Going by government data, India’s villages and households are now almost completely electrified. External research, though, suggests otherwise. Surveys have found that many households still do not have an electricity connection and, even those that do, receive electricity only sporadically.

One big reason for this is the poor financial health of state electricity distribution companies (discoms) who are hindered by non-payment of electricity bills. New research, however, suggests that Indian rural households are actually willing to pay for electricity—as long as it is of reliable quality.

In the study, to be published in Energy Policy, an energy-focused academic journal, Ryan Kennedy and others show that Indian households are willing to pay significantly more for better quality of electricity.

To understand the relationship between the quality of electricity service and willingness to pay, they use 2014-2015 ACCESS survey data from 8,500 rural households in 74 villages across six states. The ACCESS survey is a large-scale survey on energy access in rural India which includes specific questions on households’ willingness to pay for electricity.

The authors find that households would be willing to pay an additional 56 a month for an additional hour of electricity supply and 160 more for an additional hour of electricity at night. More generally, the average non-electrified household would be willing to pay 399 for an electricity connection.

The authors argue that since much of India’s rural electricity problems stem from discoms’ poor financial health, better quality of supply can trigger a ‘virtuous cycle’ for improved electricity access. Better power supply would increase demand for electricity, inducing more households to connect to the grid at higher prices, which in turn would allow discoms to recover costs and help pay for the improved power supply.

Also read: Quality of Service Predicts Willingness to Pay for Household Electricity Connections in Rural India

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