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In April, Uttar Pradesh joined the 24×7 Power for All (PFA) scheme, a joint initiative of the Centre and state governments. PFA, touted as based on principles of cooperative federalism, seeks to connect all unconnected households and ensure 24×7 supply for all by 2019. UP is critical to the scheme’s success. With one-sixth of India’s population, the state has about one-third unelectrified households in the country. Given that household size in UP is the largest among Indian states, the state may have as many as 40 per cent of Indian citizens without access to electricity.
Unfortunately, UP faces major difficulties in meeting the PFA goals. The drive to connect all households and improve the quality of service could be a major technical challenge and very costly to the state government and electricity distribution companies (discoms). The PFA document for UP does not address these issues. To begin with, there are different estimates of unelectrified households in the state. While GARV (a website and a mobile application developed by the Rural Electrification Corporation of India to provide real time data on rural electrification) reports 15 million unelectrified households in the state, the PFA document for UP reports about 20 million households yet to be connected and/or registered, including unauthorised consumers. The number of unauthorised connections is as high as authorised household connections.
While more than two-third authorised connections are not yet metered, supply is unreliable and intermittent even for the authorised consumers, with a stark rural-urban divide and VIP area prioritisation. A survey conducted in 2014 revealed that the average rural household in the state received only nine hours of electricity on a typical day. To improve electricity service, the PFA UP plan suggests seven steps: One, connect 11.2 million households to the grid; two, formalise and meter 8.5 million unauthorised consumers; three, meter another 6.8 million authorised consumers; four, ensure round-the-clock supply to all; five, almost double the electricity sector asset base; six, bring down losses by half; seven, make discoms profitable.
These ambitious targets are to be achieved by 2019, but the PFA document does not propose a strategy for doing so. The challenge is momentous, especially considering that the goals are often at cross purposes: Increasing the number of rural electricity connections, for example, undermines the finances of discoms, and thus compromises the pursuit of round-the-clock power.
In 2014-15, when about half of UP households were connected to the grid (authorised or unauthorised) with intermittent supply, households accounted for 41 per cent of electricity consumption. Ensuring 24×7 supply to all households, considering the low consumption potential of unconnected households, would lead to a doubling of household energy demand — at least. If UP manages to improve quality and reliability of electricity supply, industrial and commercial demand will also grow, though at a slower pace. Overall, there will be a massive expansion in power demand. This expansion will hurt the discoms. They will have to increase their power procurement by 40 per cent to 50 per cent within two years, when long-term power procurement cost will be at its peak. To cater to this demand, the state would also have to make huge investments in expanding and strengthening the distribution network. At present, the distribution network capacity is lower than peak demand in the state, resulting in load-shedding and breakdowns even when power is available.
Funding such an infrastructure upgrade will be a major challenge even with the Centre’s help. Between 2006 and 2016, the Centre sanctioned about Rs 22,533 crore to the state for electrification, but as per news reports, only 34 per cent of these funds have been utilised. While distribution companies would have to incur a higher cost for additional power procurement, the potential revenue from household consumers would be very low. In 2014-15, average revenue realisation from domestic consumers was Rs 2.78/kWh against an average cost of supply of Rs 5.64/kWh. Subsequently, net commercial loss in the state of the five discoms stood at 31 per cent of the revenue realised from sales. At this rate of revenue realisation, 24×7 supply to all households would almost double the commercial losses of discoms. In addition, the expansion of the low-tension distribution network would increase line losses.
Metering 6.8 million authorised rural consumers may or may not increase the discoms’ revenues. While the high-end consumers will end up paying more than the existing fixed charge of Rs 180-200 per connection, many of the low-end consumers will reduce their electricity bill below the fixed charge. Thus, the net effect is unclear, though metering would certainly rationalise household energy demand and reduce wasteful usage.
Reducing electricity theft in the state is a major challenge. Rampant electricity theft in the state is largely backed by political protection, which will be hard to evade in the short-run. Simultaneously, it has created an influential and sizable group of katiyabaazs (one who steals electricity through illegal wiring), who service the unauthorised consumers.
Despite these difficulties, UP offers many opportunities to revolutionise the rural electricity supply. The state needs more time and a multi-pronged strategy to address each challenge. Success will ultimately depend on the state’s ability to bundle policies, align interests, and build trust among stakeholders.