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Business News/ Elections 2019 / Lok Sabha Elections 2019/  The curious case of electrification in India amid discom blackouts

The curious case of electrification in India amid discom blackouts

In the five years of Narendra Modi government, India witnessed near-universal electrification, but the quality of power access remains an issue, a Mint analysis shows

The Narendra Modi government simply finished the job of electrification started by previous governments, but quality of access still remains an issue. (Pradeep Gaur/Mint)Premium
The Narendra Modi government simply finished the job of electrification started by previous governments, but quality of access still remains an issue. (Pradeep Gaur/Mint)

Mumbai/New Delhi: In its 2014 election campaign, the Bharatiya Janata Party (BJP) promised to bring development, and specifically electricity, to all of India’s villages and homes. However, by then, almost all of India’s villages (97%) already had an electricity connection, according to data from the Central Electricity Authority (CEA). This left the BJP-led National Democratic Alliance-II (NDA-II) to simply finish the job.

It did this, amid much fanfare, in April 2018 when Leisang in Manipur became India’s last village to be electrified. The NDA-II has electrified 20,910 villages, some in India’s most remote locations, but the bulk of the work had been done by previous regimes—the United Progressive Alliance-II (UPA-II) electrified 80,189 villages and UPA-I 52,611 villages.

Village electrification, however, is only the first step in delivering power across India. A village is declared electrified if just 10% of the households has electricity connections, which masks poor access at household-level. The bigger challenge facing the Narendra Modi government was to provide households with higher quality and regular supply of electricity. And even here, data suggests that the NDA-II were simply building on groundwork done by previous governments.

According to data from the National Family Health Survey (NFHS), in 2015-16, 83% of rural households already had an electricity connection, up from 56% in 2005-06.

To complete the process of household electrification, the NDA government rolled out the Sahaj Bijli Har Ghar Yojana (Saubhagya Scheme) in 2017. The scheme provides free electricity connections and low-cost power supply to households, and initially targeted universal household electrification by December 2018.

While this was not achieved then, current data from the Saubhagya dashboard suggests India is close to being fully electrified. Across the country, less than 20,000 households lack electricity access, according to the government. Official data from Saubhagya, though, is prone to be misreported, as a previous Plain Facts column pointed out.

However, data from non-government sources also suggest that India is getting closer to complete household electrification. A 2018 survey of 9,000 households across India’s poorest states—Bihar, Madhya Pradesh, Jharkhand, Odisha, Uttar Pradesh and West Bengal—by the centre for Electricity, Environment and Water (CEEW) showed that the share of rural households connected to the grid in these states increased 20 percentage points since the last such survey was conducted in 2015, and rose to 84%. According to the NFHS 2015-16 report, an average of 72% rural households in these states had access to electricity.

More than access to electricity, the bigger challenge for India now is providing better quality of electricity. Across the country, there are significant disparities in the number of hours households get electricity. For instance, the CEEW survey revealed that while West Bengal households get 20 hours of power supply on average, Jharkhand households receive only 9 hours.

Data from the Mission Antyodaya, a nationwide survey of villages conducted by the ministry of rural development, also points to these differences. Around 20% of India’s households received less than 8 hours of electricity and only 47% received more than 12 hours, suggesting that another NDA promise—24x7 power for all households by 2019—is very much unlikely to be met.

A big reason for low-quality electricity supply is the financial health of the power distribution companies (power discoms), which are responsible for distributing electricity at the state level. Low tariffs mandated by governments, electricity theft and weak infrastructure mean that state power discoms are burdened by losses and debts. In March 2015, discoms had accumulated losses worth 3.8 trillion—3% of gross domestic product (GDP)—and outstanding debt worth 4.3 trillion.

To tackle this, the NDA launched the Ujwal Discom Assurance Yojana (UDAY) in 2015 as a bailout scheme in which power discoms could convert their debt into government bonds as long as they met certain conditions. While 27 states have joined the scheme and 2.3 trillion worth of government bonds have been issued, few meet the necessary conditions.

One condition under UDAY Scheme is to reduce aggregate technical and commercial losses (AT&C) in delivering electricity. AT&C losses, a major reason for discom struggles, arise from electricity theft and transmission losses due to weak infrastructure. UDAY mandated that states keep AT&C losses under 15% by 2018-19.

Since the scheme’s launch, aggregate AT&C losses across India has fallen from 21% in 2015-16 to 18% in 2017-18. But this decrease is largely a result of a handful of over-performing discoms in the five southern states and Gujarat. These states are the only ones likely to meet the 15% target. The other condition of UDAY was for power discoms to ensure commercial sustainability by bridging the gap between revenues and costs.

UDAY mandated that discoms bring the gap between average revenue and average costs to zero. Here, too, there has been progress with the gap reducing (from 0.60/kWh in 2015-16 to 0.17/kWh in 2017-18), but 21 of 26 states are still unlikely to meet the target.

According to a National Institute of Public Finance and Policy study, this data suggests that the UDAY scheme is failing to turn around the power sector. The authors also find that discoms remain plagued by operational inefficiencies such as lack of effective billing procedures, poor measurement of power consumption, and ineffective monitoring of power theft.

Taken together, data shows that the NDA has built on the previous government’s work to get more households electrified—but quality of access still remains an issue.

While the government has tried to address this by improving the financial health of discoms, much more needs to be done. The inability of successive governments to revive discom fortunes could have important ramifications for India’s development.

The World Bank estimates India’s electricity demand to treble by 2040. Addressing this rising demand will be critical for the development agenda of whichever party is elected to form the next government.

This is the fourth of a 12-part report card series on NDA-II.

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Published: 11 Mar 2019, 04:49 AM IST
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