Energy Plus Approach: India Case Study. Country report July 2015 Final Version

Transcription

1 Energy Plus Approach: India Case Study Country report 2015 July 2015 Final Version

2 Global Network on Energy for Sustainable Development (GNESD) UNEP DTU Partnership UN City Marmorvej Copenhagen Ø Denmark Tel: Acknowledgement: This report was prepared for the Global Network on Energy for Sustainable Development by the Energy and Resources Institute (TERI), New Delhi, India Authors: Debajit Palit, Arvind Garimella, Martand Shardul and Saswata Chaudbury The front cover photo has been found through Flickr and is courtesy of DFID - The UK Department for International Development Suggested Citation: GNESD Country report (India). Analysis of the electrification programme in India using the energy plus framework and the key lessons. Report prepared for the Global Network on Energy for Sustainable Development by the Energy and Resources Institute (TERI).

3 Final Report July 2015 Analysis of the electrification programme in India using the energy plus framework and the key lessons Prepared for Global Network on Energy for Sustainable Development (GNESD) by Debajit Palit, Arvind Garimella, Martand Shardul and Saswata Chaudbury

4 The Energy and Resources Institute 2015 Suggested format for citation T E R I Analysis of the electrification programme in India using the energy plus framework and the key lessons New Delhi: The Energy and Resources Institute. 81pp. For more information Project Monitoring Cell T E R I Tel or Darbari Seth Block pmc@teri.res.in IHC Complex, Lodhi Road Fax or New Delhi Web India India +91 Delhi (0)11

5 List of Abbreviations AGECC : Advisory Group on Energy and Climate Change AP : Andhra Pradesh APMACS : Andhra Pradesh Mutually Aided Cooperative Society Act AP NE : Andhra Pradesh Non-Energy AP NNE : Andhra Pradesh No Non-Energy AP1 NE : Andhra Pradesh1 Non-Energy AP1 NNE : Andhra Pradesh1 No Non-Energy CBO : Community Based Organization CEA : Central Electricity Authority DDG : Decentralized Distributed Generation DDUGJY : Deendayal Upadhyaya Gram Jyoti Yojana DISCOMs : Distribution Companies Entp. : Enterprise GMS : Godavari Maha Samakhya HH : Household JNNSM : Jawaharlal Nehru National Solar Mission MCP : Micro Credit Plan MDG : Millennium Development Goals MNREGA : Mahatma Gandhi National Rural Employment Guarantee Act MoP : Ministry of Power MP : Madhya Pradesh MPCE : Monthly Per Capita Expenditure MP NE : Madhya Pradesh Non-Energy MP NNE : Madhya Pradesh No Non-Energy MNRE : Ministry of New and Renewable Energy

6 MoSPI : Ministry of Statistics and Programme Implementation NABARD : National Bank for Agriculture and Rural Development NCAER : National Council for Applied Economic Research NEP : National Electrification Policy NRLM : National Rural Livelihood Mission NSSO : National Sample Survey Organization O&M : Operation and Maintenance PV : Photovoltaic RGGVY : Rajiv Gandhi Grameen Vidyutikaran Yojana REDS : Rural Economic and Demographic Survey REP : Rural Electrification Policy REST : Rural Electricity Supply Technology RVEP : Remote Village Electrification Programme SC : Scheduled Caste ST : Scheduled Tribe SEFA : Sustainable Energy For All SERP : Society for Elimination of Rural Poverty SHG : Self Help Group SHS : Solar Home Systems VESP : Village Energy Security Programme VO : Village Organization

7 Executive Summary India is a predominantly rural country, with approximately 73 per cent of the total population living in villages. There is a consensus that expanded access to affordable, reliable, and socially acceptable energy services is a prerequisite for achieving the Millennium Development Goals (MDGs), as well as the overall socio-economic development of any rural area. Thus, in order to contribute to India s overall development, the village economy must have access to modern energy and cleaner fuel sources. Over the years, a number of federal government programmes and state-level initiatives attempted to enhance energy access either as part of overall rural development or specifically targeting rural electrification. Specifically, the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) was launched in 2005 under the aegis of the Bharat Nirman (Build India) initiative, a timebound national development plan focused on rural areas. The objective of the programme was not just to provide lighting to rural households, but also to attempt to create opportunities for the productive use and other co-benefits of electricity in rural areas. In addition, the Ministry of New and Renewable Energy (MNRE) has also been enhancing electricity access through decentralized renewable energy technologies wherever grid extension is not techno-economically feasible. As well as domestic lighting, the MNRE s programme also endeavoured to provide energy services for community facilities, pumping for drinking water supply or irrigation, and income-generating and other economic activities in the village. However, the progress of these programmes has largely been documented from the perspectives of physical connections, village coverage and financial and institutional delivery mechanisms; there has been a relatively lesser focus on the outcomes from the perspective of household electricity demand or the contribution of households to the local rural economy. This study attempts to analyse the rural electrification programme in India and its achievement, with a special focus on the co-benefits and productive use of electricity in line with the Energy Plus approach. The study also attempts to identify the key factors for the success and limitation of rural electrification policies and programmes and their implementation in enhancing electricity access and creating economic and income generating opportunities for the rural poor to enhance local incomes and alleviate poverty. Specifically, the objectives of the study are:

8 To evaluate rural electrification programs using the energy plus framework (Box 1) to understand and examine how Indian electricity access programs have addressed these issues; To assess the overall impact of rural electrification on local economies such as their contribution to sustainable livelihoods, income-generation, newly-developed microindustries, living standards and poverty reduction, and to identify the key factors that have contributed to their success and/or failures; To analyse the relevant issues and suggest recommendations for strengthening the rural electrification program for sustainable electrification in the context of the energy plus approach for enhancing electricity access. This will contribute to the SEFA goal of universal energy access by Study Findings The results of the primary survey reveal that income increases with electricity access, which also corroborates the existing literature. In fact, income is shown to increase even for unelectrified households and enterprises. Based on the cases of livelihood clusters from the states of Andhra Pradesh and Madhya Pradesh in India, the study finds that strong institutions foster the channelling of resources, including electricity for productive use. The study concludes that institutions aid in incorporating both energy and non-energy inputs (such as access to social infrastructure, skills training, capacity-building, and market value chain creation) to catalyse productive activities leading to sustainable electricity access for all. Specifically, the key findings from the study are as follows: The study found that the average income of an electrified household is higher than the average income of an un-electrified household in both grid and off-grid areas. Further, electrification results in increases in income (including in real terms) for both electrified and un-electrified households in both grid and off-grid areas. Electrified households in grid-connected areas reap more benefits over time (changes in income are higher) compared to un-electrified households. Thus, grid supply probably generates better livelihoods for electrified households compared to households connected to off-grid systems. Income changes are higher for electrified households with businesses as their primary source of earnings compared to electrified households with other sources of

9 earning. Thus, usage of electricity in productive or income-generating activities helps households acquire better income-generating opportunities. Institutions are the fundamental non-energy inputs that can ensure sustained nonenergy inputs to households and enterprises. Institutionally channelled non-energy inputs to households or enterprises can trigger productive usage of electricity and create income augmentation. Households with access to electricity and receiving non-energy inputs have higher income and consumption than households with relatively lower non-energy inputs. Electrical appliances are seen as potential livelihood-generating assets by households receiving relatively higher non-energy inputs. Access to channelled sustained non-energy inputs develops the potential for risktaking in households in the form of entrepreneurship. Institutions, affordable and timely finance, continuous impetus on training, market linkage and supply of quality raw materials are regarded as essential non-energy inputs by enterprises. Policy Recommendations The following are the key recommendations based on the study: Challenges to poverty eradication and livelihood generation can be eliminated by packaging the rural electrification programme with a sustained impetus of nonenergy inputs channelled through local institutions. Policies that focus on rural electrification and the productive use of electricity should concentrate on developing last-mile community-based organizations such as SHGs and energy committees, which are fundamental to linking the village economy and rural electrification. Access to affordable start-up finance, continuous skills building, market linkages, good quality raw materials channelled through community-based organizations in partnership with public and private players will trigger entrepreneurship and provide a platform for graduating towards the productive use of electricity. States that have recently implemented rural electrification programmes or are approaching saturation of rural electrification should emphasize entrepreneurship and the productive use of electricity through institutionally channelled non-energy inputs.

10 States with good coverage of rural electrification should initiate policies to develop institutions which can channel non-energy inputs and drive village economies through the productive use of electricity.

11 Table of Contents 1. INTRODUCTION Background Objectives The research questions APPROACH AND METHODOLOGY Literature review Stakeholder consultation Detail assessment in states Stage 1 Survey Stage 2 Survey Dissemination Workshop STATUS OF RURAL ELECTRIFICATION IN INDIA Background Rural Electrification Programmes and Policies in India Current Status Accessibility Availability Reliability Affordability Adequacy Decentralized village-level electrification projects Impact of rural electrification in India Challenges in enhancing access DEFINING ELECTRICITY ACCESS AND STAKEHOLDER A NALYSIS Definition of village electrification Stakeholder analysis UNDERSTANDING THE ROLE OF ELECTRICITY AND NON-ENERGY INPUTS Stage 1 Survey: impact of village electrification on livelihoods Stage 2 Survey: role of non-energy inputs Identification of villages in each cluster Income, consumption and electricity access in households Income, non-energy inputs, and electricity access in enterprises Regression analysis... 58

12 6. DISCUSSION Institution as an enabler Income, expenditure, and ownership of appliances by electrified households Monthly average income and MPCE Ownership of electrical/electronic appliances by households Electricity as a driver for the augmentation of incomes and/or opportunities for income generation Electrified enterprise income and changes in income Average monthly income of enterprises and changes in monthly income of enterprise Usage of electricity beyond basic use (lighting and mobile phone charging) CONCLUSIONS AND RECOMMENDATIONS REFERENCES ANNEX 1. SELECTED INDICATORS ANNEX 2. PROFILE OF THE SURVEY RESPONDENTS ANNEX 3. RURAL ELECTRICITY PROGRAMMES IN INDIA ANNEX 4. COMPOSITE INDEXES BASED ON 18 SELECTED INDICATORS.. 89 ANNEX 5. VARIABLES USED IN REGRESSION ANALYSIS... 91

13 List of Tables Table 1 Sample details... 9 Table 2 Sample details of Andhra Pradesh cluster Table 3 Classification of states based on percentage of households dependent on electricity for lighting Table 4 Expenditure on electricity Table 5 State-wise per capita electricity consumption (kwh) from to Table 6 Details of sample in stage 2 survey Table 7 Results of regression analysis... 59

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15 List of Figures Figure 1 Transition to energy plus approach... 3 Figure 2 Progress of electrification Figure 3 Fuel consumption pattern by income class in India Figure 4 Electrification improves with per capita income Figure 5 Electricity access in India Figure 6 Consumption of electricity (utilities) during Figure 7 Progress in village electrification Figure 8 Change in income for electrified (E) and un-electrified (UE) households Figure 9 Figure 10 Figure 11 Changes in income for un-electrified (UE) and electrified (E) households through different sources Change in average revenue of electrified (E) and un-electrified (UE) enterprises Actual change in average revenue for un-electrified (UE) and electrified (E) through different sources Figure 12 Non-energy inputs (Source: Mission Document: NRLM 2010) Figure 13 Average monthly income of electrified households Figure 14 Average monthly per capita expenditure (MPCE) in INR Figure 15 Electricity as opportunity to augment to income opportunities (per cent of HHs) Figure 16 Ownership of electrical/electronic appliances by HHs (percent of HHs) Figure 17 Ownership of electrical/electronic appliances by HHs reporting electricity supply as reliable Figure 18 Households reporting willingness to purchase new electrical appliances Figure 19 Average monthly income for electrified enterprises Figure 20 Electrified enterprises reporting change in monthly income Figure 21 Top five non-energy inputs reported by enterprise respondents Figure 22 Usage of electricity by enterprises... 58

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17 1. Introduction 1.1 Background India is a predominantly rural country, with approximately 73 per cent of the total population living in villages. Of the total of 179 million rural households in India, the socioeconomic census for 2011 indicates that 38 per cent are landless and agricultural wage earners and that only 10 per cent belong to the salaried class. The same census also reports that only a little more than 25 per cent of households own irrigated lands. The monthly income of the highest earning household member is less than 5,000 for almost 75 per cent of rural households, indicating the high incidence of poverty in most rural areas of India. The socio-economic census of 2011 also indicates that, in terms of assets, around 70 per cent households own a mobile phone but less than 20 per cent of rural households own a car or a two-wheeler. Seasonal or permanent migration for jobs to improve one s quality of life is a common feature across many rural tracts of the country. There is a consensus that expanded access to affordable, reliable, and socially acceptable energy services is a prerequisite for achieving the Millennium Development Goals (MDGs), as well as for the overall socioeconomic development of any rural area. Thus, in order to contribute to India s overall development, the village economy must have access to modern energy and cleaner fuel sources. Over the years, a number of federal government programmes and state-level initiatives have attempted to enhance energy access, whether as a part of overall rural development or specifically targeting rural electrification. However, the multiplicity of programmes has made the funding for each of them inadequate, and also programme implementation was not properly coordinated or managed by the rural electrification implementation agencies. Further, while both rural development and rural electrification have been a priority for the government over the years, there has been limited coordination between the various government departments such as electricity, agriculture, irrigation, rural development, etc., thereby restricting the synergy of various schemes in obtaining the maximum impact. Statistics indicate that in 2001, 77 per cent of all inhabited villages and only around 43 per cent of households were connected to the electricity grid. However, during the last decade rural electrification has become a political priority in India, with the central government creating the necessary enabling environment through the Rural Electricity Supply 1

18 Technology (REST) Mission in 2001, the Electricity Act in 2003, the National Electrification Policy (NEP) in 2005 and the Rural Electrification Policy (REP) in The Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) was launched in 2005 under the aegis of the Bharat Nirman (Build India) initiative, a time-bound national development plan focused on rural areas. Recently, in late 2014, the RGGVY was expanded to launch the Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY), with the aims of facilitating agricultural and non-agricultural supply to rural consumers, augmenting distribution infrastructure in rural areas, and completing household electrification in rural areas. The objective of these programmes was not just to provide lighting to rural households, but also to attempt to create opportunities for the productive use and other co-benefits of electricity in rural areas. Apart from the Ministry of Power, the Ministry of New and Renewable Energy (MNRE) has also been enhancing electricity access through decentralized renewable energy technologies, such as solar home systems (SHS), solar photovoltaic (SPV) power plants, small hydropower plants and biomass gasification under the Remote Village Electrification Programme (RVEP), wherever grid extension is not techno-economically feasible. In addition to domestic use, RVEP also endeavoured to provide energy services for community facilities, pumping for drinking water supply or irrigation, and income-generating and other economic activities in the village. However, the progress of these programmes has largely been documented from the perspectives of physical connections, village coverage and around financial and institutional delivery mechanisms; there has been a relatively lesser focus on the outcomes from the perspective of household electricity demand or the contribution of households to the local rural economy. Against this background, this study attempts to analyse the rural electrification programme in India and its achievement, with a special focus on the co-benefits and productive use of electricity in line with the Energy Plus approach. The study also attempts to identify the key factors for the success and limitation of rural electrification policies and programmes and their implementation in enhancing electricity access and in creating income-generating and other economic opportunities for the rural poor to enhance local incomes and alleviate poverty. 2

19 1.2 Objectives Specifically, the objectives of the study are: To evaluate the rural electrification programmes using the energy plus framework (Box 1) to understand and examine how Indian electricity access programmes have addressed these issues. To assess the overall impact of rural electrification on local economies, e.g. their contribution to sustainable livelihoods, income-generation, newly-developed microindustries, living standards and poverty reduction, as well as identify the key factors that have contributed to their success and/or failures. To analyse the relevant issues and suggest recommendations for strengthening the rural electrification programme for sustainable electrification in the context of the energy plus approach for enhancing electricity access. This will contribute to the Sustainable Energy For All (SEFA) goal of universal energy access by Box 1. The Energy Plus approach of the UNDP Based on a review of seventeen energy access programmes and projects in the Asia-Pacific region, the United Nations Development Programme (UNDP) published a report entitled Towards an energy plus approach for the poor: a review of good practices and lessons learned from Asia and the Pacific (UNDP 2011). This report found that most energy access programmes and projects have traditionally employed a minimalist approach and focused largely on basic domestic energy access. Furthermore, as such projects focus mainly on energy inputs only, they are often not effective enough to enable the poor to escape the poverty trap. The recommended energy plus framework (Figure 1) incorporates a combination of energy inputs and other complementary inputs such as infrastructure, access to markets, access to capital, availability of information and skills training, and social services such as medical facilities and schools. The report (UNDP 2011) suggests an integrated approach that combines energy service delivery with measures that generate income or improve livelihood. 3

20 Figure 1. Transition to energy plus approach. 1.3 The research questions The study attempted to focus on some of the key issues indicated below: What is the current status of rural electrification in India, and how effective has been the trend in enhancing access since the last decade? What is the definition/understanding of electricity access in the country among policy-makers, and what is the efficacy of the definition in enhancing access? Which economic and income-generating opportunities have resulted from enhanced electricity access in rural areas, whether through grid electricity access or off-grid programmes, which have helped alleviate the poverty and/or are enabling the poor to pay for energy services? Has there been any change in livelihood practices or changes in consumption, expenditure, and savings because of rural electrification? What capacity development strategies have been adopted by energy access projects for enhancing electrification and achieving synergistic effects? What are the enabling or inhibiting factors that may have come as opportunities or barriers to implementing the energy plus approach for rural electrification? 4

21 What are the main challenges and issues (e.g., technical, financial, institutional, political, etc.) for improving the electricity access following the energy plus approach? Whether the current rural electrification model(s) are an appropriate solution to ensuring enhanced electricity access and sustainability? 5

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23 2. Approach and Methodology In light of the research objectives mentioned in the previous section, this study has employed an evaluative research design consisting of the following broad steps. 2.1 Literature review As a first step, an intensive literature review was undertaken to build understanding of the energy plus approach and already documented knowledge on the subject. International peer-reviewed journals, papers and articles were consulted, along with the publications and project reports of internationally reputed institutions, universities and government bodies. In addition, Google Scholar was also used for web research on the topic. 2.2 Stakeholder consultation Stakeholder consultation was carried out with the aim of collecting views on the current electricity access scenario in India, along with the importance of productive applications in providing electricity access. The stakeholders consulted for the study included actors from the government, donor agencies, academic and research institutes and the private sector. The stakeholders willingly participated in these discussions and shared their views on the current electricity scenario and the inclusion of productive applications. Examples are quoted from their experiences, highlighting the factors that were significant in facilitating or hampering the use of electricity for productive purposes. They also shared their views on appropriate technologies and business and institutional models, and made suggestions for enhancing the links between these models and productive activities. 2.3 Detail assessment in states While the availability of electricity at an affordable price is a pre-condition for enhancing access, its use for basic lighting purposes alone may not assist in improving livelihoods. Thus, the use of electricity for productive purposes as a necessary requirement for improvements to livelihoods is an important issue for discussion. Moreover, whether only providing energy input is sufficient or whether some other complementary factors are needed to utilize and/or augment the impact of energy use for livelihoods also requires a thorough discussion. Thus, to address these issues, this study conducted primary surveys in two stages. In stage 1, the study focused on measuring the impact of electrification on 7

24 livelihood improvement through the monthly incomes of households and/or the revenues of enterprises. In stage 2, the study attempted to identify different non-energy inputs that can help to improve livelihoods over and above energy usage and measure their impact. The following sections briefly discuss the methodology adopted for both stage 1 and stage Stage 1 Survey The relationship between electrification and livelihood improvement is well established in the literature. To verify the links, the study conducted a primary survey in selected villages. The sample for the survey was selected through purposive random sampling in three consecutive stages, viz., selection of state, selection of cluster, and selection of sample (households and enterprises) for the survey. Selection of state To identify the states for stage 1 survey, the study considered the growth in rural household electrification between the last two censuses ( ). Based on this indicator, the top three states where the growth in rural household electrification was highest were selected for stage 1. 1 Selection of cluster Electrified and un-electrified clusters were chosen from the selected states based on discussions with stakeholders. However, an electrified sample was collected from households with different sources of electrification (namely grid, mini-grid, and stand-alone systems). This was done to help the study measure the impact of electrification, as well as help it identify the sources that provide relatively better energy for livelihood applications. Based on discussions with stakeholders, all clusters in these states were identified. However, preference was given to a particular cluster if it had both electrified and un-electrified households. Further, the selection was also made on the basis of the availability of all the three modes of electrification mentioned above. If a cluster with above characteristics was not available in any state, the cluster with the best performing mode (e.g., mini-grid or stand-alone system) was considered. 1 The same indicator was also considered along with other indicators in the state selection methodology for stage 2. 8

25 Sample selection The sample comprises household and enterprises (Table 1). Actual samples were collected on random basis. The random sample was chosen using the random number table and list of households and enterprises (available at respective block offices). If the respondent was not available or reluctant to provide feedback, a proper replacement was made. Table 1. Sample details. Mode of electrification Sample Household (HH) Electrified (E) Un-electrified (UE) Sample Enterprise (Entp.) Electrified (E) Un-electrified (UE) Grid Mini-grid Stand-alone system To identify the impact of electrification on livelihoods, the stage 1 survey collected the preand post- (most recent) electrification average monthly incomes for households and revenues for enterprises. The perceptions of the respondents about the impact of electrification in respect of changes in health service and children s education, among others, were also collected. Moreover, to overcome the influence of inflation (increases in price levels over time) on incomes and revenues, the real (deflated) incomes and revenues were calculated for all respondents Stage 2 Survey After the stage 1 survey, the stage 2 survey was conducted to identify the impact of nonenergy inputs on productive activity. However, because of shortages of both resources and time, only one source of electrification was chosen for the study. Based on our stage 1 primary survey, the source which provides relatively better opportunities for livelihoods was chosen for the stage 2 survey. In this stage also, the sample selection was done in three consecutive stages, viz., selection of state, selection of cluster, and selection of sample. Selection of state Two kinds of states were required for this study, one a good performer, the other a not so good performer. A good performer was considered to be a state where electrification has helped the community use it for productive purposes and not just for lighting. In other 9

26 words, in such a state, electrification should improve standards of living through the use of electricity in a productive activity. On the other hand, a not so good performer is a state in which utilization of electricity for productive use has resulted in limited improvements to livelihoods or new electricity connections not being used for any productive income generation. To select the good and not so good performing states, a composite index method was used. There may be different dimensions of livelihood improvement due to the productive use of electricity, for example, it may increase employment, incomes or business opportunities. Similarly, other complementary factors are also important if similar improvements in the standard of living are to be achieved. Thus, to calculate the composite index, a total of 18 selected indicators were considered (Annex 1) for all major states of India (i.e., except the north-eastern states, which are smaller) and the Union Territories. Different composite indices were calculated by giving different weights to different indicators (in accordance with their perceived importance). Among the eighteen indicators considered, eight were given more importance (10 per cent weightage), compared to the remaining ten variables (2 per cent weightage for each) because of their closer links with electricity access and livelihood improvements through non-energy inputs. These eight indicators are: 1. Growth of village electrification ( to ) 2. Percentage of rural HHs using electricity for lighting (as major source) 3. Growth of rural HHs using electricity ( ) 4. Percentage of enterprises receiving assistance 5. Share of rural enterprises in rural households 6. Percentage of enterprises working more than 12 hours 7. Percentage peak demand met (peak demand met as percentage of peak demand) ( ) 8. Pump-set per thousand hector net sown area ( ). As the weight of different indicators changes, states may change their ranking among themselves, but in all cases, the top and bottom three good and relatively poor performer states remain the same. Based on logistical convenience and resource availability, in administering the survey questionnaires, one state each from the three states were selected 10

27 as representatives of good and not so good performing states to identify the impact of non-energy inputs in improving livelihoods through productive use. Selection of cluster Once the states had been selected, all small and home-based livelihood clusters were listed from respective state government websites. Based on logistical and other factors (such as the availability of district-level data, of partner institutions to facilitate the study in the region, etc.), one livelihood cluster from a relatively poor performing state and two livelihood clusters from a better performing state were chosen. However, among the two clusters selected from the better performing state, one cluster has a livelihood profile similar to the cluster selected from the poor performing state. All three clusters are similar in the sense that they represent small or micro- and home-based enterprising livelihood clusters. However, two clusters were chosen from the best performing state to overcome any statespecific and profession-specific bias. Further, in each of the clusters, both better off and relatively poor villages (in terms of access to non-energy inputs) were selected. Selection of sample After the clusters had been selected, stratification was done based on the availability of nonenergy inputs. Then from each stratum, sample households and enterprises were chosen randomly, using the random number table and the list of households and enterprises (available at the respective block offices). If the respondent was not available or reluctant, a proper replacement was made. The sample details are listed in Table 2 below. Annex 2 provides insights into the profile of the survey respondents. Table 2. Sample details of the Andhra Pradesh cluster. Cluster Type Household Enterprise Better performing state_cluster Better performing state_cluster Poor performing state_cluster Dissemination Workshop The dissemination of the study results will be done through a one-day national-level workshop to be held in New Delhi, prospectively in October

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29 3. Status of Rural Electrification in India This chapter describes the current status of rural electrification in India and how effective progress has been in enhancing access to electricity in rural areas in the last decade. 3.1 Background The Indian government has made conscious efforts to make substantial improvements to its electricity infrastructure, especially in terms of availability and accessibility, since the country s planned economic development began in However, progress in modern energy provision in rural India has been somewhat sporadic, with only a marginal success in terms of both policies and programmes (Modi 2005; Bhattacharyya 2006). Though 95.6 per cent of the total of 597,464 villages have access to electricity (Figure 2) (CEA, 2014), the household electrification rate is only about 67 per cent (Census of India, 2011). There are only nine states which have achieved more than 90 per cent household electrification, and the larger states such as Assam, Bihar, Madhya Pradesh, Rajasthan, Uttar Pradesh and West Bengal are lagging behind in terms of their rural electrification efforts. Also, the states of Uttar Pradesh (20 million households), Bihar (15 million), and West Bengal (9 million) account for more than 50 per cent of the non-electrified households. Further, the share of electrified villages between regions and states can be explained by structural factors (Chaurey et al. 2004, Kemmler 2007). For example, the challenge of rural access to electricity in some states is aggravated by factors such as poor institutional arrangements, ineffective implementation, the overemphasis on serving urban customers, the poor paying capacity of users, etc. Even where there is access to electricity, the quality of supply remains poor due to the non-availability of power during the evening hours, when people need it the most (Palit and Chaurey 2011). Historically, the level of electrification has been measured as a percentage of electrified villages (with grid extension to any point within the revenue boundary of a village, irrespective of whether any household is being connected or not), not as a percentage of electrified households, thereby reflecting the low household electrification levels in many states (Palit et al. 2014). In fact, some researchers argue that the main driver of rural electrification was the electrification component of the Green Revolution in agriculture (Bhattacharyya 2006, Krishnaswamy 2010). During the early five-year planning period in the 1950s to 1980s, pumpset energization was given more importance so that irrigation facilities 13

30 could be created in the rural areas to support the Green Revolution and make the country self-sufficient in food grains. Thus, targets were set for pumpset energization, but no explicit targets for connecting households to electricity. Wherever a target for household connection was set, as with the Government of India s Kutir Jyoti scheme, it was restricted to providing a single lighting connection (Balachandra 2012) Planwise Growth of Number of Villages Electrified in the Country Number of villages Figure 2. Progress of electrification. Plan / Year Furthermore, the growth in village electrification has largely been measured in terms of the expansion of the central grid infrastructure (Rehman et al. 2012), the mere creation of infrastructure at the village level having been the larger focus area for rural electrification programmes (Balachandra 2013). A reliable, affordable and adequate electricity supply is still a serious challenge. Also, there is an divide in energy access based on the geography and income of the community, that is, households belonging to higher income groups and/or urban areas consume more electricity than households in rural areas and/or with low incomes (Figure 3) (Pachauri 2007, Ramji et al. 2012). Figure 4 clearly indicates that there is a link between a state s economic development and its electrification rate, with states having low per capita incomes being poor performers as compared to those with high per capita incomes. The higher electricity consumption among high-income group can be 14

31 attributed to appliances and productive use, whereas low-income groups use electricity mostly for lighting purposes. Figure 3. Fuel consumption pattern by income class in India. Note: U-poor: urban poor, U-Mi: urban middle class, U-ri: urban rich; R-poor: rural poor, R-Mi: rural middle class, R-ri: rural rich. (Source: National Sample Survey Organisation, 2012). Figure 4. Electrification improves with per capita income (source: Census 2011 & Economic Survey ). 15

32 3.2 Rural Electrification Programmes and Policies in India In the area of rural electrification, a number of government programmes, 2 such as Kutir Jyoti, the Minimum Needs Programme and the Accelerated Rural Electrification Programme, have attempted to increase access over the years, either as part of an overall rural development programme or as one specifically targeting rural electrification. However, Bhattacharya (2006) argues that the multiplicity of such programmes has resulted in inadequate allocations of funds and programme implementations lacking coordination and management. During the last decade, rural electrification has become a political priority, with the central government creating the necessary enabling environment through the REST (Rural Electricity Supply Technology) Mission 3 in 2001, the Electricity Act 2003, the National Electrification Policy 2005, and the Rural Electrification Policy In 2001, under the REST Mission, the government declared the objective of power for all by 2012, which was followed by the launch of a large-scale electrification scheme by the Ministry of Power in April 2005 known as the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY). 4 The legitimization and enactment of the Electricity Act 2003 brought about a major thrust for electrification programmes and schemes during the period from 2003 to This Act authorized a national electricity policy and tariff policy (MoP 2014a) under which the government was to endeavour to supply electricity to all areas of India, including villages and hamlets. This was followed by the announcement of a National Electricity Policy (NEP) later in 2005, which set a time-bound target to achieve Power for All by 2012 and a minimum benchmark of the lifeline consumption of one unit/household/day as a merit 2 The Minimum Needs Programme started in the period of the Fifth Five-year Plan ( ), which had rural electrification as one of the components. The Kutir Jyoti Programme was initiated in 1989 to provide a single light connection to all Below Poverty Line (BPL) households. This programme provided a 100% grant for a one-time cost of internal wiring and service connection charges. The Accelerated Rural Electrification Programme (2003), which was initiated to offer interest subsidies to states for rural electrification, was combined with the Kutir Jyoti programme in February 2004 to create the Accelerated Rural Electrification of one lakh (0.1 million) villages and one crore households (10 million). 3 REST was designed to ensure a holistic and integrated approach to providing electricity for all by 2012 by identifying and adopting technological solutions, changing the legal and institutional framework, and promoting, financing and facilitating alternative approaches. Under the programme, electrification projects based on grid extension and stand-alone electrification based on distributed generation were both eligible for a capital subsidy. 4 RGGVY is the most ambitious rural electrification programme of the decade in India. 16

33 good (MoP 2014b). In 2006, the Rural Electrification Policy was passed soon after, in compliance with Sections 4 and 5 of the Electricity Act, 2003 (MoP 2014c). This policy gave a mandate to respective state governments to prepare and notify a Rural Electrification Plan. However, owing to a range of factors, including the non-completion of work to set up the electricity transmission and distribution infrastructure within the prescribed timeframe under the national rural electrification programme, poor planning and execution, the poor paying capacities of rural households, inadequate attention to connecting rural households above the poverty line, the scattered distribution of households and the inadequate electricity supply, these targets have not yet been achieved. A great deal is evident from the fact that, during the initial stage of RGGVY in 10th Five-Year Plan, RGGVY implementation was only intended for villages with a population of over 300. In addition, the installation of distribution transformers of an inadequate capacity restricted households from securing an electricity connection. Prior to RGGVY, most programmes have failed to attain the goal of electricity access, whereas under RGGVY million households, including million Below Poverty Line (BPL) households, have been electrified 5 (Balachandra 2013). According to the secondary data analysis, there was an almost 15 per cent growth in village electrification between the end of the 10th and 11th Five-Year Plans (Figure 2) and a 6.7 per cent growth between the end of the 11th Five-Year Plan and the end of the 1st year of the 12th Five-Year Plan (CEA 2013). This growth in village electrification can be attributed to the political will evident from the policies passed into law. In addition to the central schemes, there are other individual programmes under the state governments, such as the Jyoti Gram Yojana in Gujarat and the Atal Jyoti Yojana in Madhya Pradesh. The details of Indian rural electricity programmes and schemes are given in Annex Current Status Out of the total number of electrified villages, there were still 77 million households without electricity in 2011 (Figure 5) (Census of India, 2011). The primary mode of village electrification during the four decades after India s independence was the centralized grid. Decentralized renewable energy-based projects were primarily meant for technology demonstrations in rural areas. However, currently, wide use is being made of renewable 5As of 31st October,

34 energy technologies such as solar photovoltaic (PV), biomass gasifier and pico/micro hydrobased electricity supply for villages and hamlets in cases where a central grid-based electricity supply is either technically or financially unviable or the grid electricity supply is inadequate. This was triggered by the Electricity Act enacted in 2003, Section 3 of which mandated the development and passing of a National Electricity Plan for the development of power based on the optimum utilization of resources, including renewable energy sources. Also, Section 86 (1) (e) mandated the Regulatory Commission to specify renewable purchase obligations. In addition, Section 4 of the said Act provided for stand-alone systems, including those based on renewable energy for rural areas. Further, the eighth provision under Section 14 of the Electricity Act 2003 provided a framework for the generation and distribution of electricity in rural areas and specified that no one intending to generate and distribute electricity in rural areas shall require any licence to do so. Hence, the RGGVY rural electrification programme also has provisions for decentralized generation and electricity distribution using both conventional and non-conventional energy sources (RGGVY 2014b). The environment for private-sector participation in India in both grid-connected and off-grid renewable-based systems has been further enabled by the Jawaharlal Nehru National Solar Mission (JNNSM) and financial instruments like feed-in tariffs and renewable purchase obligations. The challenges for rural access to electricity in India (as discussed in the previous section) have often been linked to the power supply in terms of its accessibility, reliability, availability, affordability (including upfront costs for connection fees and appliance costs) and adequacy (Patil 2010). To explain the current status of rural electrification in India further, the position of electricity in terms of accessibility, availability, reliability, affordability and adequacy, along with rural electricity consumption, is discussed in the following sections. 18

35 Figure 5. Electricity access in India (source: Census of India, 2011) Accessibility There is inequality of electricity access both between rural and urban households and between states. Among all the states and union territories in India, Bihar reports the lowest percentage of households depending on electricity for lighting. Among the smaller states of the Indian north-east, Assam has the lowest percentage of households depending on electricity for lighting (Census of India, 2011). The lower percentage of households dependent on electricity for lighting can be attributed to several factors, including higher population densities, the poor paying capacities of households, difficulties of terrain, governance issues, and the gap between supply and demand, coupled with an unreliable grid electricity service, resulting in a limited willingness by households to secure a legitimate electricity connection, etc. The situation is also attributable to low 6 state gross development product, higher transmission and distribution losses, and poor electricity generation capacity in these states, among other things. The summary of the status of each of the states and union territories in terms of the percentage of households depending on electricity for lighting is given in Table 3. 6 In comparison to states that have a higher percentage of households using electricity for lighting. 19

36 Table 3. Classification of states based on percentage of households dependent on electricity for lighting. A 30 and below Bihar B Assam, Jharkhand, Odisha, Uttar Pradesh C Rajasthan, Arunachal Pradesh, Manipur, Tripura, Meghalaya, West Bengal, Madhya Pradesh D Jammu & Kashmir, Uttarakhand, Nagaland, Mizoram, Chhattisgarh, Andaman & Nicobar Islands, Maharashtra E and above Himachal Pradesh, Punjab, Chandigarh, Haryana, Sikkim, Gujarat, Daman & Diu, Dadra & Nagar Haveli, Andhra Pradesh, Tamil Nadu, Puducherry, Karnataka, Goa, Lakshadweep, Kerala, NCT of Delhi Source: TERI Energy Data Directory & Yearbook (TEDDY), 2013/14. A comparison of the total percentage of villages electrified and total number of rural households dependent on electricity for lighting reveals that, while over 95 per cent of the villages have already been electrified, 7 45 per cent of the rural households still do not have electricity for lighting (CEA 2014). Furthermore, while the average growth rate of rural households during the decade from 2001 to 2010 was 21.4 per cent, the average growth rate of rural electrification stood at 27.1 per cent (Figure 3). Assuming a similar average growth rate for rural households and village electrification in 2020, it is estimated that close to 61 million households will still not have electricity for lighting. Incidentally, the IEA (2013) estimates that even in the New Policies Scenario for 2030, over 100 million people in India will still not have access to electricity. In the above context, Pachauri et al. (2004), while discussing energy poverty with a focus on electricity, found that, although whether a household chooses to use a number of different pieces of electrical equipment or not is a matter of choice, what is important is that the household has an opportunity to make a choice. For this to be possible, physical access to the grid infrastructure and connectivity are preliminary requirements. Furthermore, the consumer must also have access to markets where electrical equipment can be purchased, as well as the purchasing power to buy the equipment and obtain electricity at a competitive price. 7As of 31st December,

37 3.3.2 Availability The availability of electricity supply is a critical challenge in rural India. The national rural electrification programme, i.e., the RGGVY, is mandated to supply at least eight hours of electricity on daily basis to rural consumers, while the policies of the government specify 24 hours of supply in both rural and urban areas. However, rural consumers in several states receive less than eight hours of grid supply daily (Planning Commission 2013). While the non-availability of actual supply or the non-availability of the necessary infrastructure for supply and connectivity restricts access to electricity, delays in maintaining existing and faulty infrastructure is an equally critical challenge. For example, in Bihar, 17 per cent of the distribution transformers installed under RGGVY 8 were reported to be defective, including burnt transformers (MoP 2013). In , at the national level, the actual power supply position recorded an overall deficit of 4.5 per cent in terms of peak demand vis-à-vis peak supply (CEA 2014b). In the case of remote villages, though a number of off-grid energy solutions are operational across many states, a recent study (GNESD 2014), reports that the majority of the mini-grid based companies operating in rural areas provide electricity for only five to ten hours during the evenings. As the peak demand is for lighting, the electricity supply is restricted to five to ten hours of daily supply to meet this basic need only, owing to the limited funding available to set up mini-grid plants under the government s schemes Reliability While the level of village electrification has grown to around 95.6 per cent, since the RGGVY was initiated there are still structural deficiencies in implementing and sustaining the rural electrification sector, with an impact on the growth in the household electrification level and the supply of electricity to rural areas. While an adequate and quality supply of power and also a quality service are important to sustaining the rural electricity distribution network, field assessment of the programme indicates that concurrent, parallel measures have not been taken to improve the quality of the rural electricity supply and service 9 (TERI 2010). In 8 As of 31st March, According to the Rural Energy Policy, state governments should prepare and notify a Rural Electrification Plan in six months to achieve the goal of providing access to all households falling under the Plan for the establishment of a transmission and distribution system and the provision of an adequate power supply. It was observed that while seventeen states have so far notified their Plans, they have not taken the required steps to fulfil the commitments they made under the Plans. Further, for purposes of availing capital subsidies under the RGGVY scheme, the states have to ensure a minimum of six to eight hours of power supply in RGGVY network. While the states have committed themselves to this arrangement, in reality they are not procuring enough power to supply the rural areas either because they do not generate enough revenue and any supply in rural areas is deemed to be a loss-making proposition, or because the state s planned generation capacity has not materialized, resulting in a chronic shortage of supply. 21

38 states like Tamil Nadu, Haryana and Andhra Pradesh, over 90 per cent of villages are now electrified. However, the deficit in electricity supply even in these states is high. While the demand in rural areas does not contribute significantly to the peak deficit, if such a deficit occurs, it is the rural areas that are often affected the most (E&Y 2007) Affordability The affordability of electricity has been an issue of debate in recent years. The rising price of fossil fuels such as coal, which is the primary energy source for electricity generation in India, is reflected in consumers electricity bill, including those of rural consumers. The offgrid communities that draw their energy from local decentralized electricity suppliers like the diesel generator operator or the renewable based micro- or mini-grid operator largely pay a service-fee which is almost seventeen times that of the grid electricity of equivalent units. 10 Table 4 below highlights the monthly expenditure classes for electricity consumers in rural India. Table 4. Expenditure on electricity. MPCE classes Electricity in kwh above Source: TERI Energy Data Directory & Yearbook (TEDDY), 2013/ In accordance with the North Bihar Power Distribution Company Limited s order for a performance review for the 2013/14 financial year and the determination of aggregate revenue requirement and tariffs for retail sales of electricity for the 2014/15 financial year, Kutir Jyoti (metered rural) household consumers of grid electricity pay INR 1.60 per unit of electricity consumption. Conversely, the household consumers of a decentralized renewable energy-based electricity generation and distribution company in Bihar pay almost INR 150 for close to 5.4 units of electricity consumed in 30 days, which comes to over INR 27 per unit of electricity consumption per household consumer (NBPDCL 2014; Sevea 2013). 22

39 3.3.5 Adequacy Though 67 per cent of rural households are reported to have had access to electricity in , their per capita consumption of electricity is only around 8 kwh per month, which is just one-third of the reported consumption of 24 kwh in urban areas (Planning Commission 2013). This is largely because of the poor quality of electricity supplies and reflects significant unmet demand. Table 5 below highlights state-wise per capita electricity consumption (kwh) from to Table 5. State-wise per capita electricity consumption (kwh) from to Per Capita Electricity Consumption (kwh) State/UTs Chandigarh Delhi Haryana Himachal Pradesh Jammu & Kashmir Punjab Rajasthan Uttar Pradesh Uttarakhand Northern Region Chhattisgarh Gujarat Madhya Pradesh Maharashtra Daman & Diu D. & N. Haveli Goa Western Region Andhra Pradesh Karnataka Kerala Tamil Nadu Puducherry Lakshadweep

40 Per Capita Electricity Consumption (kwh) State/UTs Southern Region Bihar Jharkhand Odisha West Bengal A. & N. Islands Sikkim Eastern Region Arunachal Pradesh Assam Manipur Meghalaya Mizoram Nagaland Tripura North-Eastern All India Source: MoP, Of the total of electricity from utilities consumed during the year , 22 per cent was utilized by the domestic sector in India (Figure 6). Access to electricity enables an enterprise and a household to draw benefits other than modern and clean lighting (World Bank 2008). It augments business hours for rural and home-based enterprises. It also enables the poor to augment their income-generating opportunities. 11 In addition, motive power enhances productivity. However, due to a prohibitive environment of high initial investments, the limited paying capacity of consumers and restricted opportunities for scalability, decentralized renewable-based solutions are often interested in providing lighting services only and refrain from providing motive power in remote and rural areas Access to electricity opens up avenues for industry as well as avenues for households to undertake business activities such as selling aerated drinks during the summer. 12 IDFC (2011) and GNESD (2014) briefly highlight the services provided by some of the major decentralized electricity mini- and micro-grid operators in India. Most of them provide household consumers with electricity only for lighting or for lighting and mobile handset charging. 24

41 Figure 6. Consumption of electricity (utilities) during (source: MoSPI, 2013). In summary, the priority in government programmes has been the installation and commissioning of a basic electricity distribution infrastructure for rural electrification. While this has accelerated physical access to the electricity service delivery infrastructure, reliability, adequacy, availability and affordability continue to be challenges that have to be dealt with. While significant progress has been reported in terms of the percentage of electrified villages across all states, actual household electrification and the supply of electricity remain far behind the targets announced by the government. In addition, the per capita consumption of electricity in rural areas has not significantly improved over the years, and there is also inequality among different states in respect of per capita electricity consumption. In rural areas, in order to foster the sustainable use of electricity, the challenge of affordability also has to be addressed. It is equally important to raise the awareness of the inhabitants and to mobilize their support for the effective functioning of the state electricity distribution companies. 3.4 Decentralized village-level electrification projects In India, coal constitutes the major energy source for electricity generation. However, in recent years, fluctuation in the prices of fossil fuels and shortages in the supply of fuels such as coal have become serious concerns for the growing electricity demand in the country. There is also an immense global focus towards increasing the share of renewables in the energy mix, in India as elsewhere (AGECC 2010). The JNNSM alone has set a target of an additional 20 GW of grid-connected solar power by The Government of India has set a target of 15 per cent of power generation from renewables by the same date (MNRE 2013). 25

42 At present, renewables constitute close to 12 per cent of installed electricity - generating capacity 13 (MoSPI 2013). While grid-connected renewables-based electricity generation includes large-scale projects, decentralized rural electricity generation from renewables involves small-scale projects. A majority of the decentralized projects for village-level electricity generation in rural areas are financed primarily by the impact investors, international grant-awarding agencies, and bilateral and multilateral agencies. The challenges, including the scalability and sustainability of the business model, are serious issues (MNRE 2013). In this context, Palit and Bandyopadhyay (2015) stress that the cost of electricity supply using off-grid renewable energy-based solutions in rural areas is a function of the technology used, the energy resources utilized, the capacity of the system, the pattern of demand, the infrastructure created and service quality. Furthermore, due to the higher operational and maintenance cost, the costs of generation for decentralized offgrid systems is often higher than the paying capacities of their customers. This restricts revenue generation through tariffs and hence the sustainability of power plant system. In addition, competition from the central grid is always a threat to the long-term sustainability of small-scale, village-level, decentralized renewable energy electricity generation projects in rural areas 14 operated by the private sector, village-level entrepreneurs and/or communitybased institutions. The lack of policy regulation in this direction limits private-sector participation in village-level decentralized rural electricity generation and distribution using renewables. 3.5 Impact of rural electrification in India Rural electrification in developing economies, including India, has been a subject of study for decades. The literature available in international peer-reviewed journals and reports provides an insight into the different approaches that have been undertaken to analyse the impacts of rural electrification. This section of the report draws insights from the literature reflecting on India s rural electrification programme, especially what economic and incomegenerating opportunities may have resulted from enhanced electricity access in rural areas. 13 Electricity (utilities) as of (source: MoSPI 2013). 14 Decentralized energy service companies mostly operate in off-grid regions or in locations where the grid electricity supply is not reliable. However, most such companies offer only basic lighting services to consumers. Hence, with the extension of centralized grid network into the operating areas of decentralized energy service companies and with improvements in the reliability of electricity supply, both existing and prospective consumers are likely to shift to grid service, the former due to growing energy demand, the latter due to a desire for grid service. Hence, the privately owned decentralized energy service companies refrain from investing in expanding their electricity generating capacity, which may make their services obsolete in course of time. 26

43 Panda (2007) discussed the governance of rural electricity systems in India and stated that the rural electrification programmes have largely pursued a supply-led strategy. Further, Rehman et al. (2012) point out the demand supply gap for electricity in rural India. Pachauri et al. (2004), while discussing energy poverty in rural Indian households, state that the lack of electricity and of the efficient use of equipment is reflections of poverty. Khandker et al. (2010), also writing on the issue of poverty, raise the question of whether the provision of energy services leads to economic development, or economic development leads to an increase in the demand for energy. The paper evaluates the relationship between energy and poverty in India. In this context, Panda (2007) adds that both the direct and indirect integration of the utility s service delivery system, with income-generating opportunities for consumers, can foster access. Modi et al. (2005) describe modern energy service as a facilitator for the attainment of the UN s Millennium Development Goals. However, Cook (2011) suggests that, while the increased focus on rural electrification has emphasized its connection with productive use and poverty alleviation, progress in rural areas in terms of electrification has been limited. On similar lines, Khandker et al. (2012) suggest that the impacts of electrification on incomes are proportionate, while Bhattacharyya (2005) recommends expanding the productive use of electricity for the economic and financial viability of rural electrification projects in India. The author finds that traditionally in rural households, electricity is only used for lighting and hence, it does not emerge as a primary energy requirement at the household level. Rud (2007) finds that in India, the need for electricity to operate electrical pumpsets has generated a demand for electricity in certain states and for the subsequent expansion of the grid network. Cabraal et al. (2005) add that productive use for energy must take account of health, education and gender alongside augmentation of incomes. They further add that the programme for the productive use of electricity has been relatively successful in the area of irrigation. Using data set from the India Rural Economic and Demographic Survey (REDS) for different periods ( and ) conducted by the National Council for Applied Economic Research (NCAER), Walle et al. (2013) have carried out an evaluation of the long-term effects of household electrification on consumption, labour supply and schooling in rural India. The study provides information about the positive impact of electrification on schooling for boys 27

44 and the significant gains for consumption and earnings. It also highlights that un-electrified households also benefit from village electrification. The study suggests that village electrification through grid connectivity adds one percentage point to the annual consumption growth rate for households that do not have their own electricity. Also, it reports that households compete among themselves to maintain their status and hence purchase electrical equipment or acquire assets. An evaluation study for RGGVY points to the use of electricity by rural inhabitants for productive purposes (TERI 2013a, TERI 2013b). These reports highlight income-generating activities such as bamboo mat and khadi weaving by community members using grid electricity. In addition, it also highlights use of grid electricity for lighting. Similarly, a study by Chaurey et al. (2012) shows that decentralized electricity service businesses through the renting of solar lanterns and mini-grid, micro-grid or diesel-based generation has developed business opportunities for community members. In addition, provision for franchisees under RGGVY has also developed business models for income generation. In another study, Chaurey and Mohanty (2007) provide insights from the Sundarbans in West Bengal highlighting that the provision of reliable electricity to remote communities has had a significant impact on the socio-economic development of the region, particularly for women. The availability of electricity has enabled women to undertake certain household chores at their convenience. For example, water pumping and water storage using motive power saves time and prevents drudgery. In addition, economic activities such as weaving and sewing can also be undertaken using machines powered by electricity. Similarly, a study of Sagardweep Island in West Bengal documented both the direct and indirect benefits of solar power systems (Chakrabarti et al. 2014). A further study of the Sundarbans region of West Bengal also identified significant impacts of electrification using solar energy on local economies (Imai and Palit 2014). Analyses of Census of India 2011 and National Sample Survey data (Balachandra 2011) have provided insights into the dynamics of electricity access, revealing that deprivation is highest for households in the poorest income strata. Similarly, survey data collected by the Government of India highlights the complexities and inadequacies of using a normative consumption-based approach and also stresses the ineffectiveness of benchmark-based approaches (Srivastava et al. 2012). Using cross-sectional data from the Indian Human and Development Survey, the income differences between urban and rural non-farm enterprises have been evaluated in terms of the different number of hours of electricity supply (Rao 2013). The study finds a strong relationship between incomes and access to electricity and better supply. Similarly, the instrumental variable approach has been used to determine the impact of electrification 28

45 using the India Human and Development Survey s 2005 data (Khandker et al. 2012). Their analysis reveals that electrification has a positive effect on time allocation for fuel collection, incomes, expenditures and the incidence of poverty. It also establishes that electrification can address poverty in both the short and long terms. The paper adds that the relatively wealthy households in rural settings benefit more from rural electrification. The literature referred to in this report establishes that access to electricity in the village and the household has a positive impact for rural inhabitants. Further, access to electricity enhances the income-generating opportunities for households and enterprises. Hence, the integration of electricity access with income-generating opportunities has been widely recommended. However, rural electrification in India has largely pursued a supply-led approach, as is also evident from the current definition of village electrification. A majority of past studies and the secondary literature referred to in this report seems to have looked at the impacts of rural electrification using secondary data, nor does it consider the relationships between rural electrification, non-energy inputs and the village economy. Therefore, the present study attempts to evaluate the recent rural electrification programme in India by using the energy plus framework of the United Nations (UNDP, 2011) and by focusing on the relationship between rural electrification, the flow of non-energy inputs and the graduation of non-farm, home-based micro-enterprises from basic needs to the productive use of electricity. 3.6 Challenges in enhancing access There are many challenges technical, financial, regulatory and institutional hindering electricity access in India. Despite having moderate to high village electrification rates, household connections in rural India continue to be low. Furthermore, a large population continues to use biomass fuels to meet their cooking energy needs. Some of the specific challenges inhibiting the provision of sustainable electricity access in rural areas are discussed below (Palit et al. 2014). a) Subsidy trap. India s electrification programme is deeply anchored in a subsidy culture. The expansion of grid infrastructure to rural areas has always been supported with grants of capital. The capital subsidy level reached its peak under the RGGVY, with 90 per cent support available for grid extension, as well as off-grid options. The subsidy syndrome is even more visible in the case of electricity tariffs for grid-based 29

46 supply, with agricultural consumers and BPL consumers in many states paying only a minimum charge for electricity. The problem is further compounded by the practice of unmetered supply, 15 especially in the larger states of Uttar Pradesh and Bihar, which makes billing and revenue collection difficult. The issue is so politically fraught that tariff rationalization has become a major challenge for the electricity regulators. As a consequence, most utilities have become practically financially unviable as entities. While a case for supporting the poor and supporting infrastructure creation can be made, such a system essentially has to be selective and targeted to ensure sustainability. b) Poor linkage with rural development agendas. The Indian approach has remained a top-down approach, with the federal government designing the programme, and implementation and operation being done by state agencies or others in pursuit of the programme s targets. However, the agenda has always failed to consider the issue of electrification in a comprehensive manner. Instead, the impetus always seems to be on taking the distribution network to the villages without appreciating the fact that energy is a derived demand that requires appropriate appliances to create the demand. Consumers cannot procure such equipment unless they have sufficient buying power, and the process did not focus on facilitating rural development in a way that could enhance their incomes and buying power. The village economy was always seen in isolation from the rural electrification programmes. This lack of emphasis in packaging rural electrification with the village economy restricted the graduation of rural households from the basic use of electricity to its productive use. This linkage or synergy between rural electrification and the village economy is quintessential in making the leap to the productive use of electricity, which can in turn result in enhanced household cash flows. c) Lack of local resource integration. Although India has been pursuing various policies on renewable energies and enhancing access, the attempts to harness local resources for local-level supply have not been very effective. Large programmes have often relied on conventional technologies and fuels, whereas funding and political support 15 There are several reasons for unmetered supply, such as the meter being faulty after installation, or the household securing an electricity connection before the metering of supply was introduced by the electricity distribution company. Also, in some regions it is due to poor governance and community resistance to metered connection. 30

47 for programmes based on local resources has been limited. This has created failed projects and sent the wrong signals, although the potential remains high. d) Policy barriers. In spite of the policy push over the years, it is sometimes argued that the full potential of electricity access in remote rural areas cannot be realized under existing conditions. For example, while the level of village electrification in India is high, the actual number of connected households is comparatively low. In fact, the current definition of village electrification in India requires the electrification of only 10 per cent of households for a village to be considered electrified. The key issues are how to improve the household level connection, and also how to ensure sustained electricity supply to rural areas in line with demand. Furthermore, current policy frameworks and interconnection standards do not fully allow excess generation from a local mini-grid system to be fed into the conventional grid at a lower voltage level. Also, under the current policy and regulatory regime, decisions on tariffs for an independent mini-grid fall outside the regulatory regime. Off-grid systems are entirely free of licensing obligations and regulatory oversight, leaving retail tariffs to be determined solely by market forces. At the same time, the remoteness of these projects increases their capital and O&M costs and hence the costs of generation and supply. The poor payment capacity of rural consumers is an additional challenge. As a result, projects sometimes lapse after few months of operation, as was observed in the case of VESP (Palit et al. 2011). In this context, Palit and Bandyopadhyay (2015) recommend providing cross-subsidies for mini-grid consumers, as is currently available for consumers who draw electricity from the central grid. In terms of the legal framework, the benefits of cross-subsidization are limited to grid-supplied consumers and cannot be extended to consumers of off-grid systems. This benefit could have helped the financial viability of mini-grid systems in remote areas, where user payments are currently insufficient to achieve this. 31

48

49 4. Defining Electricity Access and Stakeholder Analysis 4.1 Definition of village electrification The SE4All Global Tracking Framework defines electricity access as the availability of an electricity connection at home or the use of electricity as the primary source for lighting. In India also, one of the major impediments to achieving universal access to electricity has been the definition of village electrification, which has evolved over the years. Before October 1997, a village was classified as electrified if electricity was being used within its revenue area for any purpose whatsoever. After October, 1997 the definition was changed to a village being deemed as electrified if the electricity is used in the inhabited locality, that is, within the revenue boundary of the village, for any purpose whatsoever. According to the new definition that came into effect in , a village is declared electrified if: 1) Basic infrastructure such as a distribution transformer and distribution lines has been provided in the inhabited locality, as well as in the Dalit Basti hamlet, where this exists. 2) Electricity is provided to public places like schools, the panchayat office, health centres, dispensaries, community centres, etc. 3) The number of households that have been electrified should be at least 10 per cent of the total number of households in the village. Because of this change of definition in 2004, many villages that were previously considered electrified were classified in the un-electrified category, with an almost 10 per cent drop in in the village electrification rate (Figure 7). In spite of the Government of India adopting a more comprehensive definition of village electrification since 2004, it is still not comprehensive enough, as it does not capture issues such as the quantity, quality or adequacy of service. 33

50 Figure 7. Progress in village electrification (source: CEA, 2013). In the above context, Maithani and Gupta (2015) have recently proposed a new and more comprehensive definition of village electrification, viewing it from a supply and demand perspective, rather than just focusing on supply-side provision alone. They propose that: a. More than 50 per cent of all households and public places in a village have an actual electricity connection; b. Electricity is supplied for a minimum of twelve hours, including a minimum of three hours during peak evening hours (i.e., 5:30 10:30 pm); c. The distribution transformer size is related to the potential load of more than 75 per cent of the population based on the stated objective of providing 1 kwh per household per day; and d. Billing and collection should involve more than 80 per cent of the connected households. 4.2 Stakeholder analysis This section summarizes stakeholders views regarding electricity access, with a focus on rural areas and issues regarding the inclusion of productive applications in electricity access. Stakeholders were of the view that providing electricity is seen more as a way to develop infrastructure than as a public service entity. In fact, donor agencies mentioned that government tends to side-line the service aspect of electricity and focuses on policies and programmes that aim to develop infrastructure. In support of this statement, they quoted the RGGVY programme and the Decentralized Distributed Generation (DDG) scheme of the Ministry of Power, which concentrates only on infrastructural development. 34

51 Stakeholders also stated that there are discrepancies when it comes to the planning of urban and rural electricity infrastructure, as well as their quantity and quality. While in rural areas end-users are provided with a defined amount of energy, consumers in urban areas can use electricity at demand. This is due to the fact that, in planning the energy needs of urban areas, electricity access is considered to be an infrastructural investment for the future, whereas in rural areas it is still seen as a lifeline provisioning and subsidy scheme. Stakeholders also talked about the reservations of government agencies in accepting new technologies that could help reduce production costs, such as an unwillingness to accept lithium ion batteries as a viable alternative to lead acid batteries or to adopt sufficiently large transformers capable of taking up a productive application load to facilitate rural livelihood opportunities along with electricity access. One of the important points raised during the stakeholder discussions was a lack of coordination and integration across different ministries, agencies and government programmes. For example, integrating the government scheme of the National Rural Livelihood Mission (NRLM) with other energy access programmes could provide better market linkages and micro-finance facilities to communities, which in current scenario have only failed to transfer the benefits to end-users. Also, to make the maximum use of electricity, different players should be brought on to a single platform through a mechanism. Electricity access in rural areas is also greatly affected by the cost factor and prices compared to grid electricity, which often discourage people to take up electricity through off-grid interventions. However, the reliability of the energy supply from the latter pushes the consumer to take up the connection, and, with the support of suitably designed incentive schemes, such off-grid interventions become the preferred option. Further, stakeholders views indicated that, although many electricity access programmes and schemes are being implemented by both government and the private sector, there is no particular policy which could facilitate the use of energy. Despite the fact that being able to use electricity for productive purposes will not only provide income-earning opportunities to the rural population, but will also support the whole idea of national development, still there is hardly any best case study demonstrating significant take-up of productive use through rural electricity access programmes. The main factor hindering this development is 35

52 the simple lack of any rural electricity access delivery model being designed to provide just the basic lighting and mobile charging facility. Stakeholders have quoted some examples where few government programmes, whether in past or presently operating, have tried to link productivity with electricity but have not been successful for various reasons. One such example, where the initial goal was to have productive activities as one of the major design parameters in the electricity delivery model, was RGGVY, 16 but when the programme was implemented, it focused more on providing electricity for lighting only. Remote Village Electrification was one such programme where one can find mention of productive use, but it became defunct in Also, it has been well pointed out that end-users cannot use electricity for productive purposes unless there is an uninterrupted supply with minimal voltage fluctuations. Hence, government policies should bear in mind the quality of energy supply, which aids in it being taken up for productive purposes. To this, stakeholders also added the role of the distribution companies (DISCOMs) in supplying uninterrupted electricity through the grid in rural areas, assuming they had better functionality and profitability and a self-directing approach. This would only result in faster processes for acquiring connections, streamlining revenue collection and quicker responses to complaints, thereby serving consumers in a more efficient manner and improving the DISCOMs image. Stakeholders made a few recommendations to promote the productive use of rural electricity access models, such as the alignment of different government departments and ministries to ensure the optimal use of electricity for productive purposes, better availability of finance for end-users to help them establish small-scale enterprises, encouraging village cluster formation to promote large-scale productive activities for better economies of scale, and finally, linking electricity access to an existing economic activity in the rural market. All these initiatives may significantly result in the uptake of electricity for productive purposes, simultaneously also reducing the expenditure on external training. 16 In 2005, the Government of India started the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) to electrify all un-electrified villages and habitations and to provide access to electricity to all rural households in un-electrified and electrified villages in the entire country in a timely manner. 36

53 The findings that have emerged from the consultations with stakeholders primarily highlight the importance of convergence between electricity service provisioning and the development of livelihood activities. Most stakeholders felt that there is a need for greater regulatory certainty and the demarcation of areas for expanding electricity access through the main grid and mini-grids respectively. Government should include mini-grids in the regulatory framework to improve the clarity of project developers. Further, the focus should be on aligning different government departments and ministries to ensure the optimal use of electricity for productive purposes. Providing finance facilities for end-users to help establish small-scale enterprises may also be given an enhanced focus. In addition, the government may encourage the formation of village clusters to carry out productive activities on a larger scale to provide better economies of scale. Lastly, linking electricity to productive activities in places which have a stable supply of electricity and established livelihood activity should be prioritized. 37

54

55 5. Understanding the Role of Electricity and Non-Energy Inputs This chapter presents a socio-economic analysis bringing out the difference between the two categories of clusters selected for the study from different states. The first section discusses the findings of the stage 1 survey of clusters selected from three different states, each with different models for rural electrification. The second section discusses the stage 2 survey of clusters selected from two different states, both connected to the central grid, but further categorized into those with non-energy inputs and those without. 5.1 Stage 1 Survey: impact of village electrification on livelihoods In accordance with the methodology mentioned in section 2.3.1, the sample was selected in three steps. In the first step, three states were selected with the highest growth in rural household electrification in , namely, Bihar, Odisha and West Bengal. 17 After these states had been selected, electrified (varied across different sources of electrification) and unelectrified clusters were chosen from them. In West Bengal, the district of South 24 Parganas was identified where both electrified (through grid, mini-grid and stand-alone systems) and un-electrified clusters were available. Based on stakeholder discussions, in the case of Bihar, electrified (through mini-grids) and un-electrified clusters were identified in West Champaran District, where electrification had been effected through mini-grids. On the other hand, in Odisha, electrified (through stand-alone systems) and un-electrified clusters were chosen in the district of Mayurbhanj, where the mode of electrification is stand-alone systems. Finally, 184 electrified households and 16 electrified enterprises were chosen from grid, mini-grid, and stand-alone system-connected areas. To compare them, 100 unelectrified households and 17 un-electrified enterprises were also chosen from the same clusters. From the stage 1 survey, it was found that the average monthly income of an electrified household ( 5,717) is significantly higher than the average income of an un-electrified 17 All three states have growth rates of rural household electrification of more than 80 per cent (Bihar 103%, Odisha 83%, and West Bengal 98%), while all other states have less than 50 per cent. However, all three states have poor levels of livelihood activity using electricity. Thus, in the stage 2 survey, a new methodology for selecting states was adopted. 39

56 household ( 3,728). It was also found that post-electrification income has increased 18 for both electrified and un-electrified households. However, the increase in income is higher for an electrified household (the rate of change of income is 53 per cent compared to 48 per cent for un-electrified households). Even after deflation, this finding remains the same (Figure 8). While increases in income are observed for both electrified and un-electrified households, it is evident that there are factors beyond electricity access that lead to this difference in increases in income between electrified and un-electrified households. Hence, the stage 2 survey identifies and attempts to establish the role of any non-energy inputs (or inputs over and above electricity) affecting income augmentation. Figure 8. Change in income for electrified (E) and un-electrified (UE) households. To identify the mode of electricity service delivery which provides relatively greater opportunities for increasing incomes, we disaggregated the households in accordance with their source of electrification. Our survey reveals that, in the case of grid and off-grid supply (the latter including both mini-grids and stand-alone systems), the average income of an electrified household ( 5,608 for grid and 5,791 for off-grid) is higher than that of an unelectrified household in the case of both grid ( 3,875) and off-grid ( 3,659) areas. The incomes of households using all three modes of electricity supply have increased over time, even in real terms. But, on comparing the change in household incomes before and after electrification, it was found that in grid-connected areas, electrified households reap relatively more benefits (rate of change of income is 45 per cent) compared to un-electrified households (rate of change of income is 27 per cent) in grid-connected areas. However, in 18 Compared to pre-electrification. 40

57 the surveyed areas with access to mini-grids and/or stand-alone solar interventions, it was found that un-electrified households reap an almost equal benefit (rate of change of income is 62 per cent) compared to electrified households (rate of change of income 59 per cent) in such areas. The increase in incomes in both electrified and un-electrified households in surveyed areas (for both grid and off-grid clusters) thus indicates that, apart from electricity, other non-energy inputs may also have influenced improvements to livelihoods. A probable reason for the greater change in incomes for grid-connected households compared to households with mini-grids or stand-alone systems could be explained by the following. The fact that grid supply is available for longer time periods and that price are regulated (as compared to off-grid supply, which is available only for specific hours and has a relatively high or market-determined price) helps electrified households use it for more than just basic needs such as lighting and mobile phone charging, thus reaping more benefits. If we disaggregate the off-grid supply in electrified households through mini-grid and stand-alone systems, 19 the study reveals that the average income of an electrified household ( 6,796 for mini-grids and 3,939 for stand-alone systems) is higher than that of an unelectrified household ( 5,419 and 2,184) in both the areas with mini-grids and those with stand-alone systems. All of them enjoyed increases in incomes after electrification (compared to before electrification) even in real terms. Similarly, in both areas with minigrids and those with stand-alone systems, un-electrified households (rate of change of income is 62 per cent with mini-grids and 61 per cent with stand-alone systems) receive almost equal benefits compared to electrified households (rate of change of income is 58 per cent with mini-grids and 61 per cent with stand-alone systems) even in real terms (Figure 9). Theoretically, mini-grid supply is better than stand-alone systems, as the latter provides electricity for relatively less time and cannot be used for purposes other than for lighting. However, our sample failed to find and evidence of this. This may be because in both cases (mini-grids and stand-alone systems), the electricity supply in the surveyed areas is only provided for lighting and mobile-phone charging, i.e., the end use is for basic purposes in both areas, because of which both fail to generate relatively greater incomes for electrified households compared to un-electrified households. Thus, our sample helps us to conclude 19 To control state-specific effects on income, the study collected samples from two different states (for both categories, i.e., the mini-grid sample was collected from Bihar and West Bengal, while the stand-alone system sample was collected from Odisha and West Bengal). But, to remove sample bias on incomes and identify the impact of electrification from two different sources, comparisons of changes in income are required. 41

58 that the grid supply probably generates better livelihoods for electrified households compared to households with mini-grids or stand-alone systems. Figure 9. Changes in income for un-electrified (UE) and electrified (E) households through different sources. Note: G is electrified through grid supply; Mg is electrified through mini-grids; Ss is electrified through stand-alone systems. To explore further whether the use of electricity for income-generating activities leads to better income opportunities, the study disaggregated the electrified households in accordance with their primary sources of earnings. It was found that, even if the average incomes of households with businesses (shops, productive enterprises, etc.) as a primary source of earnings were lower 20 compared to households with non-business (mostly agriculture and allied) activities as their primary source of earnings, the change in incomes after the electrification of business households is higher (rate of change of income is 82 per cent compared to 73 per cent) even in real terms. Thus, this confirms that usage of electricity in productive or income-generating activities (compared to usage of electricity only for lighting and entertainment/communication) gives households better income-generating opportunities. If a similar analysis is undertaken by disaggregating the sample according to the three electrification options (grid, mini-grid and stand-alone system), it confirms that the situation remains unchanged only for grid-connected areas. To measure the impact of electricity on incomes, children s education and health services, the study also explored households own perceptions. Among the electrified households that reported significant changes in incomes after electrification, 65 per cent felt that 20 Depending on the nature of the business and alternative sources of earnings. 42

59 electricity (village electrification) is partly responsible (only another 8 per cent believed that electricity is largely responsible). The remaining 27 per cent felt that non-energy factors (such as skills development, job opportunities, etc.) may be responsible for such changes in incomes. On the other hand, about 36 per cent of the households that reported changes in the education of their children after electrification considered that electricity was largely responsible for the change (another 34 per cent believed that electricity was partly responsible). Finally, about 44 per cent of households who perceived a change in health services after electrification reported that electricity had a large impact on this change (another 38 per cent report that electricity has a partial impact). To explore the impact of electrification on entrepreneurial activity, the study found that the average monthly revenue of an electrified enterprise ( 14,165) is significantly higher than that of an un-electrified enterprise ( 5,950). While revenues have increased over time (before and after electrification) for both categories, in real terms average revenue has declined for both categories. 21 However, the change in revenue (20 per cent) is higher for un-electrified enterprises as compared to electrified enterprises (13 per cent). In real terms, the decline is greater for electrified (17 per cent) compared to un-electrified (11 per cent) enterprises (Figure 10). Ideally, electrified enterprises should enjoy relatively greater increases in revenues compared to un-electrified enterprises. This discrepancy in the surveyed clusters may be due to the nature of their businesses. 22 Since the sample was collected from both grid and mini-/off-grid connected areas, the study disaggregated the analysis at the boundary between the grid and mini-/off-grid area. In the grid area, the average revenue of an electrified enterprise ( 24,429) is almost double that of an un-electrified enterprise ( 12,200), even in real terms, but none reports a significant increase in revenue after electrification. Ideally, electrified enterprises in the grid area are expected to reap the benefits of electrification through significant increases in revenue after electrification. However, this 21 Revenue has increased in monetary terms but declined in real terms, implying that inflation was higher than the change in revenue. 22 It was found in the survey that a majority of the electrified sample are retail shops, while the un-electrified sample mostly consisted of a barber, mechanic, tailor, saal leaf-plate maker, etc. Now, in spite of being electrified, retail shops do not have much application of electricity beyond lighting. But using electricity only for lighting does not provide much benefit unless it is used for productive purpose. On the other hand, enterprises like the barber, mechanic and tailor are mainly skilled jobs. The absence of electricity may not have much impact on their businesses and may not affect their revenues significantly. Over time, through skills improvements, their changes in revenue may be higher despite the limited application of electricity (like retail shops). Thus, the un-electrified sample in such cases may show greater changes to revenue compared to the electrified sample in this study. 43

60 study did not find any such evidence in the surveyed area, which may be due to the fact that the cluster was electrified only couple of years ago. Further, during this period, a significant number of similar enterprises were also started in the neighbourhood area. Thus, because of increasing competition, on average monthly revenue did not change significantly for the surveyed enterprises. In the case of off-grid areas also, average revenue is higher for electrified enterprises ( 6,980) than for un-electrified enterprise ( 3,109), both enjoying increases in revenue even in real terms. However, changes in revenue are significantly higher in the case of un-electrified enterprises (83 per cent) than electrified enterprises (63 per cent). Ideally, electrified enterprises are expected to receive greater benefits from electrification through higher changes in revenue after electrification compared to unelectrified enterprises in the same area. However, this study failed to find any such evidence in the surveyed area. The reason may be explained as set out in footnote Figure 10. Change in average revenue of electrified (E) and un-electrified (UE) enterprises. If we disaggregate the off-grid connections in mini-grids and stand-alone systems, the average revenue of an electrified enterprise ( 10,400 and 3,560) is higher even in real terms than that of an un-electrified enterprise ( 4,500 and 2,314) in both mini-grid and standalone system-connected areas. Further, as in the household analysis (see footnote 19), to control state-specific effects on revenue, the study has collected samples from two different states (for both categories, i.e., a mini-grid sample was collected from Bihar and West Bengal, while a stand-alone system sample was collected from Odisha and West Bengal). To 23 See footnote

61 remove sample bias on revenues and to identify the impact of electrification from two different sources, a comparison of changes in revenue is required. However, increases in revenue after electrification compared to before electrification are higher for un-electrified enterprises (rate of change of revenue is 100 per cent compared to 50 per cent for electrified enterprises) in mini-grid areas, 24 while electrified enterprises (rate of change of revenue is 116 per cent compared to 68 per cent for un-electrified enterprises) enjoyed higher increases in revenue in stand-alone system-connected areas. In real terms the situation remains unchanged, but electrified enterprises in mini-grid areas actually faced a decline in revenue in real terms (Figure 11). Ideally, electrified enterprises in mini-grid areas are expected to have increases in revenue in both monetary and real terms but this study did not find evidence of this. In monetary terms, there were increases in revenue after electrification (though it was less than that of an un-electrified enterprise, as explained in footnote 22) for electrified enterprises in mini-grid areas. But, as monetary increases become less (though not very significantly) after deflation, the change in revenue becomes negative, in other words, a decline in revenue is observed. Thus, the enterprise survey did not show any definitive conclusion on the impact of electrification, which might be due to nature of the businesses (as explained in footnote 17) and the limited sample size. Figure 11 Actual change in average revenue for un-electrified (UE) and electrified (E) through different sources. Note: G is electrified through grid supply; mg is electrified through mini-grid; ss is electrified through stand-alone system; ng is off-grid (including both mini-grid and stand-alone system). This issue may be overcome by increasing the sample size, where more enterprises with different types of business can be included, possibly leading to different conclusions. 24 See footnote

62 However, the objective of stage 1 survey was to select the cluster with the mode of electrification which provides relatively better changes in income for stage 2 surveys. Since the household sample provided answers, the study did not attempt to overcome this problem given the limited time and resources available. Thus, based on the household survey, we selected grid-connected areas showing the existence of livelihood activities for our stage 2 survey. Moreover, since the grid covers almost 95 per cent of India s inhabited villages, it was felt that it would be easier to select livelihood clusters to analyse the impact of non-energy inputs on livelihoods (through productive activity) in the stage 2 survey. However, all three states selected for the stage 1 survey were found to have poor livelihood activities using electricity, so a new methodology for state selection was adopted for stage 2 surveys. 5.2 Stage 2 survey: role of non-energy inputs In stage 2, sites were selected which have been electrified through the central grid. Again in this stage, samples were chosen in three steps, as mentioned in section Based on a composite index, the values for each state were computed, and the states were categorized as best performing (top three in composite index value) or worst performing (bottom three in composite index value). Then one state from the top three states was picked and one from the bottom three, based on logistical feasibility. The values of the composite index for each state are given in Annex 4. Andhra Pradesh and Madhya Pradesh were chosen as the best and poorest performing states respectively for the stage 2 survey. After the states had been selected, weaving livelihood clusters were chosen from both states. In addition, a fishing livelihood cluster was chosen from Andhra Pradesh. Then each cluster was divided into two groups based on the availability of electricity with non-energy inputs. Finally, households and enterprises were chosen randomly from these groups. The following table (Table 6) briefly describes the sample. The information available from the survey is discussed in the following sections. Table 6. Details of sample in stage 2 survey. S. No. State Cluster type Location Code for this study 1. Madhya Pradesh 2. Madhya Pradesh Weaving Pranpur, Chanderi Cluster in MP with electricity and nonenergy inputs (MP NE) Weaving Ramnagar, Chanderi Cluster in MP with electricity but without non-energy inputs (MP NNE) 3. Andhra Fishing + Pochampally, Households in AP with electricity and 46

63 Pradesh Weaving Bhairavapalem, Ramanapalem, Pedalavalasa non-energy inputs (AP NE) 4. Andhra Pradesh Fishing + Weaving Raghavapuram, Kurrela, Uppalanka Households in AP with electricity but without non-energy inputs (AP NNE) 5. Andhra Pradesh Weaving Pochampally (main) Weaving cluster in AP with electricity and non-energy inputs (AP1 NE) 6. Andhra Pradesh Weaving Raghavapuram, Kurrela (near Pochampally). Weaving cluster in AP with electricity but without non-energy inputs (AP1 NNE) Identification of villages in each cluster The energy plus approach mentions the drawbacks of a minimalist approach and emphasizes the efforts that will augment incomes by complementing energy services, such as access to information, market linkages, business development services and access to capital. The approach also describes certain good practices, but it does not list the package of non-energy inputs that should be combined with the energy inputs to trigger productive uses of energy by households. In this report, as mentioned in the previous section, in each livelihood cluster two categories of households and enterprises were selected based on the access to non-energy inputs received. The definition of non-energy inputs 25 has been extended from the National Rural Livelihood Mission 26 (NRLM), the Government of India document that had redefined its focus to include the multi-dimensional nature of poverty and to initiate necessary action to alleviate the situation. The Society for the Elimination of Rural Poverty (SERP) under the NRLM has been a pioneer among community-based organizations in extending human development and livelihood services, and it was also the resource cell in the development of NRLM In accordance with UNDP 2011, non-energy inputs may include among others access to credit, access to raw materials, market linkages, infrastructure such as roads and communications, availability of information and skills training, and social services. 26 The National Rural Livelihood Mission (NRLM) is a poverty alleviation project being implemented by the Ministry of Rural Development, Government of India. This scheme is focused on promoting the selfemployment and organization of rural poor. The basic idea behind this programme is to organize the poor into SHG (Self Help Groups) and make them capable of self-employment. 27 IKP Annual Report last accessed 15 June

64 The livelihood services of NRLM, mentioned below, in combination with institutional inputs, human and social capital, and entitlements (Figure 12), are derived from the services offered by various SERP departments 28 to SHG 29 households and have been defined as the non-energy inputs for the Andhra Pradesh part of the study. Further, in addition to the nonenergy inputs mentioned above, SERP has also offered livelihood-specific and geographically specific services, as in the two clusters in Andhra Pradesh. This is being done in partnership with a Federation of SHGs (Godavari Maha Samakhya, GMS) in the case of a cluster in Thallarevu, Kakinada, also involving a non-governmental organization (the Chetana Society) and a private organization (Chenetha Colour Weaves), in the weaving cluster at Pochampally, Nalgonda. Village-level federations of SHGs known as Village Organizations (VO) are graded from A to F, with A being the highest grade). These grades are the performance of the SHGs under the VO in terms of loan repayments, savings, regular SHG meetings and internal lending. The grade of VO determines the quality and quantity of the benefits transferred. Thus, in this study, AP NNE stands for a cluster in Andhra Pradesh with electricity and without non-energy inputs, which translates into a household or an enterprise that is not a member of SHG or falls into a VO grade {C,D,E,F}, or is not a member of the federation of GMS or falls outside the support of the NGO Chetana Society and Chenetha Colour Weaves. Further, AP NE stands for clusters in Andhra Pradesh with electricity and receiving nonenergy inputs, or enterprises and households that are members of SHG, have a SHG grade {A, B}, are members of GMS or have benefited through the project of Chetana Society and Chenetha Colour Weaves. Unlike Andhra Pradesh, to identify villages for the study in Madhya Pradesh, focus-group discussions were undertaken in the villages of Pranpur and Ramnagar. The discussion revealed that both villages are located within a radius of 4 km from the block headquarters at Chanderi. Both villages have access to informal financial institutions. However, Pranpur has relatively better access to public transport and the telecom network. In addition, it is 28 last accessed 15 June SHG refers to Self Help Group. 48

65 located on the main road connecting Chanderi and the tourist rest houses in the region. Weaving has been the traditional income-generating activity in both villages. However, Ramnagar has experienced a loss of interest among weaver families. Hence, some of the families have adopted semi-skilled or unskilled jobs for livelihood purposes. Unlike Ramnagar, Pranpur also has a registered weaver s co-operative within the village. Hence, Pranpur was selected as a relatively better-off village for this study. Figure 12. Non-energy inputs (Source: Mission Document: NRLM 2010) Income, consumption and electricity access in households Average monthly income and monthly per capita expenditure To compare the average monthly income and average monthly per capita expenditure of two categories of electrified households, one receiving better, and the other relatively limited non-energy inputs, the administered survey recorded the average monthly income and average monthly per capita expenditure of such electrified households in the surveyed clusters and villages (see methodology section) in the states of Andhra Pradesh (AP) and Madhya Pradesh (MP) As reported by survey respondents. 49

66 The average monthly income of electrified households in Andhra Pradesh was found to be significantly higher than those in Madhya Pradesh (Figure 13). Further, while the average monthly income for AP NE was registered as 9,788, it was found to be 6,081 in AP NNE. Unlike Andhra Pradesh, in Madhya Pradesh the average monthly income for MP NE and MP NNE were found to be 4,595 and 3,120 respectively (lower than in Andhra Pradesh). Further, the difference in the average monthly income between AP NE and AP NNE is higher than that for the difference between MP NE and MP NNE. This is confirmed by lower average monthly per-capita expenditure 31 (Figure 14) in MP relative to household respondents in Andhra Pradesh. Further, MPCE (monthly per capita expenditure) is highest in AP NE and lowest in MP NNE. This finding is a clear indication of the important role of non-energy inputs over and above electricity access for livelihood augmentation. Average monthly household income (in INR) I n c o m e AP NE NNE MP Figure 13. Average monthly income of electrified households. Average Monthly Per Capita Expenditure for household (in INR) 1412 NE NNE AP MP Figure 14. Average monthly per capita expenditure (MPCE) in INR. 31 Monthly per capita expenditure (MPCE) is defined first at the household level (household monthly consumer expenditure household size). 50

67 Electricity as an opportunity to augment incomes and income opportunities The administered questionnaire also drew information from respondents to understand their perception of the role of electricity as an opportunity for augmenting income through entrepreneurship. From the AP NE and MP NE clusters, an increase in income 32 was reported by 54 per cent and 95 per cent of the households respectively after the injection of non-energy inputs. At the same time, the percentage of households identifying electricity as the primary factor contributing to increases in income in Madhya Pradesh is significantly lower than that in Andhra Pradesh (Figure 15). Further, the willingness of HHs to undertake entrepreneurship (intervention that uses electricity) in future was higher among respondents in AP NE (69 per cent) than in AP NNE, and the same was lowest among HH respondents in MP NE. Hence, in this study, it is evident that, despite electricity access, there is difference in the findings for the clusters selected for this study. The encouraging finding from Andhra Pradesh, beyond households access to electricity, pinpoints the role of non-energy inputs as a catalyst. Electricity as opportunity to augment income opportunities (per cent of HHs) 95 Per cent of HHs reporting increase in income Per cent fo HHs reporting electricity essential for incremental income 15 Per cent of HHs willing to 7 undertake entrepreneurship (electricity based initiative) AP NE AP NNE MP NE MP NNE Figure 15. Electricity as opportunity to augment to income opportunities (per cent of HHs) Ownership of electrical and electronic appliances by electrified households Beyond MPCE, the study also looked into the ownership of electrical and electronic appliances among the survey respondents. Appliance ownership is an indicator of a household s access to the electricity supply network. In addition, it also reflects the reliability of the electricity supply. However, this study did not aim to identify an exhaustive list of factors that have catalysed the adoption of respective appliances by survey respondents. 32 Increase in income relative to period when there was no access to effective non-energy inputs of any kind and/or no intensification of electrification within the village. 51

68 The map of appliance ownership is provided below in Figure 16. The inner and smaller hexagons (AP NNE and MP NNE in Figure 16) represent households from villages that have received relatively limited non-energy inputs. The two outer and larger hexagons (AP NE and MP NE) represent households from villages that have received relatively effective nonenergy inputs. It is evident that the outermost hexagons have a larger area 33 than the innermost ones. Incidentally, the households in the surveyed villages and clusters receiving relatively effective non-energy inputs also have higher MPCE relative to those not receiving them. Ownership of Electrical Appliances Fan 100% 95% 86% Mobile Household Appliance 95% 71% 62% 14% 43% 0% 5% 21% 7% 35% 12% 14% TV 85% 81% 71% 36% 21% 38% Fridge Water Pump AP NNE MP NNE AP NE MP NE Figure 16. Ownership of electrical/electronic appliances by HHs (percent of HHs). 33 A larger area of a hexagon indicates higher ownership percentage of appliances by households. 52

69 Similarly, the hexagon (Figure 17) represents the electrical appliance asset base of household survey respondents who reported electricity access as reliable. The mapping clearly shows that households with reliable electricity supply have a larger hexagonal area. While all respondent households had access to electricity, the households in villages and clusters receiving relatively effective non-energy inputs have higher levels of ownership of appliances (Figures 16 and 17). Further, appliance ownership beyond lighting and mobile phone charging reflects the connectivity of households to grid electricity. From the above findings, it is also evident that a relatively higher MPCE is one of the characteristics of households with higher levels of appliance ownership in the surveyed clusters. Ownership of Electrical Appliances Fan 100% 94% 75% Mobile 81% 65% 50% 53% TV 85% 69% 79% 58% Household appliances 50% 17% 0% 0% 13% 15% 55% Fridge Water pump AP_RL AP_NRL MP_RL MP_NRL Figure 17. Ownership of electrical and electronic appliances by HHs reporting electricity supply as reliable. AP_RL: AP reliable electricity access; AP_NRL: AP non-reliable electricity access; MP_RL: MP reliable electricity access; MP_NRL: MP non-reliable electricity access. 53

70 Willingness to purchase electrical appliances by electrified households While the administered survey attempted to compare the willingness of respondent households to undertake entrepreneurship (Figure 15), it was important to learn about their motivation to purchase appliances that would foster entrepreneurship in the future. In Andhra Pradesh, a majority of the household respondents who had relatively effective access to non-energy inputs expressed a willingness to purchase new electrical appliances in the future. Unlike Andhra Pradesh, in Madhya Pradesh, household respondents who had relatively limited access to effective non-energy inputs expressed a willingness to purchase new electrical appliances in the future (Figure 18). This is largely attributable to lower MPCE and the higher aspirations of the respondents in MP who have relatively limited access to effective non-energy inputs. In addition, the respondents in the village with relatively limited access to effective non-energy inputs are also exposed to modern and efficient electrical appliances, as village residents undertake seasonal jobs in the cities. Incidentally, villages in both Andhra Pradesh and Madhya Pradesh where respondent households reported a greater willingness to purchase new electrical appliances that would catalyse entrepreneurship in the future also reported higher percentages of respondents willing to undertake entrepreneurship. However, the contrast between Andhra Pradesh and Madhya Pradesh reflects the fact that it is not merely electrification that is a driver of the willingness of households to purchase electrical appliances that foster productivity and/or income generation, but also non-energy inputs such as exposure to inputs, sustained access to timely and affordable credit, and the benefits of mechanization and techniques of mechanization. Willingness to Purchase Electrical Appliances (per cent of HHs) 14% 54% 79% No Non Energy Non Energy AP 0% MP Figure 18. Households reporting willingness to purchase new electrical appliances. 54

71 5.2.3 Income, non-energy inputs, and electricity access in enterprises Income and changes to income for electrified enterprises The administered survey was also aimed at determining the average monthly income of enterprises in clusters receiving relatively effective non-energy inputs and those receiving limited non-energy inputs. Average monthly incomes for electrified enterprises in both Madhya Pradesh and Andhra Pradesh were found to be higher for villages and enterprises that received relatively effective non-energy inputs (Figure 19). However, in both Madhya Pradesh and Andhra Pradesh, for the electrified enterprises that received relatively effective non-energy inputs, the average monthly income in Andhra Pradesh was found to be higher. At the same time, for the electrified enterprises that received relatively poor or limited nonenergy inputs, average monthly incomes for Andhra Pradesh and Madhya Pradesh were not significantly different. Similarly, the percentages of electrified enterprises reporting increases in monthly incomes in both Andhra Pradesh and Madhya Pradesh are higher for those who have access to relatively effective non-energy inputs. At the same time, among the enterprises that have received relatively poor or limited nonenergy inputs, the percentage of enterprises reporting decreases in monthly incomes is higher than those reporting increases. Hence, the findings (Figures 19 and 20) reveal that, in the study area, access to effective non-energy input influences average monthly enterprise income. The study also looked at the non-energy inputs received by the surveyed villages and enterprises in both Andhra Pradesh and Madhya Pradesh. These inputs are discussed in the next section. 34 For the purposes of this study, we have only included enterprises within the habitation and enterprise, and this study refers to non-farm and home based entities only. 55

72 Monthly average income for electrified enterprises (in INR) AP1 NE AP1 NNE MP1 NE MP1 NNE Figure 19. Average monthly income for electrified enterprises. Percent of electrified enterpises reporting change in monthly income AP1 NE AP1 NNE MP NE MP NNE Increase Decrease Figure 20. Electrified enterprises reporting change in monthly income Electricity and non-energy inputs reported by electrified enterprises The administered survey recorded the non-energy inputs received by the enterprise respondents in AP1 NE, AP1 NNE, MP NE, and MP NNE. The polygons below (Figure 21) illustrate the mapping of the top five non-energy inputs reported by the majority of enterprise respondents. The differentiating non-energy input reported by AP1 NE is institutions. The inputs reported by AP1 NNE respondents are independent of any institutional or project support and are mainly personal ties and rapport in the market. Some other inputs were also reported by the AP1 NNE households, such as training by a cooperative or society. However, this was a one-off training, unlike the continuous upgrading training received by AP1 NE households on how to meet market expectations for better designs, colours and tools. Similarly, respondents in MP NE report effective access to institutions which the MP NNE respondents did not report. It is notable that the average monthly income of AP1 NE is higher than that of AP1 NNE. In the same way, the average 56

73 monthly income of MP NE respondents was found to be higher than MP NNE respondents in this study. While access to electricity is a common characteristic of enterprises in each of the surveyed clusters, presence of an effective institution emerges as a key differentiating factor. Figure 21. Top five non-energy inputs reported by enterprise respondents Usage of electricity by electrified households Further, to determine the extent to which the surveyed enterprises are reliant on electricity service, the administered survey looked into the usage of electricity (Figure 22). Over 40 per cent of respondents enterprises in Andhra Pradesh and Madhya Pradesh reported operations beyond daylight hours. At the same time, this study found that use of electricity beyond lighting and mobile phone charging was very low except for AP1 NE. Hence, this study also found that accessibility to grid electricity supply augments use of electricity for lighting and mobile phone charging. However, use of electricity for mechanizing all or a few of the operations in existing enterprises and/or use of electricity services beyond lighting and mobile phone usage requires a catalyst, as in the AP1 NE case. The discussion section 57

74 will explain further the role of a catalyst based on findings from the surveyed enterprises in the study areas. Usage of electricity by enterprises (Per cent of enterprises) AP1 NE AP1 NNE MP NE MP NNE Post daylight operations Use electricity beyond lighting and mobile phone charging Figure 22. Usage of electricity by enterprise Regression analysis To strengthen our primary survey analysis and stakeholder discussion, we conducted a set of regression analyses using an enterprise sample. This sample was collected in both states (Andhra Pradesh and Madhya Pradesh) and both clusters (Weaving and Fishering in Andhra Pradesh and Weaving in Madhya Pradesh). To address our objective of identifying the factors responsible for improvements to livelihoods in terms of increases in revenue, each entrepreneur was asked to respond whether they felt a particular factor to be important or not. Thus, to quantify the bivariate qualitative response, we generated a binary response variable with values of 1 (if yes) and 0 (if No). Because of the particular nature of the response variable, we analysed the response using a log it model and calculated the oddratio, which represents the probability of choosing a particular decision over another. The next paragraph will briefly describe the results for overall data and state-wise and clusterwise data. Annex 5 will briefly describe the explanatory variables. Running the regression on combined data (both states and both clusters), we found that all the variables except use of electricity (other than for lighting and mobile charging) and training have significant positive impacts on livelihoods (revenue of enterprises). Moreover, we found that there is significant cluster-wise variation and state-wise variation. Among all these factors, availability in peak hours is the only factor which has a significant impact in both clusters taken separately and in Andhra Pradesh. Institution and market access have significant impacts on the weaving cluster in Andhra Pradesh. On the other hand, 58

75 infrastructure has a significant impact on the weaving cluster when Andhra Pradesh and Madhya Pradesh are combined. Relationship (branding) has a significant impact in Andhra Pradesh and on the weaving cluster of Andhra Pradesh. In Madhya Pradesh, we did not find any factor among the above which had a significant impact. Table 7. Results from regression analysis. All cl 1 cl 2 st 1 st 2 st 1 cl 1 Electricity (768.80) (564.30) (.) ( ) (565.50) ( ) Availability *** *** ** ** * (670.80) (512.70) ( ) (947.10) (631.50) (929.20) Reliability *** (494.30) (476.90) ( ) (695.70) (519.30) (926.30) Finance *** (555.60) (475.20) ( ) (860.80) ( ) (946.70) Training (684.50) (530.00) (.) (864.20) ( ) (831.50) Institution *** * (552.10) (489.20) ( ) (824.80) ( ) ( ) Infrastructure ** * (602.50) (542.60) ( ) (722.70) (702.30) (962.00) Power backup ** (655.00) (598.60) (.) (910.80) ( ) ( ) Experience *** (512.10) (617.40) ( ) (836.60) ( ) ( ) Market access * * (542.50) (513.60) ( ) (748.50) ( ) (800.30) Relationship ** ** ** (632.80) (612.70) ( ) (871.40) (903.20) ( ) Family support * (706.70) (731.10) ( ) ( ) ( ) ( ) Governance *** (650.70) (595.50) ( ) (937.60) ( ) (982.60) Supply chain **

76 All cl 1 cl 2 st 1 st 2 st 1 cl 1 (597.00) (474.00) ( ) (915.90) (575.90) ( ) d_cl *** *** ** (705.70) (985.00) (.) (893.40) (920.30) ( ) d_st *** * *** 0 0 (611.80) (617.10) ( ) ( ) (.) (.) N df_m r Note: standard errors in parentheses. * p <0.05 that is significant at 5% level of significance ** p <0.01 that is significant at 1% level of significance *** p <0.001 that is significant at 0.1% level of significance 60

77 6. Discussion This chapter discusses the underlying factors that are attributable to the findings presented in Chapter 5 of this report. The chapter begins with a brief insight into institutional 35 arrangements in Andhra Pradesh and Madhya Pradesh. Further, it also discusses the reported value addition (as perceived by survey respondents) of the institutions in the clusters that were selected for this study. 6.1 Institution as an enabler Among community-based organizations, SERP under the NRLM has been the pioneer in extending human development and livelihood services, and it has also been the resource cell in the development of NRLM. 36 Thus, SERP is the guiding framework for all State Rural Livelihood Missions (SRLM) under the umbrella of the NRLM. The formation of SERP in 2001 was an initiative taken up by the Andhra Pradesh state government as a sensitive support structure to facilitate poverty alleviation, its emphasis being on social mobilization and improving the livelihoods of the rural poor in erstwhile Andhra Pradesh, efforts that were sustained by successive state governments. The SRLM of Madhya Pradesh, known as the Madhya Pradesh Rajya Ajeevika Forum (MPRAF), was established in Thus, SERP had been actively involved in the rural poverty elevation mission eleven years ahead of MPRAF, and, with the active support of successive Andhra Pradesh state governments, it has graduated from its main mandate being to ensure financial inclusion to offering livelihood services, a safety net (pensions, insurance), and human development services. Further, all the activities of SERP have been delivered to poor rural households through the network of Self-Help Groups (SHGs) and the federation of such groups. These SHGs are initiated, nurtured and developed by the SERP and form the basic unit of the rural development model in Andhra Pradesh, which was adopted by the NRLM and the respective SRLM. Therefore, the MPRAF is still in the initial phase of operations and has yet to reach the scale of SERP in Andhra Pradesh in terms of SHG members and the extent and 35 Institution in this study refers to Self Help Groups, Chit Fund Groups, Cooperatives, Non-Governmental Organizations, Community Based Organizations, and government or private facilities that amalgamate the market value chain and productive mechanisms to catalyse income generation by households and rural homebased enterprises. 36 IKP Annual Report : last accessed on 15 June

78 variety of services offered. Box 2 gives a snapshot of SHGs and the financial services that are delivered to rural households. Box 2 Strong presence of Self-Help Groups in Andhra Pradesh relative to Madhya Pradesh The state of Andhra Pradesh (AP) has the largest network of self-help groups (SHGs) with 1.2 million SHGs and 12 million members (following the bifurcation of AP into two states, AP and Telangana which has 4.2 million SHG members). Unlike AP, Madhya Pradesh (MP) has only 0.29 million SHGs. Similarly, there is a clear disparity in the SHG bank linkages in these states, with AP bank loan disbursements to SHGs of billion and MP bank loan disbursements to SHGs of 1.37 billion. Furthermore, the skewed nature in inputs received via institutions in the states is highlighted by the SHG-based bank savings, with AP SHGs savings of billion and MP SHGs savings of 0.78 billion (NABARD, 2013). The disparity in institutional strength and the density of the inputs through the medium of SHGs is further accentuated if the rural population of the states is taken into account (both states having approximately same rural populations) while reading into the number of SHGs, savings and loans disbursed, emphasizing the fact that MP is in a very nascent stage. This is indicative of the effectiveness of the SHG networks in AP. The National Rural Livelihoods Mission (NRLM) of the Government of India recognizes institutions like Self-Help Groups (SHGs), producers cooperatives and companies as entities that facilitate the enabling environment at the last mile for livelihood augmentation. Incidentally, in this study, which is based on inputs from survey respondents, we found the presence of effective institutions as key non-energy input fixing the villages selected for this study in Andhra Pradesh as performing better relative to villages in Madhya Pradesh. The study has identified five non-energy inputs that have figured in the majority of the AP1 NE entrepreneurs responses as the three non-energy inputs significant to the development of their enterprise: institutions, start-up finance, market access, supply of raw materials, and training. These inputs have been exploited by the AP1 NE enterprises through the SHG network of SERP. Moreover, the term institutions refers to SHGs, federations of SHGs, and private and non-profit organizations involved in the project through SERP. As mentioned earlier, SERP s model of rural development is based on the SHG model, the very first step involved being to develop the SHGs. 62

79 The strong SHG network in the AP1 NE cluster created access to timely and affordable finance and human development services for the weaver households. The weavers have leveraged the three forms of loan available to SHG members, such as bank linkages, the Community Investment Fund, and 0 per cent interest loans, all of which created savings for the weaver households. The partnership between SERP and the non-profit Chetana Society helped identify gaps such as market access, access to quality raw materials, and designs and skill in the AP1 NE cluster. Given the presence of the SHG network, the non-profit organization was able to mobilize, building a mutually aided cooperative and floating a handloom weaver-owned enterprise, Chenetha Colour Weaves. Raw materials and market access were provided by Chenetha Colour Weaves, and training was provided by the Chetana Society. The skills building training introduced the community to technology that makes productive use of electricity in the form of a warping machine for activities beyond lighting, such as the use of motor-driven machines to improve productivity to save time, and access to affordable finance, coupled with access to actionable information through skills building led these enterprises towards the productive use of electricity. The machine saves 2 3 man-days of work for the enterprise, which is worth (taking the MGNREGA rate as ), as well as improving the quality of the product. Further, the public-private partnership with the involvement of institutions such as SERP, the Chetana Society and the SHG federation helped in creating a private enterprise owned and run by handloom weavers. This institutionally facilitated private enterprise created access to the market and access to good-quality raw materials. Training, access to good-quality raw materials, market access and the branding of weaver products have resulted in a 20 per cent increase in the market price for the dress material in comparison to the local market at Pochampally. In the fishermen cluster study area in Andhra Pradesh, the enterprises have received the services offered to all SHGs by SERP, as well as additional inputs from the Godavari Maha Samakhya (a confederation of fisherwomen SHGs) such as finance, transport vehicles to market, smoking bins, tarpaulin sheets, collective salt procurement, renewable energy technologies and inputs on hygiene (Godavari Maha Samakhya, popularly known as GMS, is a premier confederation working for poverty eradication among coastal fishermen families in the district of East Godavari, Andhra Pradesh. This confederation is registered 37 Mahatma Gandhi National Rural Employment Guarantee Act < 63

80 under the APMACS Act of 1995 and affiliated to Zilla Samakhya, which operates under SERP.) Again the role of institutions in channelling non-energy inputs can be seen in this cluster. In the study areas in Madhya Pradesh, the survey respondents did not report any institution working intensively on a holistic pattern, as was the case with the study areas in Andhra Pradesh. In the Pranpur cluster of Madhya Pradesh, there is an electricity supply, as well as market linkage inputs from private sector-led institutions such as Fab India and Sutra. 38 However, these institutions have focused only on providing sustained sources of business at the last mile, without any long-term value inputs throughout the product s life-cycle. Further, the weaver co-operative society in the study area has lost membership after handholding support was withdrawn. The non-energy inputs channelled through institutions at various levels are absent in this cluster. Furthermore, in Madhya Pradesh the presence of institutions in the form of the private sector does not extend to providing access to affordable and timely finance, good-quality raw material supply or capacity-building, all hallmarks of the Andhra Pradesh livelihood cluster, thus hindering the growth of the livelihood sector in a sustained manner. On the other hand, the study areas in Andhra Pradesh have the required energy as well as non-energy inputs, as community-based organizations, government institutions and the private sector are active and are driving sustained access to different non-energy inputs. Hence, access to effective and sustained institution-led inputs distinguishes the households and enterprises the study areas of Andhra Pradesh from those in Madhya Pradesh. Furthermore, the quality of inputs in terms of the consistency in exploiting the non-energy inputs is easy, providing timely access and customization in non-energy inputs to meet the basic and livelihood needs of poor rural households. The existence of an established network of SHGs and their respective federations has ensured consistency in the process and in providing continuous access to non-energy inputs; furthermore, SERP has designed livelihood services to meet the needs of poor rural households. In the context of the two clusters in Andhra Pradesh, livelihood services were defined as meeting cluster needs, such as support to fisheries and handlooms in East Godavari and Nalgonda Districts respectively. Thus, the network of community-based organizations ensured good-quality non-energy inputs for poor rural households in Andhra Pradesh. 38 Fab India and Sutra are among big garment retailing brands in India. 64

81 6.2 Income, expenditure, and ownership of appliances by electrified households Monthly average income and MPCE In this study, we found that the households in villages with access to relatively effective non-energy inputs have higher average monthly incomes. Household respondents in AP NE have significantly higher incomes than in AP NNE, MP NE, or MP NNE. Electrification in AP NE has created positive externalities for respondent households in terms of job opportunities in industry and fishing boards and at the larger cities in proximity. Given that all the households fall under the category of having daily wage labourers as members, the sizeable differences in their incomes and consumption levels emphasizes the point that the mere presence or absence of a non-energy input is no indication of better standard of living for a rural household: it is the quality 39 of the input that carries weight, in addition to the strength of the institutions. This difference is confirmed by the findings for income and expenditure in Andhra Pradesh and Madhya Pradesh. The numbers given in the background section highlight the differences in institutions in Andhra Pradesh and Madhya Pradesh and the quantum of financial inclusion input received Ownership of electrical/electronic appliances by households In section , the hexagonal plot shows that, despite all the households being electrified, the ownership of appliances is skewed towards households receiving non-energy inputs, an indication of the consumption of a household as an offshoot of non-energy inputs coupled with electrification. Furthermore, mere accessibility does not ensure or improve a household s ability to purchase these appliances: it is the access to quality non-energy inputs that increases this ability. An affordable and easily accessible stream of finance, coupled with a safety net and livelihood services that enhance household incomes may have contributed to the ownership of larger number of electrical appliances in households receiving non-energy inputs in Andhra Pradesh. 39 The quality of non-energy inputs is based on: (a) consistency in the process to exploit inputs by rural poor households, (b) easy and continuous or timely access of inputs to poor rural households, and (c) inputs customized to meet the basic and livelihood needs of poor rural households. 65

82 At the same time, the study clearly establishes that not only non-energy inputs but also the reliability of electricity supply is essential for households before they opt to purchase electrical appliances. The study re-emphasizes the concept of the energy plus approach, that is, that a reliable energy supply coupled with a cocktail of good-quality non-energy inputs is necessary for households to show growth in terms of income, consumption and asset accumulation. 6.3 Electricity as driver for the augmentation of incomes and/or opportunities for income generation The study clearly indicates that electricity is regarded as essential for incremental income generation, and also that households receiving additional non-energy inputs have shown increases in income. Furthermore, a household's ability to look towards entrepreneurial activities is higher when it receives non-energy inputs channelled through institutions, as is the case with households in AP NE, while this potential ability to take on risks is absent from households in AP NNE. This greater willingness to start enterprises based on electricity as a primary input is also reflected in their willingness to purchase electrical appliances. Therefore, non-energy inputs can give the households ability to see electrical appliances as assets for income generation, as described below (Box 3). Households in Madhya Pradesh that do not receive non-energy inputs have the least possession of electrical appliances, their willingness to purchase which is more of an aspiration and a recreational thought than a step towards thinking of electricity as an income-generating activity. Similarly, AP NNE households that receive relatively lower non-energy could not relate electricity to increases in incomes. 66

83 Box 3 Institutional backing along with primary input The presence of strong institutional backing along with the primary input in the form of access to finance and MCP (Micro Credit Plan) at the heart of the activities of SERP (Society for Elimination of Rural Poverty) is seen in the entrepreneurial spirit of the women in these livelihood clusters from Andhra Pradesh. They are able to picture productive or income generating activities in household appliances: women are taking up activities like ice cream-making and grinder service using household appliances such as refrigerators and grinders respectively. This is also reflected in the previous graph on the readiness for entrepreneurship based on electricity as the primary input to the enterprise. In the cluster surveyed in MP, the presence of institutions has brought only limited benefits to households that are not engaged into handloom and handicrafts. The institutions are sector specific and are primarily motivated by their business needs. Hence, their focus is only limited to a specific target group. This shows that electrification, coupled with good quality non-energy inputs, helps households achieve better incomes and develops in them the ability to think of electrification as an opportunity for income generating or productive activities. This reemphasizes the energy plus approach, that seeks to take policies and programmes beyond the minimalist approach in order to help households break free of the vicious cycle of poverty and to demonstrate the tangible differences in households when electrification is packaged with good-quality non-energy inputs and when it is not, a trend seen in Andhra Pradesh but not in Madhya Pradesh. The absence of a trend in the latter is an indication of weak community-based organizations and the poor quality of non-energy inputs, which is clearly reflected in the absence of a difference in the survey results for households with and without non-energy inputs for all the three variables plotted on the graph. 6.4 Electrified enterprise income and changes in income Average monthly income of enterprises and changes in monthly income of enterprise Enterprises in Andhra Pradesh that receive relatively more non-energy inputs report the highest percentage of increases in incomes in comparison to the three other categories. This reaffirms the value of non-energy inputs. Similar to the household results, Madhya Pradesh enterprises do not report sizeable increases in incomes, and there is no difference among 67

84 enterprises receiving or not receiving non-energy inputs, a reflection of the lack of institutions that can channel such inputs Usage of electricity beyond basic use (lighting and mobile phone charging) As seen from the income graphs (Figures 19 and 20), these enterprises can be brought into two income brackets in each state. Taking income as an indication of the stage, scale and profitability of the enterprise, this stage to-input mapping can be derived from the pentagons shown in Figure 21. The inputs identified by the enterprises from AP1 NNE are the inputs valued in the nascent stage of an enterprise without external support or nonenergy inputs. The inputs reported by AP1 NE weavers are the inputs needed by an enterprise in order to increase its income and profitability through better quality product, market tie-up and access to affordable finance that reduces the cost of capital and improves efficiency. At this stage these enterprises are able to utilize electricity as a means to achieve additional income. Motor-driven machines have been used to improve efficiency in an activity so as to save time, improve product quality and save time for more output. The time saved is around 2 3 days per weaver from AP1 NE. Using the warping machine can translate into an indirect benefit in terms of potential earnings of (through MNREGA 40 payment). Furthermore, cell phones are being used as a medium for storing new designs in the form of photographs and as a means of information exchange. These clusters in Andhra Pradesh have had access to electricity for the last thirty to forty years, which is sizeable in comparison to the start of activities by SERP in The evolution of enterprises towards the productive usage of electricity happened because a package of nonenergy inputs was received through the SHG network. In the case of MP enterprises, electrification has been provided in recent years, but a consistent flow of non-energy inputs through community-based organizations (such as SHGs) is still lacking. A higher percentage of AP1 NE enterprises in comparison to AP1 NNE ones reported extended working hours (beyond daylight hours) and use of electricity for activities beyond lighting, such as use of motor-driven machines to improve quality, save time and efficiency. The fact that these enterprises are using electricity beyond lighting is also supported by the reported higher impact of unscheduled power cuts on productive activities. The enterprises 40 Mahatma Gandhi National Rural Employment Guarantee Act last accessed on 15 June

85 in Madhya Pradesh, both MP NE and MP NNE, do not report a high impact of unscheduled power cuts on their enterprise activities but do report using electricity beyond lighting. This is due to their use of mobile phones for information access, which is the only activity that is supported by electricity other than lighting, as there is no productive use of electricity for income augmentation. This shows the superior stage of the AP1 NE cluster that is utilizing electricity beyond lighting and mobile phone usage and is showing higher incomes (Box 4). While these enterprises have had access to electricity for thirty to forty years in the Andhra Pradesh weaving cluster, it was the injection of non-energy inputs in the form of institutional support, access to finance, market tie-up, capacity-building and training from 2003 that triggered the growth in their incomes, scale and capacity. Therefore, supplying electricity did not trigger this change: rather, it was the non-energy input that allowed enterprises to realize the potential of electricity to increase productivity and income. Box 4 Access to energy and income augmentation The anecdotal evidence from Andhra Pradesh suggests that, despite there having been access to electricity in the survey villages for thirty to forty, this had not been translated into income augmentation or the development of enterprises from the economically weaker sections. The advent of SERP in 2003 put in place a network of community-based organizations that channelled other nonenergy inputs. For the entrepreneur, this reduced the cost of capital, injected livelihood-specific trainings, implemented the concept of micro-credit plans for SHG, created access to safety nets to households through insurance and pension access, covered health expenditure and provided educational scholarships, as well as built synergetic partnerships that brought market access, market acceptability of microenterprise products, improved quality of produce, and reduced seasonality of demand. This package of non-energy inputs with the community-based organizations as the backbone accelerated the evolution of the enterprises in Andhra Pradesh and triggered the idea of the productive use of electricity to enhance productivity and income. This role of community-based organizations in triggering the productive use of energy has also been reported in the Kudumbashree project in Kerala that leveraged on the Community Development Societies, Area Development Societies and Neighbourhood Groups of women to trigger the enterprises that make productive use of electricity such as processing units, production units, electronics, and IT units. 69

86 7. Conclusions and Recommendations While over 95 per cent of Indian villages have already been electrified, this study has attempted to understand the present state of electrification in terms of availability, accessibility and reliability. Further, results from the primary survey reveal that income increases with electricity access, which corroborates the existing literature. Incidentally, income increases even for un-electrified households and enterprises. Hence, this study has also looked into inputs other than electricity access that have led to an increase in livelihood opportunities. Access to the grid augments the usage of electricity for basic lighting and charging mobile phones, but inputs other than electricity access are also required to encourage productive Key Findings The study found that the average income of an electrified household is higher than the average income of an un-electrified household for both grid and off-grid areas. Further, electrification results in increases in income (also in real terms) for both electrified and un-electrified households for both grid and off-grid areas. Electrified households in grid-connected areas reap more benefits over time (change of income is higher) compared to un-electrified households. Thus, grid supply probably generates better livelihoods for electrified households compared to households connected to off-grid systems. Income change is higher for electrified households with business as their primary source of earnings compared to electrified households with other sources of earnings. Thus, usage of electricity in productive/income-generating activity gives households better income-generating opportunities. Institutions are the fundamental non-energy inputs that can ensure sustained nonenergy inputs to households and enterprises. Institutionally channelled non-energy inputs to households or enterprises can trigger productive uses of electricity and increase incomes. Households with access to electricity and receiving non-energy inputs have higher incomes and consumption than households with relatively lower non-energy inputs. Electrical appliances are seen as potential livelihood-generating assets by households receiving relatively higher non-energy inputs. Access to channelled sustained non-energy inputs develops the tendency to take risks in households in the form of entrepreneurship. Institutions, affordable and timely finance, continuous impetus on training, market linkage and supply of quality raw materials have been regarded as the significant nonenergy inputs essential by enterprises. 70

87 uses of electricity for income generation. Based on the cases of livelihood clusters from the states of Andhra Pradesh and Madhya Pradesh, the study finds that sustainable institutions foster the channelling of resources, including electricity for productive use. The study reveals that the application of energy plus approach is essential in providing a catalyst for income generation and that it is not the mere presence of non-energy inputs that determines sustainable access to electricity and its productive use. Furthermore, the study reveals that it is the presence of strong community-based institutions that facilitate access to effective non-energy inputs and that the functionally effective institutions have a strong role to play in achieving the goal of sustainable electricity access for all. Thus, the study concludes that institutions aid in incorporating both energy and non-energy inputs (such as access to social infrastructure, skills training, capacity-building and market value chain creation) to catalyse productive activities leading to sustainable electricity access for all. While electrification in India has been a priority for decades, it is only in the last decade that there has been the necessary momentum for the creation of the necessary supply infrastructure at the village level, primarily through RGGVY. Despite limited access in rural areas, access to electricity infrastructure through various sources has triggered the use of electricity for basic and productive purposes. While both energy and non-energy inputs are essential, non-energy inputs are demand-based. Further, effective last-mile institutions are essential to channel them and to scale up their impacts. The following are the key recommendations based on the study: Recommendation 1. Availability of reliable and quality access to electricity during peak hours is essential. While it is acknowledged that round the clock availability of electricity is essential, our findings from the study areas in the livelihood clusters of Andhra Pradesh and Madhya Pradesh emphasize that the availability of electricity during peak hours has a much wider impact. However, it is important that the community has access to the infrastructure and resources that enable the productive use of electricity. Recommendation 2. Leverage on network of institutions for optimal delivery and utilization of non-energy inputs. Based on the review of secondary literature, stakeholder consultation and primary surveys in the study areas, it has become clear that where both electricity access and institutions to 71

88 channel non-energy inputs co-exist, the impacts are relatively greater. In India, energy committees exist involving community representatives constituted at the last mile. Incidentally, there are provisions for engaging these institutions in the planning and implementation of development programmes. Relevant training and capacity-building will make a majority of these institutions functional and translate them into solutions that accelerate the productive uses of resources. Recommendation 3. Development goals and electricity access should be packaged to complement each other. Access to electricity requires necessary transmission and distribution infrastructure. However, the aspirations of community members are not limited to mere access to electricity infrastructure. This implies that the use of electricity and electrical or electronic appliances are mere indicators and not the real ends in themselves. Hence, government and civilsociety development programmes must be designed to empower community members to meet their aspirations through electricity access facilitating the process. This design should incorporate rural electrification programmes with a simultaneous impact on the non-energy inputs to enable households to graduate from basic lighting and mobile phone usage towards income augmentation through the productive usage of electricity. The development of institutions is the primary input that creates access to effective non-energy inputs. Recommendation 4. The study findings from the AP1 NE handloom cluster show that nonenergy inputs, such as access to finance, training and capacity-building, access to goodquality raw materials, market access and institutions were the non-energy inputs regarded as a priority by the household handloom enterprises. Furthermore, only a few enterprises have mentioned enabling government policy as one of their top three non-energy inputs. But this list of five priority non-energy inputs, provided by these entrepreneurs, was possible only by enabling government policy and by implementation in Andhra Pradesh. As the study findings relate to handloom-based livelihoods, future studies should come up with a package of non-energy inputs that can be generalized for all forms of rural livelihoods. Recommendation 5. From the surveys of the two states of Andhra Pradesh and Madhya Pradesh, it is evident that government action in the form of enabling policy plays a significant role in creating community-based organizations. The findings from the study in Andhra Pradesh shows that enabling government policy in the creation of community-based organizations can be considered to be the initial input, institutions or community-based organizations such as SHG network and the federation of SHGs the secondary input, and 72

89 access to finance the tertiary non-energy input. The order of the non-energy inputs is based on the order of non-energy input injection in Andhra Pradesh; this involved the creation of SERP/Indira Kranti Patham 41 and the establishment of the SHG network, access to finance (SHG bank linkage, community investment fund) and access to finance, followed by livelihood-specific inputs such as training, market access and access to good-quality raw materials. Therefore, this study shows that the quality of non-energy inputs is important, and it also lists a package of non-energy inputs specific to handloom livelihoods, as well as emphasizing the significance of non-energy input injection. Future studies should invest in establishing a generalized order of non-energy input injection that should cover all major forms of rural livelihood. Further, future research should also investigate the contribution of safety net-related inputs such as pensions, insurance, educational scholarships and inputs in health and sanitation in ushering enterprises towards productive uses of electricity. 41 The activities of DWCRA (Development of Women and Children in Rural Areas) and Velugu were integrated under a programme called Indira Kranti Patham (IKP). The basic objective of this integration is to implement various programmes for strengthening of self-help groups with similar implementation strategy. The new scheme Indira Kranti Patham had been designed by clubbing Women Empowerment with Poverty Alleviation. The IKP is a state-wide poverty reduction project to enable the rural poor to improve their livelihoods and quality of life through their own organizations. It aims to cover all the rural poor households in the state with a special focus on the 30 lakh poorest of the poor households. It is implemented by Society for Elimination of Rural Poverty (SERP), Department of Rural Development, Govt of AP. SERP is an autonomous society registered under the Societies Act, and implements the project through District Rural Development Agencies (DRDAs) at the District level. The Chief Minister of Andhra Pradesh is the Chairperson of the Society. The IKP builds on more than a decade long, state wide rural women s self-help movement. The focus is on deepening the process, providing an institutional structure and developing a framework for sustaining it for comprehensive poverty eradication. It is the single largest poverty reduction project in South Asia. 73

90 Policy Recommendations Challenges in poverty eradication and in livelihood generation can be eliminated by packaging the rural electrification programme with sustained impetus of non-energy inputs channelled through local institutions. Policies that focus on rural electrification and productive uses of electricity should focus on developing last mile community-based organizations such as SHGs and energy committees, which are fundamental to linking the village economy to rural electrification. Access to affordable start-up finance, continuous skills building, market linkages, good-quality raw materials channelled through community-based organizations in partnership with public and private players will trigger entrepreneurship and provide a platform for graduating towards productive uses of electricity. States with recent rural electrification programme implementation or in the process of saturation of rural electrification should emphasize entrepreneurship and productive uses of electricity through institutionally channelled non-energy inputs. States with good coverage of rural electrification should initiate policies to develop institutions which can channelize non-energy inputs and drive village economy through productive use of electricity. 74

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97 Annex 1. Selected Indicators The selected indicators are the following: 1. Growth of village electrification ( to ): as village electrification status of all states is almost 100 per cent, we have taken growth in the last ten years to measure the performance of the states. 2. Percentage of rural HHs using electricity for lighting (as major source). 3. Growth of rural HHs using electricity ( ): this measures the performance of electrification of a state over a period in terms of accessibility. 4. Human Development Index: the better the HDI, the more performance can be expected to be better. 5. Share of priority sector lending for small enterprises in total PSL (2010): indicator of financial input, the more the PSL, the better the performance. 6. Gross enrolment ratio in Classes I VIII (6 13 years): indicator of educational input, expected to have a direct and positive relationship to performance. 7. Percentage of PHCs with electricity supply (As on March 2011): indicator of health service input, expected to have a direct relationship to performance. 8. Consumer metering (2006/07): indicator of utility efficiency, might have positive relationship with performance. 9. Percentage change in MPCE between and : indicator of economic status (change of), expected to improve with availability of electricity and expected to demand better livelihood standard (e.g., in terms of access to electricity). 10. Percentage change in per capita consumption of electricity in to : measures change in average per capita consumption. 11. Percentage of enterprises 42 receiving some kind of assistance (includes financial loans, subsidies, machinery/equipment, training, marketing, raw materials and others): receiving more assistance could help to start or run an enterprise. 42 Unincorporated Non-agricultural Enterprises (Excluding Construction) in Rural area 81

98 12. Share of rural enterprises in rural HH: represents the proportion of rural enterprises in rural HHs, indicates level of entrepreneurial activity for improving standards of living. 13. Share of employment engaged in rural enterprises in the rural population: indicates employment (self + paid) for improvements in standards of living. 14. Percentage of enterprises working more than twelve hours: enterprises working more than twelve hours definitely require some kind of lighting arrangement (other than sunlight); can be a proxy for electricity requirements for entrepreneurial activity. 15. Percentage of enterprises whose businesses have expanded in the last three years ( ): indicates prosperity/profitability of productive activity; may be due to access to electricity or business expansion, may demand access to electricity. 16. Percentage of enterprises perceiving that power is not a challenge for their business: can be a proxy for access to electricity for an enterprise. 17. Percentage peak demand met (peak demand met as a percentage of peak demand) ( ): can be a proxy for power cuts, thus, the higher is the value the better the state s performance. 18. Pump-set per thousand hectares net sown area ( ): proxy for agricultural electrification; the greater the value the better the state s performance. Data source: central and state government documents, Reserve Bank of India data base, Indiastat.com, and Indian National Sample Survey reports. 82

99 Annex 2. Profile of Survey Respondents Age group The sample only consists of adult respondents (18 and above). All of the household and enterprise respondents in the survey were in the age group of 20 to 70 years of age. In Madhya Pradesh, a majority (36.11 per cent) of household respondents were in the age group of 40 to 50 years, and a wide percentage(38.71 per cent) of enterprise respondents were in the age group of 30 to 40 years. In Andhra Pradesh, the equivalent percentage (23 per cent) of respondents belonged to two age groups (30 40 and years) and a slightly higher percentage (29 per cent) of respondents were in the age group of 40 to 50 years. Educational level The education levels of the survey respondents were identified in terms of the usual milestones for educational qualifications in rural India like primary education, high school, diploma, intermediate, etc. A majority of both household and enterprise survey respondents were found to be have attained primary education and above in MP. The percentage of illiterates (46 per cent) among respondents was also high in AP. Current primary and secondary sources of income Among household respondents in MP, 63.9 per cent reported daily wage labour and 19.4 per cent reported service (contractual/permanent service in government or private sector) as their primary livelihood activity. The remaining household respondents mentioned selling wood as their key source of livelihood. At the same time, among enterprise survey respondents, a majority (51.7 per cent) reported traditional activities (primarily handicraft, weaving, and pottery) as their primary livelihood activities. Further, 12.1 per cent of respondents reported agriculture and agri-related activities (including selling milk, raising goats, vegetable and fruit selling, and making bidis) as primary sources of income per cent of the enterprise respondents gave their professions as skilled jobs (including carpenter, electrician, painter, barber, and tailor). Over 20 per cent of the enterprise respondents reported services (including garments and grocery shops) as their primary source of income. In the two livelihood clusters in AP, the majority of respondents primary sources of income were in weaving and dry fish and prawn trading (37.5 per cent each). Further, a considerable percentage (18.1 per cent) of respondents worked as daily wage labourers on fishing boats, 83

100 in agricultural fields and factories; the respondents falling under this category pursued a combination of daily wage labour opportunities in the vicinity of their households based on the availability of work such as working on fishing boats and in agricultural fields, prawn and crab factories and zip factories. The remaining 6.9 per cent of respondents pursued agriculture and allied activities, salaried employment and skill-based labour (carpentry, cooking, masonry, car driving, etc.). 84

101 Annex 3. Rural Electricity Programmes in India In the rural electrification sector, over the years a number of government programmes 43 (such as Kutir Jyoti, the Minimum Needs Programme, the Accelerated Rural Electrification Programme, etc.) have attempted to enhance access either as part of overall rural development or by specifically targeting rural electrification. Though a number of programmes have attempted to enhance access to electricity either as part of overall rural development or specifically targeting rural electrification, the multiplicity of the programmes has meant that the funding for each programme proved inadequate and that programme implementation was not properly coordinated or managed. Due to the financial burden that such programmes impose, utilities often showed less interest in promoting these schemes actively, and even the targets set by the utilities were not met. Further, the high cross subsidy for rural electricity supply also made the utilities lukewarm towards supplying electricity to rural areas. However, during the last decade, rural electrification has become a political priority, driven by the realization of its neglect over the years, with the central government creating the necessary enabling environment through the REST (Rural Electricity Supply Technology) Mission 44 in 2001; the Electricity Act, 2003; the National Electrification Policy, 2005; and the Rural Electrification Policy, In 2001, the government declared the objective of providing power for all by 2012 under the REST Mission, and backed this up with the launch of a large-scale electrification effort, the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) scheme, in April 2005, led by the Ministry of Power. The following sections provide details of the various rural electrification programmes prevalent in India. 43The Minimum Needs Programme started in the Fifth Five-Year Plan ( ), which had rural electrification as one of the components. The Kutir Jyoti Programme was initiated in 1989 to provide a single light connection to all Below Poverty Line (BPL) households. This programme provided a 100 per cent grant for the one-time costs of internal wiring and service connection charges. The Accelerated Rural Electrification Programme (2003), which was initiated to offer interest subsidies to states for rural electrification purposes, was combined with the Kutir Jyoti programme in February 2004 to create the Accelerated Rural Electrification of one lakh villages and one crore households. 44 The REST Mission was launched for the electrification of one lakh villages and one crore households. REST was designed to ensure a holistic and integrated approach to providing electricity for all by 2012 by identifying and adopting technological solutions, changing the legal and institutional framework, and promoting, financing and facilitating alternative approaches. Under the programme, electrification projects based on grid extensions and stand-alone electrification based on distributed generation both became eligible for capital subsidies. 85

102 Rajiv Gandhi Grameen Vidyutikaran Yojana The RGGVY was launched by merging all other existing schemes of rural electrification, with the goal of electrifying all un-electrified villages and hamlets, providing access to electricity to all households within five years, and providing 23.4 million free connections to households below the national poverty line. The scheme attempted to address some of the common ailments of rural electrification in the country, such as poor distribution networks, lack of maintenance, low load densities with high transmission losses, increasing costs of delivery and poor quality of power supply. Instead of only village electrification, the emphasis of RGGVY has been on facilitating rural development, employment generation and poverty alleviation by providing access to electricity to all rural households, including below poverty line households, and also catering to the requirements of agriculture, small and micro-enterprise cold chains, health care IT and education. The RGGVY programme is covered in more detail in Section 4. Remote Village Electrification Programme While the Ministry of Power is the nodal ministry for extensions of the electricity grid, the Ministry of New and Renewable Energy (MNRE) has also been enhancing electricity access through decentralized renewable energy technologies, such as solar home systems, solar photovoltaic power plants, small hydropower plants and biomass gasification. This is being done under the Remote Village Electrification Programme (RVEP), wherever grid extension is not feasible. The RVEP was initiated in 2001 for the provision of basic lighting facilities in un-electrified census villages, regardless of whether or not these villages were likely to receive grid connectivity. The scheme was subsequently modified to cover only those unelectrified census villages that are not likely to receive grid connectivity. By focusing on remote census villages and remote hamlets in electrified census villages, the RVEP aimed to bring the benefits of electricity to people living in the most backward and deprived regions of the country. In addition to domestic use, the scheme also has the option of providing energy services for community facilities and pumping for drinking water supply or irrigation, as well as for economic and income-generating activities in the village. As of December 2011, the RVE programme has reportedly covered 12,369 villages and hamlets (MNRE 2012). However, Palit (2013) observes that the vast majority, more than 90 per cent of the villages taken up for electrification under RVE were provided with solar home systems or solar power plants. Central financial assistance of up to 90 per cent of the 86

103 cost of the project is provided as grant, with specific benchmarks as applicable in respect of the technologies adopted for electrification. The remaining 10 per cent cost of projects can be financed through sources such as the Prime Minister s Gramodaya Yojana, the Rural Infrastructure Development Fund, the Ministry of Tribal Affairs, the MP Local Area Development Fund, the MLA Local Area Development Fund and the corporate sector. The implementing agencies were given the option of raising funds from these and other sources, such as the Rural Electrification Corporation, the Power Finance Corporation, etc., but also including users, so as to meet their share of the costs of the project. Village Energy Security Programme Another programme, the Village Energy Security Programme (VESP), was conceptualized by MNRE as a step forward to the RVE programme, and it attempted to address total energy needs for electricity, cooking and motive power in remote villages through the use of locally available biomass. The programme was initiated in 2004 with the following objectives: To meet village energy requirements through biomass material and biomass-based conversion technologies or other renewable technologies, where necessary; To go beyond electrification by addressing total energy requirements such as energy required for household cooking and irrigation; These projects will involve the installation of energy production systems: biomass gasifiers, biogas plants, plantation activities and improved biomass cooking stoves. Undoubtedly, the programme was ambitious in setting itself a mandate of meeting a rural community s total demand for energy services. Appropriately for such a pioneering and unprecedented programme, the initial phase of VESP was intended to test the concept and capacity of various institutions to deliver energy to remote and inaccessible communities. However, this test phase met with very limited success, and most of the test projects could not be sustained. The programme was discontinued, and no new test projects have been sanctioned since 2010 (Palit 2011). Jawaharlal Nehru National Solar Mission MNRE is also implementing the Jawaharlal Nehru National Solar Mission (JNNSM), one of the eight National Missions comprising India s National Action Plan on Climate Change. When the JNNSM was launched, all solar energy programmes promoted by MNRE were integrated under the Mission. It has the twin objectives of contributing to India s long-term 87

104 energy security and to its environmentally sustainable growth. The Mission also aims to incentivize the installation of 22,000 MW of on- and off-grid solar power, using both solar PV and Concentrating Solar Power technologies by 2022, along with a large number of other solar applications such as solar lighting, heating and water pumps. The first phase (up to 2013) focuses on promoting off-grid systems to serve populations without access to commercial energy, as well as on adding capacity to grid-based systems, augmenting the supply with clean energy. 88

105 Annex 4. Composite indexes based on 18 selected indicators The composite indexes based on 18 selected indicators are as follows: CI# SC CI$ SC Kerala Kerala Andhra Pradesh Tamil Nadu Tamil Nadu Andhra Pradesh Uttarakhand Uttarakhand Haryana Himachal Pradesh Himachal Pradesh Haryana West Bengal Odisha Jharkhand West Bengal Odisha Jharkhand Punjab Gujarat Gujarat Rajasthan Karnataka Karnataka Rajasthan Maharashtra Maharashtra Punjab J & K J & K Chandigarh Chandigarh Uttar Pradesh Uttar Pradesh Madhya Pradesh Madhya Pradesh Assam Bihar Bihar Assam #10 per cent weightage to variable 1/2/3/11/12/14/17/18 and 2 per cent weightage to remaining 10 variables. $ Equal weightage to all variables. 89

106

107 Annex 5 Variables used in regression analysis Variables used in regression analysis Variable Electricity Availability Reliability Finance Training Institution Infrastructure Power backup Experience Market access Relationship Family support Governance Supply chain d_cl d_st cl 1 cl 2 st 1 st 2 st 1 cl 1 Detail Use of electricity for productive purposes Availability of electricity at peak hours Reliability (in terms of proper voltage, fewer unscheduled power cuts) Easy loan availability (both initial and mid-term finance) Training to start or augment productive activity Institution Infrastructure (in terms of road accessibility, etc.) Availability of power backup Prior experience in a particular productive activity Access to better and nearer market Relationship in terms of branding Family support Governance Improved supply chain Cluster dummy State dummy Cluster 1 (weaving cluster) Cluster 2 (fisherman cluster) State 1 (Andhra Pradesh) State 2 (Madhya Pradesh) Cluster 1 of State 1 (Weaving cluster of Andhra Pradesh) 91

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