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Power grid failure: How to prevent it from happening

Since Power Grid Corporation has the jurisdiction over the regional grids, it must maintain an overall control and must mercilessly trip off power supply when a user plays foul

Nearly four weeks after the massive power failure due to grid breakdown causing some 700 millions to suffer, facts and figures now emerge leading to various conclusions.
 
An expert panel headed by AS Bakshi, chairman of Central Electricity Authority has concluded that this blackout was caused by the shutting down of different circuits for upgradation work. This apparently led to the pressure on the West-North and West-East corridors for supply causing the failure.  Such a major event, like the annual maintenance and related repair work must be centrally controlled and administered and everyone concerned must be made aware of the situation, so that, even inadvertently, they do not take any action that may precipitate such a massive failure.
 
Except for the Southern Grid, rest of the four grids in North, North-East, Eastern and Western are interconnected. The danger continues if discipline is not strictly maintained by members to overdraw or underdraw resulting in a crash. There is the urgent need for both the Northern Load
Despatch Centre (NLDC) and the Regional Load Despatch Centre (RLDC) to keep a close watch and coordinate the supply position on a continuous basis.
 
Grid discipline was not strictly followed by UP, Punjab and Haryana and these states along with some others have refused to install Under Frequency Relays (UFRs) for automatic demand management schemes. Power Grid Corporation, which controls these grids, now has no alternative but to issue an ultimatum to all the users to install UFRs, and if they do not comply this within the time frame provided, the unit cost of power will have to be incrementally increased, say, by 10% to 15% until compliance.
 
Veerappa Moily, the new power minister, who replaced Sushil Kumar Shinde, has now categorically assured one and all that such a massive power outage will not occur again.  It is a satisfying assurance, but it remains to be seen if the erring states will let him succeed.
 
Apart from imposing fines, proposals have also been made for stringent action against responsible officials who have to be alert and prevent such lapses. The despatch centres, if they had acted responsibly, could have prevented this mess and isolated the erring states so that they could have stopped the domino effect on others.  Now, some of the northern states are considering islanding themselves so that they can have some discipline and control and avoid power failures.
 
Since Power Grid Corporation has the jurisdiction over these grids, it must maintain an overall control and must mercilessly trip off power supply when a user plays foul. The second step is to encourage the guilty states to plan additional power generation capacity in their own backyards or elsewhere to ensure they have some source of captive power supply. Controllers must not cow down to political pressures under any circumstances.

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US. He can be contacted at [email protected].)

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Higher money supply growth points to a positive revenue growth: Morgan Stanley

The current earnings season may have turned out to be India’s worst over the last few quarters. However, a rising growth in the narrow money supply could lead to an improvement in broad market earnings. If this true, it would be an early bullish sign

It is earnings growth that drives a market and declining sales and rising costs in the past few quarters has resulted in a decline in operating profit margins and earning growth, leading to falling stock prices. All interest among smart investors is focused on discerning what can signal a reversal of this. It is money supply according to Morgan Stanley’s latest India Strategy report “Macro points to improvement in broad market earnings”. The report says that macro indicators are showing positive change for these drivers and hence, incrementally, a better earnings picture.

The growth of the narrow money supply (M1), which shows the amount of money in cash and demand deposits in the public domain, had hit a bottom in November 2011 and therefore the revenue growth for the following quarter which ended June 2012 took a hit. With the growth in M1 over the last quarter, sales in the subsequent quarters should stabilise or even pick up. However, the September and December quarters of the last financial year saw a significant revenue growth, therefore year on year revenue growth for the subsequent quarters may not reflect due to a base effect. But there could be an improvement based on the direction of M1 growth. The growth in M1 reflects in the revenue growth approximately six months later. Therefore if M1 growth continues its upward trend we could probably see this translating into a higher revenue growth.

Persistent high inflation, depreciating rupee and high interest rates along with sluggish demand has dented the profit margins of the broader market (excluding state-run oil companies) over the last few quarters. Profit margins have a favourable base going forward as margins had been on a decline since June 2010. If the current account deficit falls faster than the fiscal deficit, margins are likely to improve. However, if investments pick up during the financial year, the relative performance of current account deficit to fiscal deficit will be less relevant to corporate margins.

According to the report, interest costs have gone up by nearly 40% year on year and interest to revenues is the highest over the last few quarters. However, the 3-month commercial paper rate has fallen by nearly three percentage points over the past few weeks. Interest costs may have peaked and is likely to stabilise. This should help corporate margins.

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