The Modi Years: Do more Indians have access to electricity?

• 2.84 crore homes connected to the electricity grid through the Saubhagya scheme
• The government claims 25 states have electrified all households
• But the 100% electrification claims are based on slashed targets

Basic infrastructure for all Indians was a key promise of the Modi government as it came to power in 2014. Electricity for all households was part of this. The government claims it has largely fulfilled this promise.

By the end of April 2018, it announced all villages in India had been electrified. Eight months later, it said all households in 25 states had been electrified.

Village electrification is not a major achievement given that a village is considered electrified once 10% of its houses and significant civic infrastructure such as schools and panchayat offices are connected to the power grid.

The United Progressive Alliance government had already connected 1,09,524 villages to the grid between 2004-2014 through the Rajiv Gandhi Grameen Vidyutikaran Yojana.

The Modi government just added 18,374 villages through the Deen Dayal Upadhyay Gram Jyoti Yojana. On its part, the government claims this was a significant achievement since the leftover villages were more inaccessible.

Soon after the government announced all villages had been electrified, an India Today report found across states, several villages were yet to receive electricity. In response to the report, the Ministry of Power clarified it had brought electricity only to census villages.

“Some of the households in sub-village units viz. habitations/hamlets/Dhanis/Majras/Tolas may not be having electricity as of now,” it said.

From village to household electrification

Where the Modi government has made significant strides is household electrification. In September 2017, it launched the Pradhan Mantri Sahaj Bijli Har Ghar Yojana scheme, better known as Saubhagya, aiming to connect all Indian households – not just villages – to the electricity grid by 2019.

While households living below the poverty line get a free electricity connection under the scheme, including single-line wiring, LED lamps and meters, others are charged Rs 500, which is collected in ten installments by the company supplying electricity.

The actual cost of one connection, however, is pegged at Rs 3,000. The electricity distribution companies executing the scheme are compensated by the government, which allocated Rs 16,320 crore for Saubhagya in 2017-’18. This came down to Rs 3,700 crore in 2018-’19. Some have argued this is inadequate and has resulted in poor quality of connections.

By the end of December 2018, the government announced 2.48 crore households had been connected to the grid. With this, it claimed 99.8% of all previously unelectrified households had been covered, with 100% household electrification achieved in 25 states.

However, as recently as April 2018, estimates submitted by states to the Centre showed 6.4 crore households were still waiting for electricity connections.

How did the numbers change so drastically? As Scroll.in reported, states steadily reduced the targets, without specifying the reasons for doing so. For instance, in Uttar Pradesh, the target fell by 81% from 1.98 crore households in April 2018 to 74.4 lakh households by December 2018.

This means the 100% electrification claim was based on dramatically reduced targets.

In its response to Scroll.in’s report, Ministry of Power did not contest the findings. It gave two reasons for the reduction of targets: some households were found cohabiting with each other or had been provided connections under state schemes. However, it did not give numbers for either category.

The government’s announcement of 100% electrification in December 2018 itself came with an admission: it said it would launch a special campaign to identify households left out of the scheme.

A report in November 2018 by Pune-based energy think tank Prayas noted that the challenge did not end with giving all households electricity connections – ensuring the quality of the connections was an uphill task.

Power efficiency and savings

In January 2015, the Modi government launched a scheme called Unnat Jyoti by Affordable LEDs for All, also known as UJALA. It is a renamed version of the UPA’s Demand Side Management-based Efficient Lighting Programme, also called DELP.

Under the scheme, the government distributes subsidised power-saving LED bulbs to all.

Till February 15, according to the UJALA website, the government has distributed 32.6 crore LED bulbs, which has resulted in savings of Rs 16,938 crore per year.

This representation of savings might, however, be exaggerated. An article by Amitabh Dubey, who is associated with the Indian National Congress, notes that the Modi government bases its savings claims on an assessment report by the audit firm PwC. As Dubey points out, this report assumes that people will use LED bulbs for eight hours each day, instead of the average 3.5 hours estimated in a 2015 study of a pilot by the Energy Essential Services Limited, the state-run company that distributes the bulbs. This in turn ends up inflating the value of savings.

In a response to Dubey, EESL said that the pilot study was not representative and that the PwC report was based on a survey of a larger state, Andhra Pradesh, where bulbs were used for more hours.

Fixing distribution companies

The Modi government’s larger challenge in the electricity sector has been improving the financial health of distribution companies that supply power to consumers.

Across India, state-run distribution companies have traditionally relied on loans with high rates of interest to finance their operations. The best-performing distribution companies were and continue to be the four in Gujarat, where their customers are predominantly industrial, who pay higher energy rates, according to an analysis by CARE Ratings India.

In 2015, the government launched the Ujwal Discom Assurance Yojana, better known as UDAY, which it said would help distribution companies manage their debt and efficiency.

The scheme allows state governments to take on 75% of the debts of distribution companies in a staggered fashion and convert them into state government bonds, which in turn reduces the total interest burden on the companies. Distribution companies were in turn supposed to increase their operational efficiency, for instance by buying cheaper power, or reducing transmission losses.

Much of the scheme hinges on state cooperation as power is a concurrent subject. Under the scheme, states have to sign memorandums of understanding with the centre to receive assistance in achieving these targets. Eleven states and union territories have not signed up for debt takeovers though they have agreed to improve operational efficiency, according to a November 2018 study of UDAY by the National Institute of Public Finance and Policy. Of the remaining states, 86% of the required bonds have been issued so far.

However, the same report finds that distribution companies have not performed as well on other efficiency parameters. For instance, UDAY requires distribution companies to reduce their aggregate technical and commercial losses to 15% by 2018-19. Only seven states have achieved that. Between May and December 2018, the average aggregate losses of all states together actually increased from 21.17% to 25.41%.

The gap between the cost of supply of power and the revenue received on each unit remains high, meaning that distribution companies still continue to bleed losses. Most states are also performing poorly on other parameters such as metering and building feeder infrastructure, the report found, as have others in months before this. And though UDAY recommends that states increase their tariffs to cover their costs, this has largely not happened.

Even as the NIPFP report praises Gujarat, Karnataka, Himachal Pradesh and Telangana for performing well, the report concludes:

“As per the recent estimates based on the UDAY portal data accessed on October 2018, we find that financial and operational parameters of power infrastructure for majority of the States in India have shown a dismal picture and in turn raise questions about the efficacy of the UDAY scheme in materialising a turnaround in power sector.”

Read more

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

Modi government electrified 100% households in 25 states – by slashing targets

This article is part of The Modi Years series which recaps the major milestones, controversies and policies of the BJP government.