Power up the rural economy

by May 19, 2020 0 comments

India is home to abundant non-conventional energy sources such as the sun, water and wind that can be harnessed to supply reliable electricity to households and micro-enterprises

The pandemic and the resultant lockdowns put a temporary stop to economic activities across the globe, impacting millions of people and their livelihoods. The Asian Development Bank (ADB) estimates this loss to be around $4 trillion, which is nearly five per cent of the global Gross Domestic Product (GDP). As a young, developing nation with 65.97 per cent of the population still residing in the villages, the pandemic not only tested India’s economic resilience but also exposed the growing urban-rural divide and income inequality. As we continue to step up our fight against the Coronavirus, we are certain that the post-pandemic world would be different from what we left behind. The rebuilding exercise should, therefore, begin with rural India — where, as Mahatma Gandhi said, “The soul of India lives.”

Rural India has always found it challenging to unleash its economic potential due to a variety of fiscal and social factors. A major reason among them is the continued unavailability of reliable power. Per capita electricity consumption in rural areas still remains significantly low due to erratic power supply. Research data show that there is a strong positive correlation between economic development and electricity consumption. For example, China started growing at double digit when the demand and consumption of power in rural areas doubled and the small-scale businesses expanded rapidly. Similarly, rural India, too, has a growing demand for reliable electricity but due to supply side constraints, this demand remains partially unfulfilled.

How do we address the challenge and ensure reliable power for all? We must strengthen the last-mile power delivery system, which is largely dominated by State-run Distribution Companies (DISCOMS). But as DISCOMS continue to remain trapped in mounting losses and operational inefficiencies, last-mile power delivery has taken a backseat. The DISCOMs, therefore, need to streamline and strengthen their distribution networks with greater focus on enhancing customer satisfaction, timely complaint redressal, regularised billing processes and transparency in finances at all levels. Addressing challenges such as power theft and billing inadequacies can help DISCOMS enhance their delivery efficiency.

In addition, the proposed amendments to the Electricity Act, 2003, particularly the unlicenced sub-distribution and payment security mechanism, will boost private sector investments in the distribution sector, reduce their losses and strengthen operational efficiencies of DISCOMS. Private investments will not only help DISCOMS deal with financial stress but will enhance the quality of services and healthy competition. This will ultimately have a transformative impact on last-mile power delivery and ensure access to reliable power for rural households.

India is home to abundant non-conventional energy sources such as solar, water and wind that can be effectively harnessed to supply reliable electricity to rural households and micro-enterprises. Renewable energy provides low-cost power models and can be deployed even in remote areas despite the geographical barriers. Expansion of renewable energy-based mini-grids in rural India can be further incentivised and be provided additional policy support for generation and distribution of electricity at affordable rates to rural households.

Mini-grids serve as the primary source of electricity in regions where grid-connected power has not found its way yet. A recent survey on the impact of COVID-19 in mini-grid villages of Uttar Pradesh (UP) and Bihar revealed that 90 per cent of the rural households trust mini-grids for reliable power supply. However, despite mini-grids becoming a trusted source of reliable electricity for rural India, they often run the risk of reverse migration of customers to centralised grids when the necessary infrastructure is available.

This concern, however, can be addressed by integrating mini-grids with centralised ones to provide enhanced access to electricity supply. A fully-integrated power system is an optimal solution for electrifying un-electrified villages with reliable power. Integrated power supply models can minimise the cost by introducing efficient planning, investment and operation of assets with significant economies of scale. Ghana, for example, built an integrated grid, providing power to 85 per cent of its urban population and 41 per cent of the rural population. Integrated power systems can speed up the rural electrification process and ensure reliable supply.

The health and economic crises triggered by the pandemic clearly underline the significance of providing reliable power for all critical rural infrastructure such as health centres, micro-enterprises and schools. Productive uses of energy such as for irrigation, small businesses, tailoring, food storage and so on will further ensure adequate livelihood options for rural communities with greater economic resilience.

How will reliable electricity help rural India rebuild its economy?

Rural healthcare: This is a key area that will lead to a new economic revolution in the post-pandemic world. India’s healthcare preparedness was found to be inadequate during our fight against the COVID-19 pandemic. Primary health centres, which approximately serve 65 per cent of the rural populations, need to be modernised with state-of-the-art infrastructure, especially uninterrupted power supply. Reliable supply can provide crucial support to critical functions of these health centres, especially during medical emergencies. The survey also revealed that a majority of the rural households depend on community health centres for their medical needs. Inadequate and irregular supply of electricity may affect their functioning with critical implications for rural populations. Electrifying and modernising the health centres will, therefore, be a key step towards rebuilding the economy and reshaping the lifestyle of rural populations. Millions of dollars can be saved if rural populations have access to high quality healthcare services. This will not only have a lasting economic impact on  health delivery but will lead to better social outcomes such as improved health and hygiene.

Modernising agriculture: Farming remains the primary source of livelihood for nearly 65 per cent of Indians. Yet, agriculture productivity is significantly low in India and accounts for only 15.4 per cent of the GDP. The growth in agriculture has been moderate in the past decade at nearly three per cent per annum. Critical functions such as irrigation, harvesting, post-harvest handling and storage, all require reliable power supply. In regions where rainfall is scanty, groundwater is the main source of irrigation. Electricity demand in rural India is majorly driven by irrigation. Villages with access to electricity have seen an uptick in agricultural productivity with availability of low-cost irrigation technologies. For example, rural households that would sell paddy at a low price earlier sell hulled rice as there is an electricity-powered rice huller in the village. These are few of the examples of the transformative impact of reliable electricity supply. Modernising agriculture will unlock myriad employment and business opportunities for rural India.

Big push to micro and small businesses: Formalisation of the rural economy is an essential step in providing necessary infrastructural support to budding micro and small businesses. Reliable electricity supply encourages creation and expansion of new businesses in rural areas and can potentially open the door for greater economic activity and investments. Villages with access to reliable electricity have already seen the emergence of micro enterprises such as training centres for computer skills, coaching institutes and travel agencies. The income levels of households engaged in small business have witnessed a steady increase, too. These are replicable models that can be extended to other villages and reliable power can help rural India unleash its economic potential.

As we seek to rebuild the rural economy, reliable electricity will play a crucial role in promoting micro-enterprises, doubling farmer incomes and creating sustainable job opportunities. The cumulative impact of improved healthcare, modernised agriculture practices and rise in rural enterprises will be significant and will enable rural India’s transformation into a hub of economic activity. A new India is waiting to be born out of the COVID-19 pandemic.

(Writer: Jaideep Mukherji; Courtesy: The Pioneer)

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