Shalu Agrawal

Prof. Johannes Urpelainen

Beyond Gloom and Doom: Strengthening Electricity Demand in Rural India

On February 19, Nikhil Jaisinghani published a comment on the recent report “Rural Electrification in India: Customer Behaviour and Demand” by Smart Power India (SPI) and the Initiative for Sustainable Energy Policy (ISEP).

As authors of the report, we do not believe that rural India is forever doomed to remain in a low-energy trap. This article aims to clarify that Mr. Jaisinghani’s pessimism regarding rural India is unwarranted. With appropriate policy decisions, village economies can and will be energized over time.

To begin with, we must clarify that our study was never intended to offer representative statistics for any Indian state. We conducted a study of rural electricity customers - households and enterprises, barriers to electricity use, and drivers of electricity demand – with different supply options, including SPI mini-grids and private distribution franchises. To fulfil these multiple objectives, we conducted surveys in 200 ‘census villages’ sampled in a purposive manner. We aimed for large villages with non-farm entrepreneurial activity. We never intended to cover all rural communities, though our villages do include a large number of small hamlets.

Mr. Jaisinghani claims that “the low demand for grid electricity in rural India is authentic and is a function of the customers, not the grid”. He quotes the report’s findings that economic status, education, and income stability are the key drivers of household electricity demand, but conveniently avoids a critically important variable: hours of grid-electricity supply. Our data shows that low electricity demand is significantly linked with power outages, even when controlling for the socio-economic variables. Thus, our report offers ample evidence for a link between the quality grid-electricity supply and power demand. At the state level, higher consumption levels in Odisha and Rajasthan, which have better supply parameters, demonstrate the point.

Another problematic claim is that “the business case for more electricity simply seems to be absent for many rural enterprises and the demand for power is driven by largely static metrics.” Even if few rural enterprises currently use electric appliances for purposes other than lighting and cooling, there is no reason why rural enterprises should continue to depend on manual tools. The fact that the use of productive appliances is low due to multiple challenges strengthens the case for policy intervention in this area. Policies to improve rural electricity service and create economic opportunities can contribute to rural development. Rural India need not remain in Mr. Jaisinghani’s poverty trap.

The author also claims that “coupling the dual demands of higher quality and lower cost electricity service cannot be met with the national grid.” In many parts of India, national grid is providing quality power supply at affordable costs to rural consumers. Indeed, the quality and duration of power supply have already improved in the states focused in the study. Moreover, a recent ISEP study shows that improved power supply is linked to higher consumer willingness to pay for electricity. Thus, reliable power at affordable costs is feasible.

Ensuring 24X7 power supply on a sustainable basis will need successful power sector reforms and institutional capacity in the power distribution companies. These are major challenges, but they are not insurmountable.

Mr. Jaisinghani claims that the report advocates for lower electricity prices. This is incorrect, and instead the report advocates for effective metering and payment collection. Many rural consumers with low electricity use lack metered connections and pay fixed monthly charges regardless of their energy consumption. The report argues for filling the gaps in metering of electricity connections and ensuring regular payments collection, which would allow even the poorest households to use electricity in an affordable manner. Replacing high fixed fees with metering would also discourage power theft, as households would pay based on their actual consumption.

We do agree with Mr. Jaisinghani that decentralized solutions such as solar micro-grids and home systems can serve rural consumers with low electricity demand and offer reliability in areas with frequent outages. Rural India is diverse and has many kinds of consumers. The choice of technology depends on technology, economics, and people’s preferences.

A key conclusion from the report is that along with better electricity supply, parallel efforts will be needed to boost rural economy and support existing and new non-farm enterprises in rural areas. Today’s low levels of electricity demand are not set in stone. We see tremendous opportunities from enhancing electricity access and use among rural households and enterprises. Access to reliable, affordable, and adequate electricity will be a key part of an integrated approach to address India’s rural developmental challenges.

 

Shalu Agrawal is Research Associate and Prof. Johannes Urpelainen is the Founding Director at the Initiative for Sustainable Energy Policy.