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Challenges in Rural Electrification

The Rajiv Gandhi Grameen Vidyutikaran Yojana for rural electrification has made some achievements in grid extension, village electrification and rural household connections. But there are questions on the quality of power supply, sustainability of infrastructure and the contribution to rural development. A critical examination of the planning, implementation and sustainability of the RGGVY leads to suggestions of some corrective measures in this massive electrification effort.

Challenges in Rural Electrification

Sreekumar N, Shantanu Dixit

the programme, it presents some ideas for better implementation.

The scope of RGGVY is to electrify all villages and rural households by 2012. This includes (a) Construction of substations and lines in blocks where they do not exist; (b) electrification of unelectrified

The Rajiv Gandhi Grameen Vidyutikaran Yojana for rural electrification has made some achievements in grid extension, village electrification and rural household connections. But there are questions on the quality of power supply, sustainability of infrastructure and the contribution to rural development. A critical examination of the planning, implementation and sustainability of the RGGVY leads to suggestions of some corrective measures in this massive electrification effort.

Sreekumar N (sreekumar@prayaspune.org) and Shantanu Dixit (shantanu@prayaspune. org) are with the Prayas Energy Group, Pune.

Economic & Political Weekly

EPW
octoBER 22, 2011

T
he Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) is one of the flagship programmes of the central government. It is a part of the Bharat Nirman, the rural infrastructure initiative started in 2005, which covers electrification, water supply, irrigation, housing, roads and telephones and the internet. With the central government capital subsidy of around Rs 33,000 crore spread over the Tenth and Eleventh Five-Year Plans, the RGGVY is the biggest rural electrification programme in the country and perhaps also in the world. It is being implemented in nearly all districts covering half the villages in the country.

The state electricity boards (SEBs) set up after independence had a clear mandate to extend electricity supply beyond the urban centres. The Electricity Act (2003) and subsequent national policies (the National Electrification Policy 2005 and Rural Electrification Policy 2006) also empha sise the importance of rural electrification.

Till the 1970s, rural electrification was

a by-product of connecting the towns

with the grid and villages near the grid

benefited. Later, rural electrification was

driven by irrigation pumpset electrifica

tion. Household electrification towards

“electricity for all” was not a priority. No

wonder that many states with high village

electrification levels have low household

access (Sankar 2009). From the 1980s,

there were initiatives like Kutir Jyoti

(1989) and the Rural Electricity Supply

Technology Mission (2002) with a house

hold electrification focus. But RGGVY with

large resource allocation, management at

tention and ambitious targets has brought

the focus back to the crucial issue of

rural electrification.

Scope and Progress

The objective of this article is to present a public interest critique of RGGVY. By identifying weaknesses and challenges of

vol xlvi no 43

villages and habitations (with a population of more than 100 and which can be electrified by grid power), augmentation of distribution transformers in electrified villages/habitations; (c) setting up small generators and distribution network in villages where grid extensions are not cost-effective and which are not covered by the remote village electrification programme of the Ministry of New and Renewable Energy; and (d) free connection to the below poverty line (BPL) households, the above poverty line (APL) households to approach distribution companies for connections.

For items (a) to (c), the central government provides 90% capital subsidy and soft loans for the remaining portion. Hundred per cent capital subsidy is provided for item (d). The total expenditure estimate was Rs 16,000 crore in 2005 (MoP 2005).

The cost estimate norms for household village electrification were revised upwards in 2008 to a total cost of Rs 36,667 crore. In 2009, the Ministry of Power (MoP) was said to have made an estimate of Rs 52,000 crore. This is a large public investment , but is comparable to the figures for many other national programmes.

The progress under RGGVY is impressive as shown in Table 1 (p 29). It shows the progress in village electrification, franchisee deployment, household electrification and funds released. Village electrification data is as per the revised definition of 2004, when in a significant improvement, the definition of village electrification was changed to include minimum 10% household access and electrification of public places. The household electrification data of 2005 is from the 2001 Census, since there is no other reliable source of data and there is no significant electrification before the implementation of RGGVY.

It can be seen that in the course of the last six years, around 96,000 villages have been electrified, raising the level of village

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octoBER 22, 2011 vol xlvi no 43

Number % Number (Crore) %

2005 439,800 74.1 5.97 43.4

2011 537,947 90.6 110,790 (19%) 7.72 56.0 25,335

Source: RGGVY office memo (2005), CEA Annual General Review (2005), CEA Monthly Reports (2011), Bharat Nirman website.

electrification from 74% to 91%. Around

1.75 crore, largely BPL rural households, have been given connections, raising the level of rural household electrification from 44% to 56%. An amount of Rs 25,335 crore has been released as subsidy and loan. There are 1.1 lakh franchisees covering 19% of the total villages.

Progress in household electrification includes that of BPL and APL households. As against the targets of 2.34 crore BPL and

5.46 crore APL rural households, there is a significant progress with the BPL households, with 68% of the target met. Progress with APL household electrification is very slow with only 2.68% of the target met. The number of APL household connections is surprisingly reported as zero in most states.

A Public Interest Critique

A programme of such massive scale, implemented in a vast country like India, can be expected to have many shortcomings. The objective of this critique is not to run down the programme. This public interest critique is based on a long-term, pro-poor perspective. It looks at three broad areas of RGGVY – planning, implementation and sustainable operation.

Planning: There have been many limitations in the planning process, which have subsequently resulted in implementation and sustainability issues.

The emphasis on top-down planning implied that RGGVY was designed at the central government level, largely by the MoP and Rural Electrification Corporation (REC). There was a broad-brush approach and mission mode ambitious target-driven implementation schedules. To cite a few examples: there were uniform estimates for village or household electrification, a similar approach to franchisees across the country, and a same end target for universal access for all states. This, no doubt, helped get things moving, but has caused problems too.

All states were expected to prepare rural electrification plans within six

Economic Political Weekly

EPW
octoBER 22, 2011

months of notification of the national

rural electrification policy in August

2006. There was a lot of delay in this with

the first ones notified in 2008. Even today

all state rural electrification plans are not

available in the public domain.

It should have been clear at the very beginning that an electrification programme to be executed across the country would require massive preparation – technical, management and institutional. While detailed technical specification for rural electrification had been prepared by REC, it has been reported that sufficient attention was not given to availability of person-power, contractors, material (poles, conductors, transformers, etc), land acquisition, availability of BPL lists, or strengthening distribution companies for the increased rural operation and maintenance burden.

It is sad to note the watering down of the commitments – of providing quality electricity supply to rural networks and of promoting economic activities. On rural supply, the RGGVY Office Memorandum (2005) makes a bold commitment of equal treatment for rural and urban households: “States must make adequate arrangements for supply of electricity and there should be no discrimination in the hours of supply between rural and urban households”. The RGGVY continuation order (2008) reduces this to six to eight hours of supply to be eligible for subsidy: “Guarantee by State Government for a minimum daily supply of 6-8 hours of electricity in the RGGVY network with the assurance of meeting any deficit in this context by supplying electricity at subsidised tariff as required under the Electricity Act, 2003”. On economic activities, the 2005 memo explicitly states that RGGVY infrastructure should support activities like agriculture, irrigation, small industry, khadi and village industry, cold chains, healthcare, education and IT to facilitate overall rural development, employment generation and poverty alleviation. This commitment is repeated in the 2006

vol xlvi no 43

a similar clause, but stated in a more general fashion: “REDB, VEI and DDG would indirectly facilitate power requirement of agriculture and other activities, etc” (emphasis added).

One would think that for a programme with high capital investment implemented all over the country, the quality monitoring mechanisms would be developed right at the beginning. The detailed quality monitoring system was developed only in 2008 and an enquiry for National Quality Monitors was issued by the MoP only in 2009. This quality monitoring mechanism, involving the implementation agency, REC and the MoP, is also far removed from the field of action.

It is to be noted that RGGVY has resulted in a high push for grid electricity as the only solution for electrification, perhaps at the cost of neglecting stand-alone and grid interactive systems. While it is true that grid extension has a significant role to play in rural electrification, an integrated approach with a mix of grid extension, grid interactive and off-grid systems to meet the rural electricity should be developed.

Implementation: RGGVY implementation has many challenges, some of them having roots in planning.

The number of agencies in RGGVY is indeed high – central government agencies like MoP and REC; central public sector units; state governments; distribution companies; quality monitors; state and district committees; panchayats; turnkey contractors; equipment suppliers, transporters and finally the consumers. Reports indicate that coordination across these agencies has been poor, leading to delays and problems.

The website of the RGGVY, inaugurated in May 2008 (three years after the programme started), provides a detailed status report up to the village level. This indeed has increased transparency, but it is not clear how close to field reality these reports are and how much they are used for monitoring.

Detailed reports by the third party, REC and national quality monitors, are not available for public review. There are no participatory public processes to monitor progress at the state level. Tariff

COMMENTARY

submissions to regulatory commissions in a few states and responses to a few Parliament questions provide only some gross numbers about the progress in electrification. There are issues with local monitoring mechanisms. District committees are reportedly not functioning well to monitor the progress. The role of panchayati raj institutions has been low and social audit practices found in the National Rural Employment Guarantee Act (NREGA) program mes are unfortunately not present in RGGVY.

Shortcomings in quality monitoring can lead to poor quality of construction. There have been reports of transformer failure within days of installation, laying single phase 11 kV lines, installation of old distribution transformers or extension of lines from the existing distribution transformers (without enhancing capacity) to quickly meet the electrification targets. RGGVY projects were to be executed on a turnkey basis, but there have been reports of multiple levels of subcontracting, which could be another reason for poor quality. Or as stated by Jairam Ramesh, the then mini ster of state for power:1 “It is shocking to find that everybody is keen on passing the buck, the central PSU like NHPC has engaged a Kolkata-based firm which in turn has given contracts to as many as 30 contractors for RGGVY work in two districts of Orissa”.

Sustainable Operation: Sustainable ope ration appears to have received the minimum attention from the planners and implementers.

Adequate, quality supply of power and good quality of service are important to sustain the RGGVY network. There are no indications to show that measures are being taken in a parallel fashion to improve the quality of rural supply and service. RGGVY has indeed brought lines, transformers and service wires in rural areas, but the question remains if quality electricity supply has arrived.

The solution proposed in RGGVY to ensure quality of service in villages is through the formation of rural franchisees. As mentioned before, there has been some progress in forming franchisees, but there has not been much evaluation of their functioning, especially with respect to the sustainable revenue model. The sample studies commissioned by REC in 2007 note that franchisees have brought some improvements in quality of service, but there are issues like revenue sustainability, transparency, capacity building, etc.

With the increase in rural electrification, the number of poor consumers with a tariff less than the cost of supply would go up. Anticipating this, RGGVY order notes that “prior commitment is to be taken from the state governments for providing the requisite revenue subsidy”. There have been problems in many states regarding the estimation, timely disbursal and targeting of subsidy.

Need for Mid-Course Correction

The current approach followed in planning, implementation and sustainable operation of RGGVY has challenges and shortcomings. It is worthwhile to examine the possible outcomes to develop a case for mid-course correction.

One positive outcome of this effort is the creation of a massive rural electricity infrastructure with distribution substations, lines and transformers covering most of the country. Another is the significant increase in rural household connections across the country. It is currently limited to BPL households, but with the infrastructure in place, it is possible to extend this to APL households also.

But there are many areas of concern. Six years into the programme and less than a year away from the target year of 2012, it is evident that universal household access and the minimum supply of one unit/household/day will not be met. Delays have been due to numerous reasons: poor coordination across the multiple actors; low attention by state government or distribution companies; shortage in material or person-power; problems with right of way, non-availability of BPL lists, safety inspection and takeover by the distribution company, etc. There have been strong early warnings of the slow progress of RGGVY in the Parliamentary Committee Report (2009), parliamentary questions and press reports. Recent reports by the comptroller and auditor general (CAG) in Maharashtra and Karnataka have said that these states cannot meet

octoBER 22, 2011

the target of power for all by 2012, due to generation capacity planning and management problems.

The cost estimates for village and household electrification prepared in 2005 when RGGVY started were revised upwards by nearly two times in 2008, when the RGGVY continuation order was issued. In 2005, estimates for electrification were Rs 6.5 lakh/village and Rs 1,500/household. This was revised to Rs 13 lakh/ village (Rs 18 lakh for hilly terrain) and Rs 2,200/household in 2008. The total cost estimates varied from Rs 16,000 crore (2005), to Rs 36,667 crore (2008) to Rs 52,000 crore (2009).2 Some upward revision is understandable, but it would have been better if realistic estimates based on the ground situation were made in the beginning.

The RGGVY network is expected to get six to eight hours of power supply, but this may not be achieved due to generation shortages and poor quality of supply and service. Some rural survey reports indicate that actual hours of rural supply vary from 2 to 10 hours a day (often not when it is most needed) and it takes weeks to repair failed distribution transformers. It is near impossible to depend on electricity to pursue any economic activity. The RGGVY is often cited as the justification for the current ambitious generation capacity addition plans, which aim to double the capacity in a decade. But the available estimates of power requirement for RGGVY is around 20,000 MW for the country, just 12% of the current installed capacity, indicating that generation capacity is not the main issue.

The risk of de-electrification is high, if the network has many maintenance issues due to suboptimal and poor quality of construction; if adequate electricity supply is not provided to consumers; or if the economic activities do not pick up. It is doubtful if the large number of BPL households connected under RGGVY will remain legal consumers. Problems with high bills, poor metering and billing or bad quality of supply can make them non-consumers once again.

Planning for just six to eight hours of power supply, not having any specific initiatives to connect the APL households and a weak emphasis on promoting

vol xlvi no 43

economic activities create doubts on RGGVY catalysing rural transformation. No wonder a newspaper article by a former senior MoP official notes: “Urban India is now achieving double-digit growth rates with increasingly productive engagement and integration with the global economy. In the absence of electricity in our villages, economic activity has to be necessarily confined to the preindustrial era (Shankar 2010).

Suggestions for Way Forward

Many steps could be considered to enhance the chances of keeping the promise of the programme. One set of steps is fundamental in nature, at the macro, longterm level and the second set of steps is at the operational, mid-term level.

One fundamental step is questioning the wisdom of the top-down, “one-sizefits-all” approach that was followed in RGGVY, as opposed to letting states evolve their own strategies with the central government limiting its role to providing capital subsidy and technical support. Other such steps include incentivising distribution companies for better rural supply; exploring institutional alternatives to small rural franchisees; evolving policy and institutional measures to make grid based, grid interactive and off-grid systems operate in a complimentary fashion; making long-term provision for capital and revenue subsidy to support rural electrification; improving the definition of village electrification to include minimum hours of supply in a day and days in a year, minimum economic use, etc; and planning parallel rural development activities consonant with rural electrification. These are crucial and need to be debated to evolve innovative workable solutions. But this would require wide consultations, building institutional capacities, etc, and would take time.

The second set of steps, which are operational in nature, are easier to implement in the current framework and could result in immediate improvements. These are important since under RGGVY a lot of work has already happened and money also spent. But the work is not complete, all projects have not been handed over and only half the estimated amount has been spent. Hence it is not too late to make

Economic Political Weekly

EPW
octoBER 22, 2011

amends. A few such steps are presented here: one time initiatives, process and policy shifts and governance measures.

One-Time Initiatives

Strengthening Quality Monitoring Mechanism to Ensure Quality Network:

Making the detailed third party quality monitoring reports public and improving the RGGVY website would increase accountability. Encouraging local community organisations to take up the social audit of the RGGVY scheme would put pressure on the implementation agencies to ensure quality of construction.3 State governments could take the lead in this along with distribution companies, enlisting support from district and village organisations as well as civil society groups. Local organisations, NGOs, gram panchayats, etc, should be trained and empowered to conduct social audits.

Organising Connection Drives: Since universal access is the target, it is essential that distribution companies take up proactive drives connecting all households within 100 metres of the power line, to ensure that all APL households also get electricity connection. This would also help reduce losses (due to illegal connections or theft), increase revenue and ensure better planning of distribution infrastructure.4

Improving Tariff Schemes for the Poor:

Every state should have a separate tariff category for the BPL households, and it should be ensured that all BPL households are covered. This category should have a low tariff (as indicated in the National Electricity Policy) and tariff should not have any fixed or the minimum charges, which often become a source of problems. The energy consumption limit for this category (typically 30 units/month in most states) could be reviewed and the inclusion in the BPL category decided based on annual, and not monthly consumption, which often causes problems during festivals or family events. Until the rural quality of supply and service improves, there is a strong case to have a low tariff for rural consumers, though this should not become an excuse

vol xlvi no 43

to never improve rural quality of supply and service.

Process and Policy Shifts

Adequate and Quality Power to RGGVY Network: Measures should be taken to ensure quality adequate power supply, especially during evening hours. It is important to reserve cheap generation capacity to serve the RGGVY network, especially in states where the consumer base has significantly grown. This could be cheap hydro power, unallocated central power or a dedicated ultra-mega power project. MoP could work with distribution companies for planning and implementation.

Consumer groups should be encouraged to monitor the quality of supply and service by using innovative devices which could automatically record the presence of power supply. Considering the shortages, load shedding protocols should be developed through participatory regulatory process, to make load shedding transparent and predictable. Metering and billing should be improved with the use of load limiters for small consumers (where the consumer is charged based on the connected load), photo-metering (where a photo of the meter is printed on the consumer bill) and third party audit of metering and billing systems. Long-term measures to improve the quality of supply and service include ensuring dedicated rural wings for distribution companies and implementing ideas like separation of agriculture feeders.

Governance Measures

State-Level Reviews of RGGVY: Even if the funds and expertise for construction are from the central government, the state distribution companies are expected to take over and maintain the network. Considering this, it is crucial that transparent reviews with scope for public participation are organised at the state level, preferably by the state electricity regulatory commissions. Prudence of investment and good outcome should be the interest of the MoP. The MoP could provide the required policy clarity and mandate to state regulatory commissions to initiate such reviews, which could cover the quantitative and qualitative progress, functioning of franchisees, issues of rural power

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supply, functioning on district committees, state coordination committee, etc. A forum of regulators could provide a framework for review.

National Review of RGGVY: Independent surveys and studies should be organised by MoP and the Planning Commission. These could cover the pattern of household connection, transaction costs for getting a connection (even when it is supposed to be free), cost per connection, causes of delays, electricity availability, use, impact, growth of small enterprises, comparative study of franchisees, etc. All these would help initiate corrective steps during the Twelfth Five-Year Plan.

To conclude, RGGVY with significant resource allocation has brought rural electrification back to focus. It has many positive features like strengthening the rural distribution network and providing connections. But if timely corrective measures are not taken, it will not achieve the objective of electrification. Some critical measures include reserving ultra-mega power project for rural supply, large-scale connection drives, public regulatory reviews and improving accountability to ensure quality of network.

Notes

1 Reported in The Statesman, 31 January 2009.

2 Lok Sabha (2009): Parliamentary Standing Committee on Energy (Fourteenth Lok Sabha) –

-

Implementation of RGGVY, Lok Sabha Secre tariat, New Delhi.

3 For example, Greenpeace (2011): “Report on RGGVY Social Survey in Bihar, UP and AP”, 2011, available at: http://www.greenpeace.org/india/ en/publications /#st=Climate%20change.

4 Prayas (2010): “Electricity for All: Ten Ideas towards Turning Rhetoric into Reality” (Pune: Prayas Energy Group).

References

MoP (2005): “Rajiv Gandhi Grameen Vidyutikaran Yojana Office Memorandum” (New Delhi: Ministry of Power).

Sankar, T L (2009): “Rural Electrification, Energy Infrastructure: Priorities, Constraints and Strategies for India” in Energy Infrastructure: Priorities, Constraints and Strategies for India, Asian Development Bank and Oxford University Press

Shankar, Ajay (2010): “Give Bharat Its Share of Electricity”, Economic Times, 10 July.

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