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India’s power struggle

Category : Business

The electricity grid failure that plunged millions into darkness in northern India this week was symptomatic of the myriad problems facing the country’s power sector

This week, much of northern India was plunged into darkness for two consecutive days. About 700 million people were left without power, a situation that has affected transport, communication, healthcare, industries, agriculture and everything in between.

The outgoing power minister, Sushil Kumar Shinde, blamed a few states for drawing more power than they were entitled to receive. He didn’t name them, but Indian newspapers were less coy, identifying Uttar Pradesh, Punjab, Haryana, and Jammu Kashmir as the offending areas. The regional grid could not cope with the increased demand, and – because some of the grids are interconnected – the system tripped.

The power sector operates as if economic principles don’t matter. India primarily depends on coal for its energy needs. It has vast coal reserves, but its extraction rate is inefficient. State-owned Coal India, which controls 80% of production, is required to sell coal to industry at a hugely subsidised rate, considerably below market price, making production uneconomic.

Transmission losses are huge: some result from ageing infrastructure, but many are due to electricity theft by politically connected individuals who give away electricity cheaply, or even for free, in return for votes. Customers who fail to pay bills on time – not least state-owned companies – are another culprit.

Since 2003, the government has allowed private industry to generate power, but such companies are unable to operate viably since Coal India cannot guarantee a reliable supply. Approximately 55% of India’s energy comes from coal, but Coal India’s production rose by only 1% last year (well below the expected growth rate). At a time of rapidly growing demand, this has led to increased imports.

Private power producers are stuck between a rock and a hard place. Unable to rely on Coal India, they would like to import coal. But it costs a lot more in international markets, and they are prevented from passing costs to consumers. Most Indian consumers pay less for their power than it costs to generate and distribute. Politicians, fearful of the public backlash that has greeted previous price rises, won’t increase fuel costs. The conventional wisdom is that parties can win elections by offering cheap electricity. And so the cycle continues.

In the past year alone, the gap between demand and supply has grown to 10.2%, up from 7.7% the previous year. In the southern states of Andhra Pradesh and Tamil Nadu, which are unaffected by the current blackout, companies are investing in diesel-run generators for their own needs, which increases their fuel costs threefold.

Fresh investment in coal mining has been difficult for several reasons. India’s well-intentioned environmental laws have made prospecting for mines in protected areas more difficult; a Maoist insurgency rages in large parts of central India, including the mineral-rich region, making operations unsafe; and procedures to get capital investment approved are cumbersome and bureaucratic.

Alternatives aren’t promising. Gas output from the Bay of Bengal has not met its promise. India uses nuclear power, and would like to invest more, but post-Fukushima fears coupled with nimbyism have slowed efforts to build new plants. Foreign investment in nuclear power generation is permitted, but investors have been deterred by India’s refusal to put a cap on accident liabilities and insistence that equipment suppliers, not plant operators, should be held to account in the event of an accident.

In the face of these various problems, those who can afford it buy private generators and diesel-powered units to keep their homes and factories running; millions living below or close to the poverty line do not have access to electricity at all.

Yet the situation is not altogether bleak. Some states are exploring innovations. As the Wall Street Journal reports, Tamil Nadu may allow a nuclear plant. Bihar is privatising distribution in one large city. In Maharashtra, some consumers can negotiate their tariffs directly with the generator. And Gujarat has not only cracked down on power theft, becoming a surplus state, but also set up a parallel distribution network to sell farmers electricity at competitive prices. By splitting residential and agricultural use, the state has stabilised supply.

India needs an estimated $400bn investment in the power sector if it is to meet its development goals. Power failures shave percentage points off the country’s's growth, inhibiting development and delaying the time when millions below the poverty line can live a life of dignity.

Electricity is vital. It doesn’t just keep the plasma TVs working, or the air conditioning humming – it means students in rural India can study at night, medicines and vaccinations don’t spoil due to a lack of refrigeration, and food in cold storage doesn’t rot.

Salil Tripathi wrote this piece in a personal capacity

IMF chief Christine Lagarde warns world risks triple crisis

Category : Business

Lagarde says world risks falling incomes, environmental damage and social unrest without more sustainable approach to growth

Christine Lagarde, the head of the International Monetary Fund, has warned that the world risks a triple crisis of declining incomes, environmental damage and social unrest unless countries adopt a more sustainable approach to economic growth.

Ahead of the Rio+20 Earth summit later this month, she said the rich should restrain their demands for higher incomes while there are still 200 million people worldwide looking for a job and poverty is on the rise.

Giving her clearest backing yet to green taxes and a range of measures to protect the environment, she argued for taxes on petrol-guzzling cars among a range of green measures to tackle climate change.

“It has been 20 years since world leaders first went to Rio to commit to the noble goal of protecting the planet for future generations. And now, 20 years on, we will be journeying back to Rio to affirm our commitment to sustainable development – the idea that we should strive for economic growth, environmental protection and social progress at the same time,” she said in a speech in Washington on Tuesday.

“The idea that different economic, environmental and social objectives can be seen as distinct aspects of a single vision, essential parts of a connected whole.”

But she said the current economic crisis in Europe and slowing growth worldwide, coupled with the growing threat from climate change and social tensions could wreck the efforts of leaders to chart a more sustainable future.

“Over the past four years, we have been mired in the worst economic crisis since the Great Depression. And we are not out of it yet.

“In fact, tensions are on the rise again, and financial stability risks have once more moved front and centre. Great uncertainty hangs over global prospects.

“Too many regions today are still stuck in a trap of low growth and high unemployment,” she said.

“Right now, 200 million people worldwide cannot find work, including 75 million young people trying to take their first step on the ladder of success.

“So we need a strategy that is good for stability and good for growth – where stability is conducive to growth and growth facilitates stability.”

Lagarde, a right-wing former French finance minister, recently caused a storm of controversy after she accused Europeans of blocking progress to end the current financial crisis. Asked if she sympathised with Greeks impoverished by austerity measurers demanded by Brussels, she said the children of Niger were more her concern. It also emerged that Lagarde pays no tax on her $467,940 (£298,675) a year salary.

Ahead of the summit, she said taxes on petrol and other carbon fuels could raise billions of dollars for green investment projects. “Right now, less than 10% of worldwide greenhouse gas emissions are covered by formal pricing programmes. Only a handful of cities charge for the use of gridlocked roads. Farmers in rich countries are undercharged – if charged at all – for increasingly scarce water resources.”

She added: “Many countries continue to subsidise polluting energy systems. These subsidies are costly for the budget and costly for the planet. Countries should reduce them. But in doing so, they must protect vulnerable groups by tightly focusing subsidies on products used by poorer people, and by strengthening social safety nets.”

The foundations of entrepreneurial success: a shed and a hammer

Category : Business

To mark World Entrepreneurship Day today, Yorkshire inventor Emily Cummins talks to Amy Byard about what kick-started her entrepreneurial flair, and reveals for the first time her plans to revolutionise the British education system

At the age of only 25, Emily Cummins has already established herself as one of the most successful entrepreneur-inventors in the UK.

With a string of awards behind her, including being named as one of the Top Ten Outstanding Young People in the World in 2010 and winning a Barclays Woman of the Year Award in 2009, she is recognised internationally for her work. And it all started in a garden shed in Keighley.

When I was four, my granddad gave me a hammer. He has a shed in the bottom of his garden, and in that shed he had collected machinery and tools, over the years. It was an Aladdin’s cave of all these bits and bobs that I would take apart and put back together. My granddad really allowed me to experiment and be creative and I think that’s something he instilled within me.

He taught me the benefit of taking risks. If I wanted to use a doorknob to create a wheel and it didn’t work, I learned from that.

Whilst studying for a degree in business management at Leeds University business school, Emily developed a sustainable fridge, which is powered by dirty water but keeps the contents dry, hygienic and cool. She refined her idea in African townships before giving away the plans to benefit local people.

I came up with idea when I was at school. I went out to Namibia and started to develop the notion of a sustainable fridge to store food and medicines that would run without electricity, using heat transfer and evaporation of dirty water.

I open-sourced my idea – there was no patent because I wanted local people to be able to create and use my product themselves. It could be made from all sorts of things – whether it was a milk churn or a water barrel – anything they wanted to use, really.

At the moment my fridges are used across southern Africa in Zambia, Zimbabwe, South Africa and Botswana and are making a real difference to people’s lives.

The idea wasn’t about making money for me; it was about seeing benefit from the product that I had created. That was all I wanted to do. For me, that is the proof that I have the ability to solve a real problem. I don’t like to create products that people want, I create products that meet a need.

For Emily, inspiring others to believe in themselves is a core motivation behind her entrepreneurial pursuits.

People often look at me and think it’s strange that I do what I do. I often hear things like, ‘Oh… but you’re a girl? And an inventor?’

It’s important to inspire others to believe that they can achieve whatever they want to achieve, in spite of what others may think.  That’s why awareness days like World Entrepreneurship Day are so great. If a day like today can inspire just five others to think more about entrepreneurship,that for me has made that day a success. It’s about inspiring others.

For the past year, Emily has been working on a revolutionary project that’s been kept firmly under wraps. Today, she can finally lift the lid.

I have been establishing a social enterprise called Big Promise. The business is currently in its inception phase and we are canvassing support from a whole range of people and businesses.

Big Promise is about inspiring young people; our aim is to set up a network of initiatives that supports the next generation to find their passions and fulfil their potential. We want to encourage a shift in the way that young people are taught; we want to encourage schools to embrace new approaches and new ways of working.

For example, recently I’ve been working with a new start-up business called PV Education creating educational apps for tablet computers in schools. Learning needs to be interactive, engaging and collaborative; the adoption of tablets in schools is going to be one way of reinventing how we teach and how we learn. I am going to make sure that what we develop will free the innate creative spirit of kids in the classroom. I believe in modern technology. If apps are created in tandem with the kids themselves, I believe that they can deliver a new way of learning.

We’re going to be working in partnership with PV Education and children in several primary schools including St Benedict’s Catholic Primary School at Garforth in Leeds. Success in phase one will see the launch of a series of apps throughout the UK. I hope that these will then fund projects for disadvantaged young people in the UK and in developing countries.

It is widely accepted that the education system needs an overhaul and I intend, through Big Promise, to play a big part in that. This country needs to be bold enough to make some big changes and needs to do it quickly. We’re looking at a total revolution in the way children are educated across the world.

Kids need other ways of being stimulated to encourage them to play a part in their world. I have been extremely lucky and feel privileged to have been recognised the way that I have. I feel I owe it to the next generation to create as many opportunities for them as I can and to influence people to take risks and to challenge current systems, because they are showing signs of failure.

I want to get kids excited about learning to start projects of their own, and benefit from them. I’m going to give then the chance to solve real world problems and make education exciting and fun.

In the spirit of World Entrepreneurship Day, Emily offers her best piece of advice to anyone considering entrepreneurship as a career path.

For me, it’s really about passion and determination. You have to be passionate about what you’re doing. Passion is the unstoppable force that will make your idea work.

It’s so important to find something you love doing. I feel like I have a seven day weekend because I adore the work that I do.

Amy Byard is a BA broadcast journalism graduate of Leeds university.