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Rural electricity to speed up inclusion


The Indian Electricity Act, 2003, initially envisaged that the appropriate governments shall endeavour to supply electricity to all areas including villages and hamlets (Section 6), thus placing the responsibility for ensuring rural electricity supply on state governments.

The UPA-I government amended this section to read as follows after detailed deliberations internally and with opposition parties: the concerned state government and the central government shall jointly endeavour to provide access to electricity to all areas including villages and hamlets through rural electricity infrastructure and electrification of households.

Consequent to this amendment, the central government redesigned the National Rural Electrification Scheme, the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), with 90% capital subsidy from the central government for rural electrification to the states. The earlier rural electrification programme provided a capital subsidy of 40-50% and did not cover household-level electrification.

In addition to funding the backbone distribution infrastructure for rural supply, the RGGVY has the following provision for household-level electrification:

Electrification of unelectrified below-poverty-line (BPL) households would be financed with 100% capital subsidy as per norms of Kutir Jyoti Programme in all rural habitations. Households above poverty line would be paying for their connections at prescribed connection charges and no subsidy would be available for this.

The National Common Minimum Programme envisaged electrification of all households within five years; that target has now been shifted to 2012.

Progress under RGGVY

Village electrification: The country’s village electrification stands at 83.9% as on March 31, 2010, against 81% (as per old definition) and 79% (as per new definition) as of 2001. There are seven states — Andhra Pradesh, Delhi, Goa, Haryana, Kerala, Punjab and Tamil Nadu — which have achieved around 100% village electrification. Jharkhand is the only state with a village electrification of less than 50% (31.1%).

Rural household electrification: As far as rural household electrification is concerned, about 52% of the rural households are electrified as of 2010 vis-a-vis 43.5% in 2001 and 30.5% as of 1991.

States like Andhra Pradesh and Rajasthan have performed better against the targets related to rural household electrification under the programme. The accompanying graphic shows the target coverage — number of connections to rural households, including BPL — and the actual achievement against the targets in terms of percentage.

Himachal Pradesh and Goa have achieved rural household electrification above 90%, while Bihar, Jharkhand and Orissa are still below 35%.

The key questions before the government are:

l Are the provisions of RGGVY adequate to achieve the objectives of electricity for all by 2012 given the varied socio-economic requirements?

l What has been the impact of RGGVY in the last few years and what have we learned from its implementation?

l Given the historical lag in some northern and eastern states with respect to rural electrification, what needs additionally to be done, especially in the context of slower agricultural growth in recent times and greater rural economic distress?

l Is there a case for breaking away from the current economic wisdom of not providing free power to rural households?

l What are the implications of such a policy to the development of the electricity sector in the state and the state government’s financial health and consequent impact on other development initiatives?

A policy debate and analysis is required to answer some of these questions, especially if the government is keen to further its inclusive growth
agenda.

Since household electrification under RGGVY provides subsidy only to officially-notified BPL households, it is unlikely that it will help cover all households in rural areas. There is a clear possibility of not achieving the national target for power for all by 2012. The huge infrastructure investments made for a rural electricity distribution network through RGGVY programme will be underutilised and a large section of the people will forever be waiting to gain access to that network.

The money allocated for RGGVY infrastructure development programme is around Rs 28,000 crore. There is little doubt that the funds provided by the government facilitated infrastructure growth in the last few years — and such growth is an important contributor to GDP growth in general — and that the section of the private sector that participated in this programme benefited immensely. Nevertheless, it is clear also that the people in whose name the infrastructure has been created are yet to be its real beneficiaries.

The record of progress with respect to household connectivity across the country teaches us that getting electricity wires to a village level is no assurance that electricity will be available to all households in that village. There are other barriers — initial connection charges, consumption tariffs and, for some, even the cost involved in the purchase of light bulbs and other electrical accessories — that prevent poor households from gaining access to electricity.

The Rural Electrification Policy, 2006, aims to achieve a minimum lifeline consumption of one unit per household per day as a merit good by 2012. Unless we operationalise this policy provision with budgetary support, electricity for all will remain a dream. Other developing countries are having innovative loan and subsidy arrangements to ensure this last-mile connectivity and sustained consumption. We need to learn from those experiences.