SEBs continue to bleed, technical problems with the grid remain unaddressed, and politicians keep doling out power. 300 million people lack access to supply. In China and Brazil, theft is as rampant as in India, but both countries are curbing it through smart meters. India disdains them, in part because the politician-bureaucrat nexus fears losing the gravy from lineman corruption.

Gujarat used to serve rural areas through one network, which encouraged households to avail of the cheaper agricultural rate. By bifurcating supply, households now cannot game the system. Other states might want to follow suit.

Most of India dreads the onset of summer. Homes sweat, industry bitches. Air-conditioning, which should be de rigueur in factories and schools, is the true differentiator of class. Instead the powers that be, who themselves are fully air-conned, refuse to accept that making the facility pervasive would dramatically increase productivity.

Every Independence Day, the Indian prime minister highlights the need for more electricity and reduction in losses. Despite his promises, energy woes are strangulating the country. Manmohan Singh perhaps forgets that his obsession with power was precisely what won him power in 2009. R.V. Shahi in the meantime has been consigned to oblivion. If Singh wants to match his own rhetoric, he might consider appointing Shahi as his energy czar and empower him to reform the sector.