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Power cuts cost India Inc. Rs 20,000 crore a year

Power disruptions have never been considered as matters of strategic importance by Indian corporates. But things may change with the findings of a recent report jointly commissioned by MAIT and Emerson Network Power (India). This report may just be the eye-opener for Indian corporates to invest more in power protection solutions. Srikanth R P reports

Most of us don't bother to do much beyond cursing power utilities whenever a power disruption takes place. And while a power disruption at home may not cost much—the same, if it takes place in a commercial outfit, can run into crores of rupees. That is exactly what a study commissioned by the Manufacturers Association of Information Technology (MAIT) and Emerson Network Power (India) reveals. The cost of downtime for India Inc. is a staggering Rs 20,000 crore in direct losses due to poor power quality and downtime. This accounts for roughly 2 percent of the gross output of the industrial and service sectors.

Lack of quantification
While lack of infrastructure has been cited as a common problem for almost all industries, there have been no attempts to quantify the impact of power-related problems. So when Emerson Network Power, which is in the business of providing UPS and power protection-related solutions, looked for figures related to the Indian scenario, it could find data relevant only to the US market. This spurred Emerson to hold talks with MAIT, which was only too willing to undertake the study, considering the importance of the same in the Indian context.

The study was undertaken by a research firm, Feedback Consulting, covering 325 firms across six centres—Mumbai, Delhi, Bangalore, Chennai, Calcutta and Hyderabad. This, in turn, was divided across eight major industry segments, namely telecom, IT services, IT-enabled services, ISPs, banking & finance, services and manufacturing. The findings of the study have turned out to be a real eye-opener for Indian industry. For instance, as power outages are not as sensational as compared to other disasters, the common perception has been to treat power disruptions as minor irritants. And while the problem of power outages cannot be solved overnight, it is important for organisations to take the next best step—invest in solutions that can help in recovering from power disruptions.

Says Anand Ekbote, managing director, Emerson Net-work Power (India), "Most organisations don't fully realise the impact of power disruptions. For instance, when we did a study for a fruit processing plant, we found out that they had power disruptions averaging 4-6 times a month. Further, every power disruption consumed another four hours for cleaning the pipes used for processing juice. The organisation was jolted when we said that 40 percent of their projected profits was lost on an yearly basis only due to power outrages—assuming on an average a capacity of 5,000 litres per hour." Consequently, Emerson is offering a solution to the company to completely bring down the number of power disruptions, which can in turn boost profits. This case is not an isolated example; there are instances in almost every industry, though the scale of losses may differ from industry to industry.

While the study has taken into account only direct losses suffered due to power disruption, the real figure could be much higher if indirect impacts are considered. Just as a disaster can knock a company out of business, minor irritants like power disruptions can gradually chew away a company's profits. This break in business continuity not only results in immediate monetary losses but also adversely impacts the image of an organisation in the long term.

For instance, take an industry like manufacturing. The losses due to the non-availability of a proper system for handling power disruptions can put a manufacturing company out of business. Explains Ekbote, "While immediate loss of production, idle capacity and time to re-start operations are the apparent handicaps, failing customer expectations and being considered an unreliable supplier can have long-term repercussions." Though the impact of not having a proper power protection system is disastrous for a manufacturing company, the level of awareness in the Indian manufacturing sector about such solutions is surprisingly low. Sectors that have a high awareness turned out be sectors like telecom and IT.

The study also throws up interesting pointers for state governments who are increasingly looking for investors to invest and set up factories or offices. In Bangalore, for instance, which has always been admired by other states, only 2 percent of companies say that they have never encountered power disruptions. Obviously, if Bangalore needs to continuously attract new investment, it needs a higher figure than the measly 2 percent. This number is significant if compared to other cities: 4.1 percent of firms in Chennai, 4 percent in Delhi, 21.5 percent in Hyderabad and 18.4 percent in Mumbai say they have never experienced power disruptions.

And contrary to the popular myth that countries with poor power infrastructure should be bigger markets than the ones with good power infrastructure—the reality is far different. Explains Ekbote, "Sophisticated economies recognise the importance of uptime even though the quality of power is not an issue. This is the reason why the size of markets like the US and Japan is much more than that of India in this space. If India needs to rank itself with the global giants, industries need to think about power protection strategies the same way they are looking at disaster recovery solutions today." While awareness about the need for investing in power protection solutions is still low in India, there is still a glimmer of hope as over 85 percent of respondents have indicated that they were looking at investing in high quality uptime solutions.