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Rural Electricity in India
Contents
Brief History
Rural electrification comprises chiefly of domestic connections, street lighting in villages and pump sets electrification. Rural electrification received attention only after independence, when the State Electricity Boards (SEBs) were formed under the Electricity Supply Act, 1948. The responsibility of the SEBs apart from generation and distribution was also to extend the transmission network to rural areas. The Rural Electricity Corporation (REC) formed in 1969, was entrusted with responsibility to administer the Central Plan outlay and to provide loans to the SEBS and Rural Electric Co-operatives (RECOs) for implementing schemes of rural electrification.¹
As a part of the RE programme RECOs were formed in the latter half of the Sixties for distribution of Power in rural areas. They were responsible for both extending the transmission network in rural areas as well as providing services. The government undertook the responsibility of funding and promoting these pilot societies. REC has so far sanctioned 41 RE Cooperatives in the country spread over 12 States. As on date 33 are in operation as 8 societies (3 in Rajasthan and one each in the States of Bihar, Gujarat, Jammu & Kashmir, Uttar Pradesh and Orissa) have since been taken over by the respective State Electricity Boards (SEBs). 33 RE Cooperatives Societies presently in operation are located in the States of Madhya Pradesh (17), Andhra Pradesh (9), Tamil Nadu (3), Maharashtra (1), Karnataka (1) and West Bengal (2).
Out of a total number of 5,87,258 villages in the country as per the 1991 census, as many as 5,07,451 villages, i.e. 86.4 per cent were declared electrified by December 31, 2000. The remaining about 81,660 unelectrified villages of the country are mostly in Uttar Pradesh, Bihar, Orissa, West Bengal, Meghalaya, Arunachal Pradesh, Tripura and Rajasthan, accounting for 99.14 per cent of the total unelectrified villages in the country.
The important players in the Power Infrastructure are State Electricity Boards (SEBs) and Electricity Departments (ED), Power Grid Corporation (PGC), Power Finance Corporation (PFC), National Thermal Power Corporation (NTPC), National Hydro Power Corporation (NHPC), Central Electricity Authority (CEA), North Eastern Electric Power Corporation Ltd (NEEPCO) and now with the change in power sector policies independent power producers and electricity regulatory commissions (ERCs). The SEB at state level was responsible, and is still in some states, for production, transmission and distribution. It invested in developing power generation capacity, transmission and distribution network as well as end use marketing. NTPC and NHPC were the two central level organization for developing thermal based power projects and hydro-based power projects. NEEPCO is responsible for developing generation capacity in the North-Eastern states of India. These fell in the central pool from which power was sold to different SEBs. PGC is responsible for developing interstate grids for power transmission. PFC is responsible for providing finance to power infrastructure development. REC was responsible for financing Rural Electrification, which is now diversified to include system improvements as well. CEA was the technical, financial and economic advisor to the MOP on power sector development. With the changes in power sector policies, it is now merely an advisory body.
¹ Q: What is the source of funding for REC - it seems initially it was the central plan outlays (didn't centre have any grant component and yes, was that routed through REC), which were further loaned to SEBs for the RE work. Currently REC also relies on other FIs for channeling loans, bilateral funding agencies as well raise money from the market.
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Funding for RE
As the primary responsibility of RE infrastructure lies with the States, the major funding for generation and distribution network of Electricity was provided from the State Budget. The center too provides resources to states for developing the infrastructure. This was done primarily in the form of loans through REC and some component of it has been through grants provided by the Government under various rural development schemes.
Historically the share of electricity sector in total plan outlay of the Center has been 15-20 percent. Within this the major share of funding has been towards power generation and transmission. To give an idea of the extent of distribution, the Ninth Plan distribution among various components was 40 percent generation, 44.6 percent T&D, 8 percent for REC (this is towards rural electrification as well as system improvement).²
RE activities were mainly funded through REC. From the Fourth Plan onwards to augment the resources for RE, RE schemes attracted substantial loan assistance from the Agricultural Refinance Development Corporation, the Agricultural Finance Corporation, Commercial Banks and the State Land Development Banks.
Central allocations for power infrastructure development are through plan outlays of the Ministry of Power. The table below presents the outlay for MOP for the year 2000-2001 to illustrate the allocations. As is evident from the table, the resources are allocated by the Centre for creation of generation capacity in the central pool as well as transmission infrastructure, loans and grants for rural electrification through REC, and allocations to various central power research and other institutes. Allocations of loans are also made for SEB for power infrastructure development. Also some of the grant based funding for rural electrification are through REC.
Table: Plan outlay for Ministry of Power for the year 2000-2001 for a glimpse of funding activity.
| Budget Head |
Plan Allocation |
Remarks |
| 2801/ power sector |
456.70 crores |
This allocation is to all the institutes in Power sector as well as subsidy on interest to various PE in power sector. It also covers the allocation towards Kutir Jyoti Programme (65 crore). |
3601/Grant in Aid to State Governments |
4.75 crores |
|
4801/ Capital outlay for Power projects |
1271.19 crores |
This covers funding for power plants as well as transmission infrastructure. It is outlay for PE. |
| 6801/Loan for power projects |
898.08 crores |
Essentially for above purpose, but a loan rather than grant. This also includes 189 crore outlay for REC to further advance loans to SEB for system improvement and small hydro-electric projects. |
| Plan outlays in other budgets toward Electrification under Plan outlays for state governments |
| Prime Ministers Gramodaya Yojana |
5000 crore |
2500 crore is for rural roads, and the rest for other basic minimum needs of rural areas, which includes rural electrification. Part of this is grant and rest loan. |
| Loans for state governments for Rural Electrification |
460 crores |
This is channeled through REC |
| Accelerated Power Development Programme (APDP) |
1000 crore |
? Is this a loan. It is reported in the budgets under the transfers to the state from Central Plan Outlay. |
Apart from the loans and grants through REC for RE, the GoI from time to time have launched special programmes for providing electricity in rural areas. The Minimum needs Programme was introduced in the first year of the Fifth Five Year Plan (1974-79). The objective of the Programme is to establish a network of basic services and facilities of social consumption in all the areas, within a specified time frame. The programme is designed to assist in raising living standards and in reducing the regional disparities in development. The programme is essentially an investment in human resources. The basic needs of the people identified for this programme are Elementary Education, Adult Education, Rural Health, Rural Roads, Rural Electrification, Rural Housing, Environmental Improvement of Urban Slums and Nutrition. The RE component was released to REC as 100 percent loan to SEBs. This has been changed since 2000-2001 by releasing it as loan directly to the state governments.
In 1988-89, a programme called Kutir Jyoti was launched for extending single-point light connection to rural poor households below poverty line. About 38 lakh households have been provided connections under this programme. This is provided as subsidy component to the state and is covered under the budget head 2801 of the MoP.
The GoI has recently initiated a new programme titled Accelerated Power Development Programme (APDP). APDP allocations are addressed at strengthening the power infrastructure. The allocation is given to states for R&M of power plants, strengthening of existing T&D network, full metering, restructuring of power sector and so on. As such it is not addressed at extending grid for rural electrification. Improving the quality of power supply in villages, augmentation of distribution networks in rural areas supported by REC under the Accelerated Power Development Programme.
Apart from the Central Government, state allocations to this sector too are significant. For the 8th five year plan states allocated 48408 crore to center's 31181 crore. The areas of investment in state too are power plants, state T&D, and rural electrification. In recent years the stress on RE has increased. Of all the states Rajasthan and Meghalaya have spent a significant proportion, 10 percent, on RE during the 90s. Recently others states too that have lagged in RE, such as UP HP MP have spent significant portions of budgets on RE.
² Annual Report on the working of SEB and ED. Panning Commission, GOI. April 2000. TERI Library [621.311.1(047) IND.
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Quality and Quantity
The table below gives the development in RE till year 2000. The figures in bracket give the percentage of rural households with electricity connection in each stage.
| 100% Electrification |
95 - 100% |
Below 75% |
| North |
| Haryana (63.2) |
Himachal Pradesh, (85.86) |
Uttar Pradesh (10.96) |
| Punjab (76.98) |
J&K |
|
| Chandigarh, (65.25)(76.98) |
Rajasthan (22.44) |
|
| Delhi, (59.85) |
|
|
| West |
| Gujarat, (56.43) |
Madhya Pradesh, (34.49) |
|
| Maharashtra, (58.45) |
|
|
| Goa, (81.82) |
|
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| Dadar and Nagar Haveli (51.2) |
|
|
| Daman and Diu, (92.87) |
|
|
| South |
| Andhra Pradesh, (37.5) |
|
|
| Karnataka, (41.75) |
|
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| Kerela, (41.95) |
|
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| Tamil Nadu, (44.49) |
|
|
| Pondicherry, (51.2) |
|
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| East |
| Andaman and Nicobar Islands, (53.62) |
|
West Bengal (17.75) |
| Sikkim (57.12) |
|
Bihar (5.57) |
| |
|
Orissa (17.45) |
| North-East |
| Mizoram (35.47) |
Assam, (12.44) |
Meghalaya (16.34) |
| |
Tripura 928.5) |
Arunachal Pradesh (33.88) |
| |
Manipur (41.73) |
|
| |
Nagaland (47.16) |
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Table taken from TEDDY 1999/2000 needs updation. Figures in bracket are rural household with electricity connections in 1991 (TEDDY).
As mentioned earlier 86 percent of the villages have been electrified. The remaining villages are in 6 states. In the initial stages, widely scattered villages, non-clustered pump sets and poor load factor emanating from seasonal consumption of electricity were barriers. This required a wide network involving a huge outlay. Also, the lack of facility for domestic connection in initial stages, uncertainty of power, load shedding and rostering schedule on an extensive scale dampened the demand for power in rural areas. The progress of electrification was also affected by shift in focus to electrification of pump sets for irrigation.
There have been few studies on the impact of RE on development. Rural electrification as per a survey study by the Planning Commission shows a spurt in rural industry with electrification. The survey also indicated a very low consumption of electricity, 880 kwh per annum per consumer. The consumption pattern was 64% for agriculture, 14 for industry, 13 for domestic use, 4 for commercial use and 2 for street lighting. Long and cumbersome procedures for getting connection, bill paying facility and repair facility being too far off, were some of the factors that affected acceptability. Interrupted power supply and voltage fluctuations affected the economics of electric pumpset.³
The definition of village electrification as adopted by GoI is "A village will be deemed to be electrified if electricity is used in the inhabited locality within the revenue boundary of the village for any purpose what-so-ever". Therefore, electrification of a village doesn't imply all the houses in a village have electricity. It is not very clear from the reports scrutinized whether the low level of electrified household is because of lack of purchasing power or because of lack to grid to support the load. As per the 1991 census, 30% of the rural households had electricity. The low power quality as per some reports is the main reason for low level of participation.*
A disturbing trend to note is that the rate of electrification of villages has been steadily declining after the 7th Plan. State agencies are not so keen in making investments in traditional areas of village electrification and pumpset energisation. They consider it unremunerative. Also with increasing subsidies the returns on the investment affected the loan repaying capacity of the SEBs.
Therefore, the focus changed and extra resources were allocated to the states through various alternative schemes for undertaking RE. Also this phase saw the focus widening from purely RE to system improvement and rural load development, which would make it more remunerative to invest in RE.
³ Long and cumbersome procedures for getting connection, bill paying facility and repair facility being too far off, were some of the factors that affected acceptability. Interupted power supply and voltage fluctuations affected the economics of electric pumpsets.
* (http://planningcommission.nic.in/stgpnt/stgpnt_ch7.pdf)
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Latest Development
The government has set a target of electrifying all villages, including those located in remote areas, by 2012 at an estimated investment of Rs 10,000 crore. A committee comprising of a Group of Ministers under the Dy-Chairperson, Planning Commission, has been setup to oversee implementation of this target. It has been recommended that the Centre should aim at connecting 62,000 villages by grid by the end of the Tenth Plan (2007) and the remaining 18,000 villages situated in remote areas by 2012. The 18,000 remote villages would be electrified through non-conventional energy sources, as they cannot be connected by grid.
A new scheme Pradhan Mantri Gram Vidyut Yojana has been suggested for achieving the target. This will be a 100 per cent Centrally-sponsored Scheme (CSS) for the 10th (2002 to 2007) as well as the 11th Plan (2007 to 2012). The GoM suggested that the entire requirement for 100 per cent village electrification, covering of unelectrified hamlets and intensification of dalit bastis, should be covered by the proposed scheme.
In the year 2001-2002 RE was also made a part of the Prime Minister Gramodaya Yojana (PMGY), which so far didn't cover this aspect. Also an allocation of Rs 750 crore was made out of Rural Infrastructure Development Fund. Further REC has been allowed to float capital gains tax exemption bonds along with NABARD and NHAI to augment the funds available for RE.
GOM has also recommended pooling of funds from the minimum needs programme component for rural electrification, the Rural Electrification Corporation routed through the power ministry's Budget, Kutir Jyoti programme and funds allocated under the for rural electrification.
To ensure quality electricity supply to rural areas/rural households, decentralized generation would be encouraged with suitable regulation by the State Electricity Regulatory Commissions (SERC). An enabling provision would be made in the proposed Electricity Bill so that private generators and organizations including co-operatives, Panchayati Raj Institutions, and NGOs can also bid for supplying electricity to dispersed communities on a decentralized basis.
The table below presents the analysis of data obtained from NSS 50th and 55th round on energy used by household in urban and rural areas. The survey carried out assessment of main source of cooking as well as lighting energy in households across the country. The impact of renewed focus is brought out clearly. The first survey was carried out in 93-94 and the second survey in 99-2000.
| MPCE Class |
99-00 |
93-94 |
% point Increase |
| 0-225 |
28 |
15 |
13 |
| 225-255 |
28 |
16 |
12 |
| 255-300 |
35 |
19 |
16 |
| 300-340 |
38 |
23 |
15 |
| 340-380 |
42 |
27 |
15 |
| 380-420 |
46 |
31 |
15 |
| 420-470 |
51 |
34 |
18 |
| 470-525 |
56 |
40 |
16 |
| 525-615 |
61 |
46 |
16 |
| 615-775 |
68 |
54 |
14 |
| 775-950 |
75 |
61 |
14 |
| 950-more |
84 |
71 |
13 |
| Total |
53.00 |
37 |
16 |
The first column represents the monthly per capita expenditure class. The upper and lower bounds of the MPCE for each category has changed between the two periods, but have a one to one correspondence. The data presented above is for rural areas. The households using electricity as main source of electricity has increased from 37 per cent in 93-94 to 53 percent in 99-2000. The interesting fact is that the percentage point increase is nearly uniform across the MPCE classes. The middle shows the bulge but ever so slightly. One needs to take into account the fact that only 86 percent of villages in India are electrified and the above sample is across all the rural areas. If one were to assume that the sample reflects the percentage of villages electrified, then the percentage of households using electricity as primary source of energy would be approximately 61 per cent.
Table: % age household using electricity as main source of lighting in rural areas (survey year 1999-00)
| States |
% Household using electricity in rural areas |
% villages electrified |
% household using electricity in electrified villages |
| Andhra Pradesh |
70 |
100 |
70 |
| Arunachal Pradesh |
44 |
59 |
74 |
| Assam |
27 |
77 |
35 |
| Bihar |
7 |
71 |
10 |
| Goa |
100 |
100 |
100 |
| Gujarat |
82 |
100 |
82 |
| Haryana |
86 |
100 |
86 |
| Himachal Pradesh |
96 |
99 |
97 |
| Jammu & Kashmir |
98 |
98 |
100 |
| Karnataka |
77 |
100 |
77 |
| Kerala |
71 |
100 |
71 |
| Madhya Pradesh |
67 |
95 |
70 |
| Maharashtra |
77 |
100 |
77 |
| Manipur |
71 |
91 |
78 |
| Meghalaya |
45 |
46 |
99 |
| Mizoram |
71 |
100 |
71 |
| Nagaland |
88 |
96 |
92 |
| Orissa |
25 |
73 |
34 |
| Punjab |
96 |
100 |
96 |
| Rajasthan |
52 |
92 |
56 |
| Sikkim |
95 |
100 |
95 |
| Tamil Nadu |
77 |
100 |
77 |
| Tripura |
45 |
100 |
45 |
| Uttar Pradesh |
27 |
79 |
34 |
| West Bengal |
26 |
78 |
34 |
| A & N Islands |
71 |
100 |
71 |
| Chandigarh |
100 |
100 |
100 |
| Dadar & Nagar Haveli |
100 |
100 |
100 |
| Daman & Diu |
100 |
100 |
100 |
| Delhi |
1070 |
100 |
100 |
| Lakhsadweep |
100 |
100 |
100 |
| Pondicherry |
80 |
100 |
80 |
| All India |
53 |
86 |
62 |
The above table reports the percentage of households using electricity as the main source of lighting in year 99-00. The interesting aspect is that states with 100 percent village electrification, show upwards of 70 percent of household using electricity as the main source of lighting. Whereas those states with less than 90 percent villages electrified, the percentage of households using electricity is very low. The exceptions being Arunachal and Meghalaya, where though the level of village electrification is low the number of households using electricity is very high. Bihar is the worst case with a low 10 per cent of households in electrified villages using electricity as the main source of lighting.
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Data on RE
The information on RE primarily is reported in terms of villages electrified. The information on unelectrified villages in each state is difficult to come by. Also the information on percentage of households using electricity is generally based on the census data. Apart from that the energy surveys carried out by NSSO are other sources of electricity used in rural areas. These are based on sample surveys and the issue being addressed is more of energy expenditure than rural electrification. The quality aspect of rural energy is merely anecdotal and no systematic information exists on it.
Alternatively, the grid reach information is provided in terms of Circuit Kilometers of network developed. It is very difficult to get the information on where all these grids are available. And also the future plans for its extension at any central location. Neither is it possible to get information on the load that can be supported at the village electrification points.
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