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Cover Story | February 2018

Brightening up Households

<span style="font-weight: bold;">Saubhagya scheme, if it could achieve household electrification in full, can increase the demand for power and brighten up the livelihoods of people bereft of electricity connection hitherto.</span> <p></p> <p> Uninterrupted and quality power supply is a precursor to economic development for any country. Electricity transforms people's lives and spurs them towards a better future. It is a vital cog towards enabling education, jobs, better healthcare facilities and lighting up homes. In addition, it allows people to improve their lifestyle through usage of electricity-aided machines. Keeping these important standard of living parameters in mind, on September 25, 2017, Prime Minister Narendra Modi launched the Rs.16,320-crore Pradhan Mantri Sahaj Bijli Har Ghar Yojana, or Saubhagya, to provide electricity connections to over 4 crore families in rural and urban areas by December 2018. The main objective of the scheme is to achieve universal household electrification in the country. </p> <p>With the scheme pertaining to electricity connectivity to all villages under the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) reaching its fag end, household electrification has been taken up as a corollary. Minister for Power RK Singh said in Lok Sabha recently that only 1,694 villages out of the total 18,452 un-electrified villages in 2014 are yet to be provided electricity connection. </p> <p>A village is declared to be electrified if 10 per cent of the households are given electricity along with public places such as schools, panchayat office, health centres, dispensaries and community centres. With a large number of households still remaining without access to electricity, the scheme envisages ensuring the coverage of households now. </p> <p>Poor households would be provided electricity connections free of cost under the schem, boosting demand for power, however, the users have to pay for their consumption. The scheme funds the cost of last-mile connectivity to willing households. It will also help India to meet its global climate change commitments as electricity will substitute kerosene for lighting purposes.</p> <p>However, this is not the first time village- and household-electrification has been attempted. In April 2005, a new programme, Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), named after former prime minister, was launched with an objective to provide access to electricity to all rural households by 2022, through creation of rural electricity infrastructure comprising of rural electricity distribution backbone, village electricity infrastructure and decentralised distribution generation and supply system. DDUGJY is the new avatar of this scheme, but Saubhagya goes a step further in achieving the overall goal. At the time of independence, India had around 1,500 villages electrified. By 1991, the number reached 4,81,124. </p> <p> <span style="font-weight: bold;">The scheme</span><br /> According to the estimates, there are about 4 crore un-electrified households in the country, of which, about one crore below poverty line (BPL) households in rural areas are already covered under sanctioned projects of DDUGJY. Thus, a total of 300 lakh households - 250 lakh households in rural areas and 50 lakh in urban areas - are expected to be covered under the scheme. </p> <p>The scheme envisages providing electricity connectivity free of cost for poor households and facilities for a single light point with LED bulb and a mobile charging point. Other households would also be provided electricity connections under the scheme, but on payment of Rs.500, which shall be recovered by discoms/power departments in ten (10) instalments along with electricity bills. However, the user has to pay for the power consumed. </p> <p>Solar kits with power backup will be provided in households located in remote and inaccessible areas along with repair and maintenance assurance for five years. 'The launch of Saubhagya scheme shows a thrust on rural electrification,' says <span style="font-weight: bold;">Sabyasachi Majumdar, Senior Vice President and Group Head, ICRA Ratings.</span> Of the Rs.16,320-crore assigned for the project about Rs.12,000 crore of would be provided by the Centre under the scheme. Under the scheme, 60 per cent is funded as a grant by the Centre, 10 per cent by respective states and 30 per cent through loans (for special category states it is 85%, 5% and 10% respectively). The Rural Electrification Corporation Limited (REC) is the nodal agency for the operationalisation of the scheme.</p> <p>As per the budget plan for Saubhagya, Rs.4,900 crore would be spent in 2017-18, including Rs.3,100 crore of rural allocation. In a report, brokerage firm, India Infoline said, 'This makes the balance for FY19E (2018-19) at Rs.11,420 crore (Rs.7,487.5 crore for rural allocation). However, given the rural focus of the upcoming Union Budget, it is likely that the pace of execution will increase along with higher budgetary allocation.' India has been able to achieve satisfactory progress in urban electrification, and similar achievement is required for rural household electrification. The government has from time to time taken several steps and initiatives in order to ensure that power is available for all, and is affordable across the country with varying degrees of success. Except for 18,542 villages, all other villages in India were electrified by 2014, and only 1,694 are yet to be electrified as at end-December 2017.</p> <p>Several initiatives and schemes such as R-APDRP, IPDS, RGGVY, FRP, DDUGJY, UDAY etc., have been launched for augmentation of electricity network and ensuring access to power for all in distribution business from time to time.</p> <p> <span style="font-weight: bold;">Benefits </span><br /> Uninterrupted power supply provides growth impetus to industrial as well as commercial activities. Thus, for a developing country like India, it is of utmost importance that affordable and uninterrupted quality power supply is available to all segments of the society. </p> <p>'As a result of insufficient infrastructure and poor quality of supply in the rural area, per-capita consumption of power has remained significantly low,' says the Report 'Sustainability of Power Business - Paradigm Shift for 24x7 Power for All', prepared by ICRA Management Consulting Services Limited (IMaCS).</p> <p>'Average rural household consumption of 2014-15 has remained at 2.6 units per day, indicating poor quality of supply. By providing quality power supply to rural consumers and providing access to electricity to remaining 4 crore households, India would tap the rural market and unlock the latent demand present there for upliftment of the rural population accruing the benefits of electrification,' said IMaCS. It cited the example of similar benefits that have accrued in Vietnam, where rural electrification has increased households' cash income, increased expenditure and improved education levels. 'If implemented in a time-bound manner, this is likely to result in a boost in energy demand, apart from improving the quality of life for rural households,' says Majumdar, ICRA Ratings. While the energy demand growth in the first five months of 2017-18 has shown some improvement (an increase of 5.4% on y.o.y basis), a sustained demand recovery still remains to be seen, he added.</p> <p>According to estimates of the government before launching the scheme, there will be requirement of additional power of about 28,000 MW and additional energy of about 80,000 million units per annum, considering an average load of one kW per household and average uses of load for eight hours. 'This is a dynamic figure. With the enhancement of income and habit of using electricity, the demand of electricity is bound to vary. This figure will also vary if the assumptions are changed,' the government said.</p> <p>If it is true, Saubhagya scheme will bring cheers among the power generating companies, which are saddled with a huge idle capacity. Currently, the idle or stranded thermal capacity is estimated at over 40 GW and the peak power requirement is also below 50 per cent of the total installed capacity in the country.</p> <p>Lighting in turn will also help in improving education, health and communications connectivity with the multiplier effect of increased economic activities and job creation. </p> <p><span style="font-weight: bold;">Kamal Nandi, Business Head &amp; EVP, Godrej Appliances </span>says, 'The hugely untapped rural markets have exponential potential. The electrification project will help increase the penetration of appliances in these markets which at the moment is very low and thereby add comfort and reduce drudgery from people's lives all over the country. It will also have a multiplier effect by freeing up time, enabling more women to join the workforce and thus will drive up income and demand.'</p> <p> Challenges IMaCS says in its report that the success of the scheme depends on the ability of the consumers to pay for the power they consume, reduction of tariff subsidy, improved health of power utilities and growth in renewables and storage solutions. As we progress towards the path of power for all, a lot of challenges and issues need to be addressed to make the power business more sustainable.</p> <p>Rural electrification is expected to re-orient the entire power sector business in a way that discoms supply quality power, and recovers reasonable cost from rural consumers. Paying capability of the rural consumers is low though a large portion of population is willing to pay for quality power supply. So, innovative billing mechanisms have to be evolved.</p> <p>Generation business needs to cater to additional demand from household electrification with appropriate generation mix and the transmission business should match network expansion appropriately to meet additional demand.</p> <p>With the lopsided tariff structure, under recovery from domestic and agriculture category consumers burdens industrial consumers the highest and impacts their competitiveness among global players. So, tariff subsidies have to be reworked in such a way the tariffs are not skewed too much in favour or against any section of users, and they should be catered to only where it is absolutely necessary.</p> <p>Health of discoms is a sore point from the beginning on account of high Aggregate Technical and Commercial (AT&amp;C) losses (in the range of 23 to 25%) and under recovery of cost - average Average Cost of Supply (ACS) vs Average Revenue Realised (ARR) gap of 43 per cent. Once discoms become stronger, they would have sufficient capability to incur capital expenditure required for meeting æPower for All' initiative.</p> <p>Building required infrastructure for evacuating renewable power is a necessity, given their importance as a source to fight greenhouse gases (GHGs) and fulfilling the commitment India has made towards reducing GHGs. 'We would be able to reap optimal benefits of clean energy only when we have cost-effective and efficient storage solutions in future,' says IMaCS in its report.</p> <p>Introducing competition in retail sale of power would help in improving discoms' service levels and to avoid a situation where high-tariff paying consumers are cherry-picked at the cost of a large chunk of subsidised consumers.</p> <p>At a time when subsidies are weighing heavily on discoms, concurrently with implementation of Saubhagya scheme, institutional mechanisms have to be developed to safeguard their interests too. </p> <p> <span style="font-weight: bold;">Conclusion</span><br /> The path towards achievement of rural electrification is strewn with several challenges and hurdles which needs to be resolved in a manner that is win-win for all the stakeholders in power business. It is important to bring nearly 67 per cent of India's population of 1.3 billion living in the rural areas, many of whom still do not have access to electricity, into the mainstream of economic activity. Electricity should not be a privilege of a few, but the right for all Indians.</p> <p>There is no substitute for addressing all the challenges mentioned above and ensuring sustainability to the sector that is the prime mover of the economic development of the country. </p> <p>Though industrialisation of these newly electrified areas will take place over a period of time, the tariff imbalances have to be addressed in the short- to medium- term so that the discom viability will not get affected in any way. At a time when the government is planning to introduce penalties for failing to provide uninterrupted power to consumers after March 2019, this becomes even more important. </p> <p>Ultimately, involving all the stakeholders of the power sector is necessary to make 'Saubhagya' a success, which in turn will help address several challenges the sector is facing - idle capacities and increasing renewable capacities, shortcomings in transmission and distribution segments, skewed tariff policy etc. </p> <p> <span style="font-weight: bold;">EXECUTIVE EDITOR<br /> Saubhagya Scheme - salient features</span><br /> Prime Minister Narendra Modi launched had the Rs 16,320-crore Pradhan Mantri Sahaj Bijli Har Ghar Yojana, or Saubhagya, on September 25, 2017 to provide electricity connections to over 4 crore families in rural and urban areas by December 2018. Here are the salient features of the scheme:</p> <p> <span style="font-weight: bold;">Aim</span><br /> The scheme funds the cost of last-mile connectivity to willing households, to help achieve the goal of universal household electrification in the country by December 31, 2018. </p> <p> <span style="font-weight: bold;">Last-mile connectivity </span><br /> The electricity connection to households include release of electricity connections by drawing a service cable from the nearest electricity pole to the household premise, installation of energy meter, wiring for a single light point with LED bulb and a mobile charging point. In case the electricity pole is not available nearby, the erection of additional pole along with conductor and associated accessories shall also be covered under the scheme. </p> <p> <span style="font-weight: bold;">Connection cost</span><br /> Yes. Poor households would be provided electricity connections free of cost. Other households would also be provided electricity connections under the scheme on payment of Rs 500 only, which shall be recovered by the discoms/power departments in ten (10) instalments along with electricity bills. </p> <p> <span style="font-weight: bold;">Power cost</span><br /> There is no provision in the scheme to provide free power to any category of consumers. The cost of electricity consumption shall have to be paid by the respective consumers as per prevailing tariff of the discom/power department. </p> <p> <span style="font-weight: bold;">Need for new scheme</span><br /> It is different from '24x7 Power for All', Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY), and Integrated Power Development Scheme (IPDS). æ24x7 Power For All' is a joint initiative with the states covering all segments of power sector. DDUGJY envisage creation of basic electricity infrastructure in villages, while Integrated Power Development Scheme (IPDS) provides for creation of necessary infrastructure in urban areas. Providing connectivity to all households is a prerequisite to ensure 24x7 power supply. Saubhagya has been launched to plug gaps and comprehensively address the issues of entry barrier, last mile connectivity and release of electricity connections to all un-electrified households in rural and urban areas. And, the cost of Saubhagya scheme i.e. Rs 16,320 crore is over and above the investment being made under DDUGJY. </p> <p> <span style="font-weight: bold;">Modus Operandi</span><br /> Project proposals shall be prepared by the state discoms / power department. and sanctioned by an inter-ministerial Monitoring Committee headed by Secretary (Power), Government of India. The electrification works under the sanctioned projects and shall be executed by respective discoms/power department. through turnkey contractors, or departmentally, or through other suitable agencies capable of doing this work as per norms. </p> <p> <span style="font-weight: bold;">Impact on power demand</span><br /> Considering an average load of 1 kW per household and average uses of load for eight hours in a day, there will be requirement of additional power of about 28,000 MW and additional energy of about 80,000 million units per annum. This is a dynamic figure. With the enhancement of income and habit of using electricity, the demand of electricity is bound to vary. This figure will also vary if the assumptions are changed. </p> <p> <span style="font-weight: bold;">Provision for remote areas</span><br /> For households located in remote and inaccessible areas, solar power packs of 200 to 300 Watt and battery backup with 5 LED lights, 1 DC fan, 1 DC power plug along with repair and maintenance for five years would be provided. </p> <p> <span style="font-weight: bold;">Households covered</span><br /> There are about 4 crore un-electrified households estimated in the country, of which, about 1 crore BPL households in rural areas are already covered under sanctioned projects of DDUGJY. Thus, total of 300 lakh households, 250 lakh households in rural areas and 50 lakh in urban areas, are expected to be covered under the scheme. </p> <p> <span style="font-weight: bold;">Status of illegal consumers</span><br /> The scheme categorically provides that the defaulters whose connections have been disconnected shall not be given benefit of the scheme. </p> <p> <span style="font-weight: bold;">General benefits</span><br /> Access to electricity would substitute use of Kerosene for lighting purposes, reducing in indoor pollution thereby improving people's health. <br /> Electricity access would help in establishing efficient and modern health services across the country. <br /> Lighting at night improves personal safety, especially for women and increases social and economic activities. <br /> Availability of electricity will boost education services across all areas. <br /> It also increases the likelihood of women getting educated and earning income. </p> <p> <span style="font-weight: bold;">Economic benefits </span><br /> Substitution of the use of Kerosene with electricity for lighting purposes would reduce annual subsidy and imports.<br /> Electricity in each home facilitates improved access to all kind of information through radio, television, internet, mobile etc.<br /> Farmers can access information that can increase their income.<br /> Availability of reliable electricity services encourage setting up of shops, offices and industries, which create direct and indirect employment.<br /> </p>
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