Modi’s Saubhagya scheme to provide 40 million electricity connections: Some hype, some confusion

On Monday, Prime Minister Narendra Modi launched the “Pradhan Mantri Sahaj Bijli Har Ghar Yojana” or the Saubhagya scheme to provide electricity connections to Indians who do not have them.

“The government will connect each house, whether it is in village, a city or in remote locations,” Modi said in his speech. “No poor [person] will have to pay for the connection. The government will go to each such poor [person’s] house and give a connection. A connection without spending a rupee. This will cost more than Rs 16,000 crore. We have decided that no poor [person] will bear this burden.”

On the fact of it, this did not seem startlingly new. Under the Deendayal Upadhyaya Gram Jyoti Yojna launched in July 2015, the central government already gives subsidies to states to provide free connections to people living below the poverty line. Besides, the Deendayal Yojna was a revised version of the Rajiv Gandhi Grameen Vidyutikaran Yojana that the Congress-led United Progressive Alliance government had announced in 2005. Under that programme too, the central government gave a subsidy to states to provide free electricity connections that the poor.

It was left to Union Power Minister RK Singh to highlight what was novel in the scheme that Prime Minister Modi had announced. Under the Saubhagya scheme, Singh said, people above the poverty line would have to pay only Rs 500 per connection in 10 instalments. He said that the government would install prepaid meters and that consumers would have to pay in advance to buy a fixed amount of electricity – quite like they would do for a prepaid phone connection.

Only for the willing

Later on Monday evening the government’s Press Information Bureau put out some more information on the scheme. It noted the scheme was to “ensure electrification of all willing households in the country in rural as well as urban areas”.

How the government will define those willing or unwilling to have an electricity connection installed was not explained. The release said that “beneficiaries for free electricity connections would be identified using Socio-Economic and Caste Census (SECC) 2011 data”.

The census was conducted in 2011 to replace the use of traditional poverty line-based identification of beneficiaries for government schemes. In a way, the government repeated on Tuesday what India’s poor have already been promised.

The rest – those who are not deemed poor – would have to pay Rs 500 in instalments, the press release said. As it now stands, some states such as Uttar Pradesh charge people below the poverty line Rs 810 for a basic 1 kilowatt connection and up to Rs 1,460 from others for a basic connection. This includes the costs of running power lines to their homes. It is not clear if the government’s new scheme will cover this or other costs, though the prime minister suggested so in his speech. It is also not clear what power load these connections will carry. Currently, besides giving poor people free connections, some states give them free electricity up to certain limits each month.

It isn’t immediately clear how the government will use the SECC data of 2011 to identify poor people living without electricity. The census does not separately identify rural households without electricity, though it did survey how many households in urban India use electricity as their primary source of lighting. The survey found that 33.55 lakh households do so.

Estimated cost

The Saubhagya scheme is estimated to cost Rs 16,320 crore, of which the Union government intends to pay Rs 12,320 crore. Of this amount, Rs 10,587.50 crore will go to rural India and Rs 1,732 crore to urban India..

In November 2014, the government put the total cost of the Deendayal Upadhyaya Gram Jyoti Yojna at Rs 43,033 crores to achieve total rural electrification by December 2018. So far, over three years (2015-’18), the government has actually allocated just under 30% of this total estimated cost of the scheme (including the full budgeted amount for this year). The Rs 12,320 crore for the Saubhagya scheme should come on top of the money committed so far.

As of today, according to government data, there are 40.53 million households without electricity connections. Of India’s 606,172 villlages, there are fewer than 200,000 villages in which all houses have electricity connections.

If the government intends to spread the Rs 16,320 crores it has announced for the Saubhagya scheme over these 40.53 million households that do not have a connection, it would have to spend an additional Rs 4,030 per household to connect them with prepaid meters.

The government has not explained the details as yet but there is some evidence that Saubaghya may not be a straightforward scheme to provide direct subsidies to consumers. The scheme is to be handled by the Rural Electrification Corporation Limited, a government owned company, the media release said on Tuesday.

As early as May 8, 2016, Piyush Goyal, the power minister at the time, had said, “I am trying to work out a mechanism where instead of paying an upfront amount for the electricity connection, we fund it through the Rural Electrification Corporation through a soft loan and then the families can repay it through small instalments over two, three or five years.”

In October 2016, Goyal he reiterated this. “We have asked states to use funds allotted under rural electrification programmes for providing electricity to all rural households,” he said. “And if more money is needed, Rural Electrification Corporation would provide soft loans.”

The corporation’s sole job is to provide financing and technical consultancies to states for electrification. It is already the nodal agency for government’s rural electrification scheme and the electricity distribution reform scheme, UDAY.

It claims to have already provided free power connections to almost 40 million households below the poverty line under various rural electrification schemes.

Rural electrification till date

On Tuesday, Prime Minister reminded people how unfortunate it was that more 40 million households were still without power even more than 70 years after Independence. At the time of Independence, only 1,500 villages were electrified. Between 2005-2012, during the tenure of the Congress-led United Progressive Alliance government, 104,496 villages were electrified and connections were provided to 21.5 million households. Of these, 19 million households were provided free connections. When the Modi government announced the new avatar of the rural electrification scheme, only 18,452 villages remained without power.

Many of these 18,452 villages are in remote locations, so the Modi government’s task isn’t easy.

More important, villages being electrified does not mean that every household in the settlement has a power connection. As per law, the government can declare that a village has been electrified if merely 10% of the households there have power connections. That is why, even though 99.37% of villages in the country are officially electrified, more than 40 million households still do not have electricity.

In addition, many of the households with electric connections do not actually have steady power through the day and night. Government data shows there are an average of 10 hours of power cuts per month at the main supply levels.

A study conducted by Council on Energy, Environment and Water in collaboration with Columbia University in 2015 showed that in the six states of Uttar Pradesh, Bihar, Jharkhand, Madhya Pradesh, Odisha and West Bengal, 50% of the electrified rural households did not get even 12 hours of supply in a day.

Power Minister RK Singh noted this difference on Tuesday. “Prime Minister expects us to bring electricity to each house by December 2018,” he said. “It is a tough target but we shall do it. After this there is another target that the PM has given, to provide 24-by-7 reliable and quality power to all without load-shedding. We shall set a deadline for that after taking a scheme to the Prime Minister for approval. This too is our target.”

The government has already launched its “Power for All” scheme to do so. The scheme involves a substantial addition to the power generation, transmission and distribution capacity across all states. For just five states – Uttar Pradesh, Bihar, Odisha, Jharkhand and Madhya Pradesh – the scheme requires expenditure of nearly Rs 1.4 lakh crore. For the states of Andhra Pradesh and Rajasthan to bring first connect 4.6 million households to the grid and then provide quality electricity, it will cost Rs.1.33 lakh crore. Records of the government show many states are already behind schedule to achieve this goal of continuous power.