Economic Energy: Ensuring Access to Energy India Energy Congress Delhi 31st Jan 2007 Girish Sant Prayas, Energy Group Pune

for enhancing livelihoods… Access to Energy for enhancing livelihoods… Present situation Challenges of present path What can help Need for a transition plan 31st Jan 2007

Subsidy – Present annual expenditure Present Situation Examples of Revenue Subsidy Kerosene – Rs. 10,000 Cr Agricultural electricity ~ Rs. 15,000 Cr Household electricity ~ Rs. 6,000 Cr (Assuming 50 million houses @ Rs 100 /month) Capital Subsidy Rural electrification – Rs. 5,000 Cr Approximate total ~ Rs 36,000 Cr /yr (selected items) 31st Jan 2007

Distribution of Household by electricity use (kWh/month) Present Situation Only 25–30% of 200 million houses in India pay electricity bill > ~ Rs 200 / month! Needs of majority are much different than rich minority… 31st Jan 2007

Other Issues Electricity Cooking Transport Present Situation Limited hours of supply (usually excluding evenings!) Official connection is too expensive, and risky (due to erratic bills) Cooking ~ 90% of rural population uses biomass (as primary fuel) Kerosene is expensive, many find it difficult to access it from official channels Transport Fuel or public transport is expensive… 31st Jan 2007

Challenges of Present Path Large errors of inclusion and exclusion (subsidies are not progressive) Difficult to prevent misuse and inefficient use 25 to 40% kerosene is un-accounted for (potentially used for adulteration) Negative impact on bystander population Air-pollution due to kerosene adulteration Falling water levels due to over-pumping 31st Jan 2007

Challenges – farm power subsidy Little benefits to poor farmers Inefficient electricity use Lowering of water table  negative impact on poor Overuse of ground water Competitive well deepening Improper crop selection 31st Jan 2007

Challenges – farm power subsidy Distribution of agricultural power subsidy in Maharashtra. Non-irrigated farmers (80%) did not get subsidy Karnataka – Only 10% subsidy reached poor farmers 31st Jan 2007

For achieving improved access… What can help Just giving subsidy will not be sufficient We need to Specifically address needs of the poor, Reduce cost of supply, Better target subsidies. 31st Jan 2007

New revenue models What can help Innovative revenue models, if implemented judicially, can have following benefits Better address needs of the poor, by designing appropriate services – with their incentive linked to service quality Reduce cost of service Can increase reliability Example – Limited load connections (for say 40 Watt = 2 efficient lamps) 31st Jan 2007

Delivery mechanism What can help Subsidy is useful only if it achieves the objectives – delivery mechanism is a weak link that we need to strengthen Use of technology can help (smart cards, finger prints for identification etc) In addition it is essential to improve governance of delivery mechanisms by Making them accountable to beneficiaries Conducting external participatory reviews etc. 31st Jan 2007

Giving subsidy What can help It is worth considering creation of dedicated agency for subsidy disbursal Subsidise items that have little alternate uses (better to subsidise modern biomass stoves, PV based lights, instead of kerosene or LPG) Need to minimise subsidy – through promotion of efficient options (CFLs, agricultural pumps, etc.) 31st Jan 2007

Need for a transition plan Sudden changes can cause major dislocations The complex web of inefficiencies are not easy to undo – example of agriculture (power utility, pumping, irrigation systems, crop choice of sugar cane, sugar factories etc.) Need to tackle major components of the system 31st Jan 2007

Movement of tariff over years: Maharashtra Case 31st Jan 2007

Special attention to Access is essential… Summary Special attention to Access is essential… Reforms are needed in terms of What we subsidise, Whom we subsidise, Improvement in accountability and governance of delivery mechanisms Need transition plans that understand interactions of sub-systems 31st Jan 2007

Thank you for your attention… Prayas Energy Group girish@prayaspune Thank you for your attention… Prayas Energy Group girish@prayaspune.org 31st Jan 2007