India has, in just over a decade, achieved extraordinary success in extending electricity access through its national programme. About 1,25,000 villages have been electrified and 500 million people have got access to electricity. Village electrification has been completed. Household electrification under the Saubhagya scheme is expected to be completed by 2020, if not earlier. The International Energy Agency recognises this as being “one of the largest successes in the history of electrification” and a “colossal achievement”.

What made this possible was the decision that completing rural electrification was overdue and this deserved full Central government financing, as had been done earlier for provision of safe drinking water in villages and, later, for roads to connect all villages.

Full turnkey individual electrification project-based financing by the Centre — comprising 90 per cent grant and 10 per cent loan — through the Rural Electrification Corporation, which exercised tight control over project design and monitoring of execution, was the key to success.

Direct project execution by central undertakings of the Power Ministry in weak States like Bihar to supplement State execution capacity helped in achieving the rapid breakthrough. While below poverty line (BPL) households were getting free connections earlier, under Saubhagya above poverty line households are now getting connections at nominal rates so as to accelerate 100 per cent coverage.

Power generating capacity in India is now considerably in excess of demand and with this providing reliable 24 hours electricity to all households, including the newly electrified ones, is now feasible and beginning to happen across States. Augmentation of distribution capacity on a continuing basis would naturally be necessary in rural areas as in urban areas, to cater to increasing demand as use of electrical appliances goes up. For all households, 24 hours reliable supply can be the new normal; not just in the metros, but all over India.

Pre-paid meters

Pre-paid service has been such a success in telecom. Consumers with more modest incomes, especially those at the bottom of the pyramid, find it so much easier to regulate their consumption to levels that they can afford. The telecom companies get their payment in advance and do not have to bother with issuing bills and their collection.

This rationale applies equally to electricity. It is time prepaid meters were introduced in electricity distribution. The cost of meter reading, billing and collection would become minimal for the millions of scattered rural households who are now getting connections and whose consumption levels in the initial years would be modest.

With the declining costs of IT systems and smart grids, this transition should make eminent commercial sense as addition of substantial manpower costs under the traditional pattern of meter reading and billing would be avoided. All connections below a certain load would prefer to have only pre-paid meters.

This would improve revenue collection and lower costs for the distribution companies. The IT based smart grid with automated metering and billing would finally make real time energy audit a reality. The legacy of high aggregate technical and commercial losses should then become a matter of history.

The Power Ministry is pushing for this. But the States, their regulators and distribution companies have to come on board and act. This could be a fundamental transition to fix electricity distribution.

Electricity for cooking

As household electrification has accelerated, a major breakthrough in supporting lifeline consumption for lighting has already been achieved with the extraordinary success in the transition to LED bulbs which consume only a tenth of the electricity of normal incandescent bulbs.

Repetitive bulk procurement by Energy Efficiency Services Ltd (EESL) of the Power Ministry drove down prices to a fifth of the original. Partnerships with the State distribution companies took these bulbs en masse to the consumers who saved money through lower electricity bills. The free connections for BPL households includes a LED bulb.

A more ambitious transition can now be attempted to get rural households to use electricity for cooking. This would transform the quality of the lives of rural women, eliminate indoor air pollution, and improve health. Like LEDs, bulk procurement of efficient electric cooking stoves could be undertaken by an aggregator, like EESL, to bring down prices.

These stoves can be given to rural households for cooking to be paid for, in easy instalments, and free to BPL households. Basic cooking and lighting can be done in about a hundred units a month.

There is, therefore, a strong case for giving these hundred units of electricity at a concessional rate of, say, ₹3 per unit as even poor households would be able to pay a monthly bill of ₹300. Clean cooking energy is a fundamental need and should be met through public policy.

Assuming an average cost of supply of ₹6.50 per unit, charging a concessional rate of ₹3 per unit involves a subsidy of ₹3.50 per unit. Though subsidies are not in favour these days, this one is amply justified on grounds of the health benefits and the impact on the quality of life of millions of women as well as air pollution.

Under the Electricity Act such subsidies are in the domain of the State governments. Many States may not have the fiscal space to provide the full subsidy. Those which cannot, could use cross-subsidy in electricity tariffs to achieve the same outcome. The power sector is used to cross subsidies.

A simple way of understanding how this could work would be as follows: all households pay ₹3 for the first hundred units per month and the rate for units above this would be raised sufficiently to recover the loss of ₹3.50 per unit for the first hundred units. The raise required would be around 10 per cent, which better-off consumers can comfortably absorb.

With this India can achieve the historic transition of all rural households, switching over from polluting firewood and cow-dung cakes to indoor pollution-free electricity for cooking. This can happen in just three to four years.

The writer is a Distinguished Fellow at Teri and has earlier worked for many years in the Power Ministry in the Govt of India.

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