Fighting energy poverty: Why reliable, affordable electricity is key to India’s economic growth

Jaideep Mukherji and Bharath Jairaj

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India’s energy access challenges have come down significantly in the last two decades, due to the concerted efforts by national and state governments. Though significant progress has been seen on the electrification of willing households, gaps still exist. Access to energy runs along the fault lines of poverty and inequality: those who are unable to pay for electricity rely on less optimum fuels such as traditional biomass or kerosene lamps. A recent study by Smart Power India (SPI) titled ‘Electricity Access in India: Benchmarking Distribution Utilities’ points out that lack of adequate electricity infrastructure is a major reason why a larger number of electricity customers have not been able to connect to the national grid. As a result, institutional customers such as hospitals, farms, schools, and skilling centres are forced to invest in expensive and polluting diesel generators to enjoy uninterrupted power supply, because when available, the grid is also unreliable.

Progress on electrification rates masks the energy poverty that continues to constrain the delivery of basic services as well as farm and non-farm productivity. Recent work by World Resources Institute India (WRI India) reiterates that without a reliable source of electricity, health care facilities struggle to deliver vital services to communities, and those providing agricultural and non-farm enterprise support services are held back all along the value chain. More than 30,000 health centres across rural India, and scores of schools, community centres, and anganwadis are not yet connected to the grid. A vast majority of them are in a few states of India. Without basic access, outcomes in the health, education and livelihoods sectors will remain difficult.

While there have been isolated successes in linking energy with development goals, a systemic approach has proved elusive. As COVID-19 threatens the well-being of people and economies across the world, the 2030 goals on health, hunger, and poverty alleviation have never been more urgent. Building the resilience of communities, particularly in Indian states with lower socio-economic development, is paramount so that they can stay healthy and economically secure. Access to reliable electricity will be critical in spurring economic activities in rural India.

A key success story in recent times is that of the Customer Voucher Scheme (CVS) that SPI, a subsidiary of the Rockefeller Foundation, launched during the lockdown to provide financial relief to mini-grid customers and, in turn, bolster the liquidity of mini-grid companies. The scheme provided three months of subsidy to 5,000 customers in 92 villages in Uttar Pradesh and Bihar. As a result, electricity revenue for mini-grid developers recovered to pre-Covid levels, and tariff collection efficiency bounced back to 100%. The scheme also ensured that mini-grids have access to the uninterrupted electricity supply. Initiatives such as this can be adopted on a larger scale to address economic barriers and provide reliable electricity to customers in underserved communities in India and around the globe.

How can India provide reliable and affordable electricity to all?

It is important to place access to reliable and affordable electricity in the front and centre of policy and regulatory efforts. Placing consumers at the centre of the next stage of reforms in the sector will require a more nuanced understanding of consumer priorities including capacity, sustainability, quality, and customer service. And energy policy, sector regulation, operations, infrastructure, and governance will need to be revamped to align with this approach. Done right, India will be able to achieve SDG7 of providing affordable and clean energy to all, with no one left behind. As the SPI study reveals, a customer-centric approach wherein the focus is on customer satisfaction will help DISCOMs improve their financial health and overall energy delivery performance.

While the effort of connecting millions of people to the grid is impressive, we need to refocus efforts to ensure the provision of electricity that matches with the electricity demand. And as discussed, this must go beyond households, to meet the needs of the health, education and livelihoods sectors that operate across rural and remote parts of the country.

This will need revamping new electricity connection processes to enable a quick, transparent, and easy connection. Equally important is the ability to harness the wide variety of Decentralized Renewable Energy (DRE) solutions that can help utilities in meeting unmet and under-met demand. One way to bring the DRE solutions in is by exploring a franchisee relationship between utilities and DRE entities. Service delivery should be grid-agnostic, to overcome the limitations of high grid extension costs, and challenges with extending the grid to remote areas. In addition to ensuring last mile connectivity, and better reliability, this effort will enable more socio-economic and rural development outcomes, while also helping build local capacity and create jobs.

A simple, yet effective way to implement this would be the establishment of a ready fund that can be used to fast-track connections by providing last-mile connectivity, standardizing service connection costs, reviewing pending or previously rejected applications, and compensating DRE companies for any gap in revenue. Equally important is the need to review that the right consumer tariffs are being charged to the right customers, and the subsidies are being rightly targeted. Increased customer awareness will require public outreach campaigns about subsidies for electricity, direct benefit transfer, and other benefits to consumers. Awareness needs to be backed by the guarantee of consumer rights – for e.g., on supply quality standards, efficiency benchmarks, ease of payment of bills, compensation for failure to adhere to the standards, and other issues that are part of the draft Electricity (Rights of Consumers) Rules, 2020.

Focusing on consumers and their demand will also help improve India’s per capita electricity consumption. Currently, some parts of the country consume in excess, and other parts barely consume electricity. We need to look at more energy efficiency, including building efficiency, to reduce the wasteful consumption of energy, while at the same time, increasing household and institutional energy consumption in rural and remote parts of the country. The added benefit of including DRE in the service delivery is that grid inefficiency and losses can be avoided since many DRE technologies allow for energy to be consumed close to the point of generation.

Jaideep Mukherji is CEO, Smart Power India, and Bharath Jairaj is Executive Director, Energy Program, World Resources Institute (WRI). Views expressed are the authors’ personal.