India has been hit by a series of power cuts this week that have knocked out electricity grids in the north and east of the country affecting around 600m people and disrupting production at the country’s tier supplier facilities in the region, which could have an impact on vehicle production.
On Sunday, India’s northern power grid collapsed and was restored briefly before going down again on Monday. On the second occasion the outage was followed by a similar collapse on the eastern grid. The north-eastern grid was reported down shortly afterwards.
The combined power failure has affected at least 13 states in India and led to disruption across half of the country. Areas in the north affected include Delhi, Punjab, Haryana, Uttar Pradesh, Himachal Pradesh and Rajasthan. In the east, West Bengal, Bihar, Orissa and Jharkhand were also all affected.
Carmakers, including Tata, Mahindra and Maruti Suzuki, with facilities in the affected areas, have been fairly insulated from the impact of the shortages because they are able to resort to agreements with State Electricity Boards for uninterrupted supply, according to VG Ramakrishnan, head of automotive practice for India and the MENASA region for business analyst firm Frost & Sullivan.
However, he went on to say that those feeling the most impact would be the tier two and tier three vendors. “Power shortages cause production disruption as these companies are unable to afford costly power from gensets [power backup generators],” he told Automotive Logistics News.
While the grid failure is a temporary issue and is expected to be resolved within the next couple of weeks, the larger issue involves the reoccuring shortage of supply. The power failure has been blamed on the affected states drawing excessive power from the national grid, which has been reporting deficits of more than 8% in recent months.
For Maruti Suzuki, which has two plants in Haryana, the impact has been lessened because its Manesar plant is on shutdown following the tragic events reported last week, in which an eruption of violence amongst the workforce led to the death of one man and the injury of around 70 others, as well as substantial damage to the facility (read more here).
However, it could mean production losses at the OEM’s other plant in Gurgaon, or when the Manesar plant comes back on line, according to Ramakrishnan.
“Maruti labour unrest and subsequent shut down has reduced demand [at Menesar] momentarily but when production comes on stream there could be production losses due to unavailability of power,” he said. “To avoid loss of business, automotive companies are investing in power back up for ensuring uninterrupted supply to their production units. This predominately happens at tier one suppliers.”
Maruti Suzuki did not respond to requests for information on current or potential disruptions to production as a result of the power outage.
The wider consequences of the power failure also include high transmission and distribution losses, coupled with bankrupt State Electricity Boards (SEBs), according to Ramakrishnan, who revealed that the SEB's sell power to certain section of customers lower than cost of production and give it away for free to farmers in many states.
“With demand soaring, each state withdrew more power than they were entitled to leading to imbalance and finally grid collapse,” he said
India’s industrial growth has led to increasing demand on the power infrastructure, which has been unable to meet that demand and without substantial investment and better discipline on usage it will be unable to do so.
This week’s breakdown is reported to have been hampered further by a weak monsoon season that has lowered hydroelectric generation while keeping temperatures higher, leading people to make greater use of electricity as they attempt to keep cool.
Hundreds of trains were affected by Tuesday and road transport thrown into greater confusion that affected logistics because of the impact on infrastructure, including the loss of power to traffic control systems.
Without substantial investment in power supply, of which there is no sign, further power failures are expected. This could be a problem for carmakers intent on setting up new manufacturing facilities in the Gujurat region, for example, which is attracting a lot of attention from both domestic and foreign carmakers, but which also has a less developed supplier base.
“Continued power shortage or worsening of the situation will impact production at OEMs and force them to source from other vendors who may have a production facility in other locations,” said Ramakrishnan. “This would add to cost of transport, additional stocking and temporary adjustment to the supply chain.”