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By Frank Jack Daniel
BHIWADI, India Aug 8 (Reuters) - A siren rang out in the cable factory in northern India when there was a power blackout in half the country last week, but its computer screens didn't even blink as $180,000 worth of batteries seamlessly took over the machines winding the thick coils on the shop floor.
A few moments later, in a back room of the cavernous plant in the scruffy Bhiwadi industrial park near New Delhi, mechanic Gaurav Bhatia fired up a shipping container-sized diesel generator that ensured continued electricity.
It was the second time in 36 hours that power supply to vast swathes of India was halted.
In factories, offices, apartment blocks and malls across the north of the country last Monday and Tuesday, similar generators coughed into life, making what were perhaps the largest blackouts in history irritating and costly events, but not catastrophic.
Indian cities and their companies are well prepared to keep business moving during power cuts because they always have to cope with unreliable supplies, not just during once-in-a-decade spasms on the grid.
Last week's shutdowns were not routine power rationing, the kind that is enforced every day in the summer and forces Kei Industries -- one of India's leading electrical equipment manufacturers -- to generate energy on site for several hours with rudimentary engines.
Both times it was a major grid failure. Three of India's five transmission grids collapsed on Tuesday, cutting power to states where some 670 million people live, more than half of the country's population. That blackout, one of the world's worst, followed a similar breakdown across the north the previous day.
"We have fuel for about 10 hours on site, but when we heard that (it was a major failure), we called our boss and asked for more supplies," said Bhatia, speaking above the mechanised roar of cable spinners.
The World Bank estimates that two-thirds of Indian companies have back-up or independent power supplies. Added to about a third of the 1.2 billion population that never has electricity, this means total grid failure in India is less of a disaster than in the United States or Europe.
This off-grid system is effective, but it hits companies' bottom lines and is a major pollutant. It is so wasteful of imported oil that the 10 percent shortfall in grid power at peak hours is a significant contributor to a yawning trade deficit.
"We cannot rely on diesel to serve the needs of day-to-day operations of small, medium and large businesses, it will drain this country and we will find ourselves back in 1991," said Amit Sinha of management consultant Bain & Co's utilities practice in India. He was referring to the year when India almost ran out of foreign exchange reserves because of a balance of payments crisis.
Diesel demand jumped during last week's power cuts by as much as 25 percent in some states, according to state-run refiner Bharat Petroleum Corp.
The Indian captive power producers association estimates about 15 percent of the country's 205,000 MW generation capacity is from on-site plants of 1 MW or over, including coal, diesel and other sources. Bain estimates another 40,000 MW comes from small back-up generators.
On a normal day, consumers on the periphery of Delhi can expect between 2 and 6 hours without mains electricity, time when they rely on diesel-fired back-up systems to generate power at twice the cost of mains power.
Kei Industries' Chairman Anil Gupta feels lucky. He suffers cuts just four hours a day and only in the summer months when the Rajasthan state electricity board gives priority to irrigating farms. He says the board is courteous enough to warn the industrial estate by e-mail before cutting supplies.
"Effectively it is rationing," said Gupta, who estimates his company would grow 5 percent more each year with regular power.
The 44-year-old company can take no chances. A few seconds' hiccup to the 24-hour-a-day extrusion process could mean kilometres of copper cable being scrapped and five hours of shutdown. Fluctuations cause bumps on the cable's insulation.
So they have nine back-up diesel motors generating 7.5 MW of power on site and have invested in uninterruptible power supply (UPS) technology - banks of high-maintenance batteries connected to computers that ensure power is not lost for even a fraction of a second. They pass the running costs on to customers.
"It effects our cost competitiveness," Gupta said. "We slip on deliveries, manpower costs, wasted labour and idle machines."
Kei can only generate power for three quarters of operations when the factories go off-grid. Non-core processes are shut, and machine operators switch to doing maintenance or training. That way, core processes are protected, Kei president S. L. Kakkar said.
"We are very careful. No customer will give you an order if you don't have the back-up," said Kakkar, whose plain office has a bird's-eye view of Kei's newest plant. "Any customer visiting, the first thing they want to see is the UPS."
Mumbai's stock market was unfazed by last week's blackouts because investors know India's companies can cope with long outages. Unsurprisingly, Cummins and Greaves Cotton , two companies that make diesel generators, saw their stock values jump.
Kei also seems to have a bright future -- its shares soared 10 percent the day after the Tuesday blackout.
Somewhat ironically, Kei sells high-tension transmission cables to the national grid, which has been rapidly modernising in recent years with the help of billions of dollars of loans from the World Bank and the Asian Development Bank.
The company looks like a winner in India's industrial revolution, churning out thick cables to power the factories that are fast replacing farmers driving camels on the road from Delhi to Rajasthan.
But, while he is hopeful about improvements in India's power supply, Kakkar says he doesn't see companies weaning themselves off back-ups and batteries in the near future.
Maintenance manager Sadhu Ram, just back from nine years working on cables for a different company in Oman, said the situation was characteristic of his home country.
"This is big business here. Most companies rely on the backup systems. Otherwise they can't survive," he said pointing to the computers and battery UPS. "In the Gulf our plants had none of this, power cuts were so rare." (Editing by John Chalmers and Raju Gopalakrishnan)
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