Where will the extra power come from to light up 78 million households, even if they are given electricity lines and if their villages boast transformers? A critique of the ambitious rural electrification programme, the Rajiv Gandhi Grameen Vidyutikaran Yojana, by Rahul Goswami

A transmission and distribution (T&D) sub-system in North Goa

The Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), which is among the world’s largest and most ambitious electrification programmes, is accelerating the pace of providing power to Indian villages in an attempt to meet a deadline in an election year.  

Four years after launch, it is falling short of targets in major states and is heading for large cost overruns as it stretches into the remainder of the Eleventh Five-Year Plan period (2007-2012).  

A year short of its deadline, the Yojana has several potentially useful new mechanisms to its credit for rural power generation, but depends more than ever for success on a combination of factors. Chief among these is cooperation between a growing set of state, institutional and small private partners. While struggling with delays in all states, the Yojana must reckon with swelling supply and equipment gaps, and a bewildering set of contractual and financial obligations between partners who range from the public sector Rural Electrification Corporation to state electricity boards and individual franchisees in target villages. 

Most alarming is the sizeable increase in the outlay of an already hugely expensive programme. The RGGVY was planned to cost Rs 16,255 crore according to its first budget, when it was launched in April 2005. The Yojana had that year set a target of electrifying 125,000 unelectrified villages and providing electricity to 78 million uncovered rural households in five years. The central government approved Rs 5,000 crore as capital subsidy for the scheme in the remaining period of the Tenth Five Year Plan, with the total estimated cost intended to continue during the Eleventh Plan period. 

When it was launched the RGGVY quickly surveyed the rural electricity landscape and this is what it found.

* Three states and four union territories (UTs) had achieved more than 85% household electrification: Himachal Pradesh, Punjab, Goa, Lakshadweep, Daman and Diu, Chandigarh and Delhi.

* Thirteen states and three UTs had achieved less than 85% but more than 50% household electrification: Andhra Pradesh, Karnataka, Madhya Pradesh, Nagaland, Gujarat, Jammu and Kashmir, Tamil Nadu, Kerala, Manipur, Uttaranchal, Haryana, Sikkim, Maharashtra, Andaman and Nicobar Islands, Dadra and Nagar Haveli and Puducherry.

* Seven states had achieved less than 50% and more than 20% household electrification: Arunachal Pradesh, Chhattisgarh, Mizoram, Tripura, Rajasthan, Meghalaya and West Bengal.

* Five states had less than 20% household electrification: Assam, Jharkhand, Uttar Pradesh, Bihar and Orissa. 

“The earlier focus of electrification in rural areas had been primarily for irrigation and it has been done generally by extending the LT (low tension) lines in a piecemeal manner resulting in unreliable and limited hours of power supply,” says a project document, to explain the origin of rural electrification. “The new programme aims at a qualitative transformation of the rural electricity infrastructure. It envisages that there will be no discrimination between urban and rural areas in respect of hours of supply; 24 hours supply of good quality power would also enable dispersal of small industries, khadi and village industries in the rural areas. It will also facilitate delivery of modern healthcare, education and application of information technologies. This is aimed at accelerated rural development, employment generation and poverty alleviation.” 

Pigeons gather on a stretch of disused cabling in Gulbarga district, Karnataka

Programme costs reassessed 

Electricity is seen by our planners as a powerful tool to tackle poverty, to create jobs and to drive economic development in rural India. But how were the costs listed? On March 18, 2005 the ministry of power listed them out as broad estimates:

* “Electrification of 125,000 un-electrified villages which includes inter alia development of backbone network comprising Rural Electricity Distribution Backbone (REDB) and Village Electrification Infrastructure (VEI) and last mile service connectivity to 10% households in the village @ Rs 6.50 lakh/village.” This was estimated at Rs 8,125 crore.

* “Rural Households Electrification (RHE) of population under BPL, ie, 30% of 7.8 crore. Un-electrified households/ ie 2.34 crore households @ Rs 1500/H/H as per Kutir Jyoti dispensation.” This was estimated at Rs 3,510 crore.

* “Augmentation of backbone network in already electrified villages having un-electrified inhabitations @ Rs/1 lakh/ village for 4.62 lakh villages.” This was estimated at Rs 4,620 crore. 

The total cost was thus estimated to be Rs 16,255 crore. Three years later, in 2008, the total cost was revised to Rs 25,646.5 crore.  

On February 6, 2008, the ministry of power issued an order which stated: “Sanction of the President is conveyed for continuation of ‘Rajiv Gandhi Grameen Vidyutikaran Yojana -- Scheme of Rural Electricity Infrastructure and Household Electrification’, in the Eleventh Plan for attaining the goal of providing access to electricity to all households, electrification of about 1.15 lakh unelectrified villages and electricity connections to 2.34 crore BPL households by 2009. The approval has been accorded for capital subsidy of Rs 28,000 crore during the Eleventh Plan period, at this stage. This is in continuation of Office Memorandum No 44/19/2004-D(RE) dated 18th March 2005.” 

This order set out new cost norms for the massive programme (see Table 1). Under the recalculated costs:

* Electrification of an unelectrified village in ‘normal terrain’ will cost Rs 13 lakh

* Electrification of an unelectrified village in ‘hilly, tribal and desert areas’ will cost Rs 18 lakh

* Intensive electrification of already electrified village in ‘normal terrain’ will cost Rs 4 lakh

* Intensive electrification of already electrified village in ‘hilly, tribal and desert areas’ will cost Rs 6 lakh

* Cost of electricity connection to a BPL household will be Rs 2,200. 

Thus electrification of a village was found to cost either 100% or 176% more after three years, intensive electrification was found to cost either 300% or 500% more, and provisioning a BPL household with a power line was found to cost 46% more. With a five-year timetable -- from the beginning of financial year 2005-06 to the end of financial year 2009-10 -- the Yojana was given the sanction to spend Rs 5,000 crore until March 2007, which was the end of the Tenth Plan period. It isn’t unreasonable to assume that the balance Rs 11,000 crore was marked for expenses that would be incurred between April 2007 (the beginning of the Eleventh Plan period) and March 2010, the end of the Yojana. Why, only a year later, were all costs revised upwards so steeply, by 75%?  

There is no explanation from the RGGVY. Were the initial estimates for electrification found to be insufficient? That seems hardly likely, for the Rural Electrification Corporation Limited (REC), the nodal agency appointed by the Government of India to oversee the Yojana has been in the business of financing rural electrification since 1969. Delays in the progress of providing power lines and related infrastructure became apparent in all the participating states in the first quarter of 2008 (see Table 2) which the ministry of power explained away as being caused by a variety of problems. First the ministry said that the delays were caused by state administrations not preparing lists of below poverty line (BPL) sections of the rural population for whom connections were to be provided. In claiming so, the ministry overlooked entirely the fact that a comprehensive countrywide survey of BPL populations was completed in 2002. Then the ministry claimed that the delays were because panchayats were not issuing certificates for village electrification and because land acquisition for 33/11KV sub-stations was proceeding slowly. 

For a programme as huge, unwieldy and as complex as the RGGVY, how do the numbers square with the estimates and the budgets? They do not. Consider as representative examples the states of Assam, Rajasthan and West Bengal:

* In Assam, electrification of 8,525 villages is needed, intensive electrification of 13,330 villages is needed and there are 1.41 million households to provide a power line to. The sanctioned project cost to achieve these goals for Assam is Rs 1,660 crore, an increase of Rs 761 crore over the earlier estimated cost of Rs 898.9 crore.

* Rajasthan has 4,488 unelectrified villages to cover, 34,841 villages in which to augment electricity connections, and 2.23 million households to provide connections to. The sanctioned budget for this is Rs 1,257 crore, which is Rs 282 crore more than the Rs 974.6 crore estimated earlier

* West Bengal has 4,573 unelectrified villages to cover, 24,775 villages in which to augment electricity connections, and 3.97 million households to provide connections to. The sanctioned budget of Rs 2,344 crore is Rs 1,203 crore more than the estimate of Rs 1,140.4 crore. 

What accounts for the differences? The RGGVY state reports used in these examples provide no explanation for the differences. It is a question that is important since costs were reassessed in early-2008. Have these budgets been raised because of work contracts granted using the new, post-February 2008 revisions? An examination of one of these states shows this is not so. Consider Rajasthan. There are 40 work zones for the Yojana in Rajasthan and of the 26 contracts awarded so far in the state (RGGVY state report as on February 16, 2009), three were awarded in the last quarter of 2005, 14 in the first quarter of 2006, seven in the second quarter of 2006 and thereafter only one was awarded until February 2008. That is, all but one of these contracts could have used the new cost assessments.  

A disguised incentive for rural business? 

The Rajasthan state report lists no achievements for the single contract awarded in 2008, which is on a date after the basic RGGVY cost reassessment. Hence all the achievements have come using the old cost base: Rs 6.5 lakh per village to be electrified, Rs 1 lakh for ‘intensive’ or ‘augmented’ electricity access, and Rs 1,500 for a household power line. These will have cost Rs 109 crore, Rs 123 crore and Rs 180 crore respectively, adding up to Rs 413 crore spent on the Yojana’s achievements so far. However, the total amount released in Rajasthan so far is Rs 539 crore. This 30% is not a small difference. Are there similar differences in accounting for the cost of work done in other states (Bihar, Jammu and Kashmir, Jharkhand, Karnataka, Manipur, Uttar Pradesh, Uttarakhand, West Bengal) that have reported at least some achievements? The RGGVY needs to explain its methods. 

Even so, the Yojana can count its work in Rajasthan as among its few successes to date, since it has achieved 37% of the coverage of unelectrified villages, 35% of the ‘intensive’ electrification of villages’ target, and 37% of the target to provide households with a power line. 

That the needs of RGGVY can be an infrastructural windfall at district level is clear from reports from Orissa. The Yojana must provide electricity to 17,895 villages that are without power, and provide power lines to 4.85 million households. By mid-May 2008, the programme was behind schedule in all 30 districts (see Table 3). The reason advanced by the RGGVY and the ministry of power was that pre-stressed concrete poles were in short supply. The Yojana estimated that two million such poles were needed to fulfil its obligation in Orissa. That prompted the state energy secretary, Suresh Chandra Mohapatra, to make a request to the state’s Industrial Infrastructure Development Corporation (IDCO), “to offer land on short-term lease to encourage small entrepreneurs to set up manufacturing facilities for PSC poles in the state”.  

The RGGVY was certainly not conceived primarily as a means of encouraging small-scale entrepreneurship, although the Orissa example gives us an indication of how a national programme can be exploited as such. Where community entrepreneurship is in fact required -- the inclusion of local energy generation based on renewable sources -- there is nothing to report by the RGGVY. To the contrary, this is how community energy resilience has been overlooked in favour of a costly and ultimately unreliable grid connection. On January 12, 2009, the ministry of power issued an order containing ‘Guidelines for Village Electrification through Decentralised Distributed Generation (DDG) under Rajiv Gandhi Grameen Vidyutikaran Yojana in the Eleventh Plan’. The objective, according to the order, is the provision of electricity to about 115,000 unelectrified villages and electricity connections to 23.4 million BPL households by 2009. 

Those eligible to work as project developers for distributed generation are: state agencies, technology suppliers, corporate houses, equipment manufacturers and contractors, self-help groups, users’ associations, individuals, registered societies, cooperatives, panchayats and local bodies. (This definition is, at least as a concept, one of the few positives that the RGGVY has yielded to date, provided it is accompanied by regulation.) Local power systems developers must provide the power required by the settlement for 6-8 hours of electricity per day at timings specified by the contract, for at least 25 days a month. The guidelines state that if grid power reaches the village within five years then the power produced from the DDG project can be exported to the grid and imported from the grid, as and when required. 

The central government has approved a capital subsidy of Rs 540 crore for decentralised distributed generation during the Eleventh Plan period which is included in capital subsidy of Rs 28,000 crore available for RGGVY in the Plan period. This is only 1.9% of the total subsidy made available, and the new order says decentralised generation will be supported “from conventional or renewable sources such as biomass, biofuels, biogas, mini hydro, solar etc”. The order however carries the rider that this be used “for villages where grid connectivity is either not feasible or not cost effective”. 

Renewables options sidelined 

The technology options available for distributed energy under the RGGVY are: micro-hydel, biofuels, biogas, solar photovoltaic and biomass gasifier. The capital cost of these options is assessed by rupees per kilowatt (kW) which for this set of five options is: Rs 60,000 (micro-hydel), Rs 20,000 (biofuels), Rs 85,000 (biogas), Rs 3,00,000 (solar photovoltaic) and Rs 78,000 (biomass gasifier). The generation cost of these options is assessed by rupees per kilowatt hour (kWh) which is, respectively: 0.25, 10.75, 0.75, 14.50 and 2.25. Using these two cost criteria and three operational criteria -- environmental impact, local manageability, enhancing livelihood opportunities -- the five options are ranked for their ability to provide distributed power generation. Micro-hydel is the first option, followed by biofuels DG sets, biomass gasifier-based DG sets, biogas DG sets and then solar photovoltaics. 

How well can distributed generation work in a rural settlement setting and as part of a massive national electrification programme? The answer hinges on how distributed generation is treated by central and state authorities, and the record is not encouraging. The captive power industry in India, which is entirely private sector, has for the last four years been adding about 3,000 MW of generation capacity. Almost all this generation is done on-site for industry (usually cement, sugar co-generation, textiles, chemicals, industrial estates and info-tech parks). Captive power was reckoned by industry in 2008 to account for about 40 GW (40,000 MW) per year of generation and captive power systems producers estimate that by the end of fiscal 2012-13 another 12,000 MW will be added. 

This industry has strenuously advocated the loosening of financial restraints which have hampered the on-site (and therefore distributed nature of) generation of power. Taxes and duties on equipment and fuel account for between 10% and 37% of generation even if that generation is for an industrial unit’s own consumption. The cross-subsidy charges on sale of surplus power to third parties can be as high as 50% of the price of generated power. For industry, distributed energy plants are imposed high duties on capital equipment -- the industry has forcefully pointed out that they incur 22% more duties on capital equipment than do mega power plants (over 2,000 MW coal-based power plants). For the Decentralised Distributed Generation (DDG) needs of the RGGVY mission, the reality that equipment and charges operate in a wider framework still needs recognition. 

Even where DDG can be considered as an augmentation of grid power -- for an individual village or for a cluster of villages -- there exist considerable fuel supply challenges. The RGGVY still needs to assess whether fuel sources and supply are actually available, an assessment that will undoubtedly influence the choice of renewable technology. Similarly, how is the fuel to be collected for community need? Biomass can be collected for several types of uses – fodder, mulching and fuel tinder – in addition to being used for a biomass gasifier. Where it has multiple uses, how will its allocation as a biogas fuel affect the poorest in the settlement who depend on biomass to fulfil other needs? How will RGGVY handle fluctuations in availability of a fuel choice (hydel, biomass) and adjust under price shocks?  

These questions are not considerations that the DDG documentation is even discussing at this stage, with the RGGVY already in a milestone year. There are a host of possible solutions, for example collaboration with related industries and with mandis, or by developing markets for biomass fuels as has been done by the Amul model. But these need urgently to be discussed. 

The RGGVY’s village franchisee system proves that its planners can conceive of and implement innovative solutions to overlapping problems in areas such as revenue collection and ownership. The franchisee system in rural distribution was designed to convert illegal connections to authorised, to improve recovery and control theft, improve productive loads (increase useful consumption of power) and set a basic standard for consumer service. The RGGVY uses various models of franchisees, from collection-based to input-based, and the eligibility has been kept wide enough to include NGOs, user associations, cooperatives, panchayati raj institutions and individual entrepreneurs. It is obviously seen as one of the strengths of the RGGVY for by end-2009 there were franchisees in 75,368 villages covered by the Yojana. 

For a DDG option to work, Devender Singh, a joint secretary in the ministry of power, has made a working assumption of revenue and expenditure for a typical system, and has envisaged a surplus of Rs 1,560 per month based on total monthly expenditure of Rs 6,000. This model envisages a biomass-based genset that provides power to 100 households, with a generating capacity of 20 KW, which will operate for a maximum of six hours a day (using fuel at the rate of 1.5 kg/kWh). The monthly expenses are: two operators who will work for a fee of Rs 1,080 each, fuel cost which at a nominal 60 paise per kg totals Rs 3,240 for 5,400 kg, and preventive maintenance and miscellaneous expenses of Rs 600. The monthly revenue is: Rs 72 collected from each household with a collection success rate of 80% to yield Rs 5,760 from domestic consumers, Rs 1,800 collected from village commercial consumers at the rate of Rs 6/kWh, which totals Rs 7,560. 

Community self-reliance is not built in 

Whether it is a biogas DG set or a biomass gasifier, an appropriate technology system will cost approximately Rs 80,000 per KW which, for a 100-household hamlet with an off-grid generating source of 20 KW, will require a basic capital outlay for equipment of about Rs 16 lakh. Equipment cost is however about 30% of the total system cost which is distributed amongst ‘hardware’ (usually 55% of total cost, and which includes masonry and support structure and the local transmission and distribution network) and ‘software’ (insurance, training, maintenance, management and other intangibles). Thus such a system can cost about Rs 55 lakh if it is to serve the hamlet as designed. 

In Maharashtra's Satara district, an electrical wares shop sells a stove fuelled by municipal waste pellets

Herein lies the myopia of the RGGVY planners. The Rs 540 crore in subsidies for DDG will serve -- if used for biogas/biomass systems as described here -- less than a thousand rural settlements. There is no clear thought given to supporting a ‘leapfrog’ element to encourage villages to diversify their fuel mix away from fossil fuels. The options are in fact predicated on grid energy (and therefore dependence on coal-burning power plants) being destined sooner or later to arrive in the village. What is the likelihood that AC power will in fact flow through the infrastructure to be put in place by the RGGVY for its target 117,748 unelectrified villages (let alone the 350,469 villages in which electricity access and use is sought to be ‘intensified’)? 

Where will the additional power come from? 

The power generation picture in India is uniformly discouraging (see Table 4). By March 2007 the capacity addition programme which had begun in the Tenth Plan period was already trailing targets by about two years. The assessment today - by the Central Electricity Authority and by public sector power producers - is that no more than 25% of the Eleventh Plan addition of 78,577 MW will be added in the first two years of the Plan (that is, 2007-08 to 2008-09). Electricity shortages ranging from moderate to severe will continue beyond 2012, the last year of this Plan period. Barring a few states (Chhattisgarh, Himachal Pradesh and Uttarakhand) conditions remain much the same today in most others as they were in the middle of the Tenth Plan period.  

Maharashtra provides an illustration of how rising incomes coupled with increasing urbanisation pushes the demand for megawatts into a trajectory that is steeper than the one described by total power available. In agriculturally active regions of Maharashtra, power cuts of up to 10 hours a day are not uncommon (they are three to six hours a day elsewhere). Even Tamil Nadu, which has a comparatively enviable record amongst Indian states on the provisioning of power, was maintaining waiting lists (in 2008) of more than 400,000 applications for rural power connections. 

Once the millions of concrete poles have been indented for, the panchayat certificates issued, the 33/11KV sub-stations built, and the light-bulb sockets have been installed in tens of millions of rural homes, what then? Will 220-240 volts of electricity flow at the required 50 hertz down those lines? The answer to that question - the very focus of the RGGVY - lies in the data collected every day and collated every month by the Central Electricity Authority. 

In January 2009, the power available for consumers in all major states was less than the demand - and this is baseline demand, not peak demand. Bihar got 28% less than the 1,024 million units (MU) it needed, Uttar Pradesh got 24% less than the 6,260 MU it needed, Maharashtra got 23% less than the 10,715 MU it needed, Madhya Pradesh got 22% less than the 4,221 MU it needed, Punjab got 16% less than the 2,899 MU it needed and Haryana got 14% less than the 2,482 MU it needed. Fifteen states had more than 10% power deficits and five states had power deficits of between 5-10%. Two years earlier, that ratio was 10 and 9 respectively, which shows that more states are now experiencing bigger power deficits. 

Wherever can the new demand for the ‘lifeline’ consumption of one unit of electricity per household come from? The 78 million rural households that was the first target of the RGGVY (which was later amended to 23.4 million BPL households) would by the end of the Eleventh Plan period demand - given minimum consumption rates, minimum hours of power supplied, and 24-25 days a month of power - about 350 million units a month. India’s cities and towns are bargaining hard for even 10 MU a month extra. Who will bargain for these new rural consumers? If the RGGVY does not give these consumers the means and the tools to generate at least half their needs locally and sustainably (with renewables) the Yojana will fail. 

(Rahul Goswami is an independent journalist based in Goa)

Infochange News & Features, March 2009

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Comments (1)

Written by GB SWAMI, on 18-05-2009 09:12 Look at the extraordinary power tariff being charged in open access @ Rs 6 to Rs 9.50/ KWH against a generation cost of only Rs 1.80 /Kwh. The rule said only 14% IRR is to be given but these companies make profit by 500% and IRR over 200%. Is this a justified rate? And on top of this 100% income tax exemption- for what? Who is paying for such FAT profits????

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