Power Outage.(electrical power in India)

Prem Kumar doesn't consider himself a thief, but he steals electricity every day--as do each of his 3,500 neighbors in a south Delhi shantytown. A spider's web of wires, hooked to overhead power cables, thread into every shack. Kumar, a 24-year-old hotel housekeeper who lives in a one-room hovel, uses illicit electricity to power a fan, a feeble 40-watt light bulb and the iron he uses to press his work uniform. Others in the neighborhood put the stolen electricity to more entertaining use. Wailing Hindi pop music, coming from tape-playing boom boxes, pierces the evening gloom. This is not some odd, local phenomenon: pilfering electricity from the state power company is practically a hobby in Delhi. Kumar is unrepentant. "The electricity line runs right above my house," he says. "Why should I pay for it? Anyway, it's always going off."

It's no wonder Delhi--and all of India-- suffers a power crisis. The country is dogged by electricity shortages, which result from a bizarre mix of brazen theft, a politicized regulatory system and lingering statism. Last year 21 percent of all the electricity generated in India was stolen, according to India's Central Electricity Authority. Two weeks ago the capital and six surrounding Indian states--home to 230 million people--went without power for up to 16 hours after the overloaded northern grid collapsed catastrophically. In the Indian summer, when temperatures soar, electrical brownouts occur almost daily. Fans and air conditioners fall lifeless. Tempers fray and protests turn to riots. Peak-period shortages averaged 13 percent last year--meaning more than one eighth of the country's power demand was not met. That's just the official number. The true number is closer to 40 percent in some regions. Erratic electricity supply is not just a nuisance. The problem dramatically affects India's manufacturing sector, which grinds to a halt when the lights go off. According to Power Line, an Indian electricity-industry journal, power shortages shave 2.5 percent from India's gross domestic product annually.

The big fear is that India's fabled information technology (IT) sector- -the bright spot in the economy--could fail to match its potential for want of power. For IT companies in India, buying backup generators is an expensive necessity. "Power is my biggest headache," says Prasad Yenigalla, who quit Silicon Valley in 1999 to form Hyderabad-based Vantel Technologies, a telecom software provider. "Backup [power] mechanisms are built into our business plans, but they add significantly to costs." Vantel has spent $100,000 for its generators-- no small change for a young company.

How did the situation get so grim? Blame the politicians. Each Indian state has a monopolistic electricity board, which generates power and sells it to businesses and consumers. The boards essentially function as personal piggy banks for pols, who use subsidies to curry favor with local voters. India's farmers, for example, get electricity at scandalously low rates. Electricity in India costs 5.19 cents (per unit of electricity) to produce. But agricultural users pay an average of just .59 cents. It amounts to an annual government subsidy of $7 billion, nearly 3 percent of India's GDP. Yet state boards fail to collect even those meager dues. "It is the economics of the madhouse," says Pritpal Bami, a Delhi-based industry consultant.

Little wonder state electricity boards are bankrupt. Last year central government-run thermal and hydroelectric corporations were owed $4 billion by state boards that couldn't pay. Losses from theft, like that in Delhi's slums, contribute to the ...