Improving Access/Quality of Basic Infrastructure Services in Urban India Anna Agarwal MIT India Reading Group May 2010

WHERE ARE THE OBSTACLES ? FOCUS ON ELECTRICITY WHERE ARE THE OBSTACLES ? Absence of Reliable Infrastructure Lack of Investment Corruption Technically difficult e.g. topographically complex Affordability Encourage Private Investment Eliminate the Middle Man Alternate Solutions e.g. Decentralized Solar Innovative Financing Each of these bullets need further study to make policy recommendations or create business opportunities to address the challenge

Why is private investment limited in the power sector FOCUS ON ELECTRICITY Hypothesis 1: Private investment is crucial to providing reliable electricity Why is private investment limited in the power sector Not commercially viable due to low user charges (basic infrastructure services are considered public goods are free or heavily subsidized) Does the public really want subsidized services? What are the hidden costs of unreliable electricity

Analysis for Hypothesis 1: Hidden costs of unreliable electricity FOCUS ON ELECTRICITY Analysis for Hypothesis 1: Hidden costs of unreliable electricity Wasted Productivity Downtime due to power cuts Backup for Power cuts Generators, Invertors : Capital Costs, O&M Costs Illegal Electricity Connections are more expensive Often provided by local “dons” (recall discussion on poverty premium) Maybe the cost of RELIABLE power is less than the cost of UNRELIABLE+BACKUPS