Saubhagya programme: The next bold step for electrification – necessary but is it sufficient?

Prime Minister Narendra Modi has launched a new scheme called Saubhagya to ensure electrification of all willing households in the country in rural as well as urban areas by 2019. The focus is on last mile connectivity and poor households would be provided electricity connections free of cost.

Is Modi’s new electricity-for-all-homes scheme Saubhagya a realistic goal to achieve, given the health of our state power utilities? Fellow Rahul Tongia comments:

After years of high-level definitions and programs for electrification, the Saubhagya scheme now focuses on the next link, addressing some 40 million households who lack electricity connections, as opposed to villages (which are mostly electrified). Worldwide, adding “marginal” and poorer consumers has required support, since they cannot pay full/true costs. DisComs have resisted connecting such users as they underpay and are expensive to connect, and cross-subsidy schemes haven’t scaled.

Top-down pushes do help, but they need bottom-up buy-in as well. Are there enough contractors to do the work? Doing simple math, Saubhagya comes to Rs. 4000/home, which is NOT going to be sufficient. A meter alone is Rs. 700, if not more (especially if prepaid or smart). Adding a wire will likely cost Rs. 2 lakh/km if new poles are required. Maybe this can be delta (gap) funding.

As per the scheme, consumers should pay notified usage charges, but often these don’t cover the marginal costs of supply. This hints at the long-term structural issue – where service quality is the next concern after getting the wire in place. Claims of power surplus notwithstanding, there are locations and times of day where people face outages even today. This scheme needs to be supplemented with formal mandates for “meaningful electrification”

While in some areas, the motto of “aim for the stars and you’ll at least reach the moon,” can be distortionary (especially in generation targets), in this case the only area that needs coordination and planning is the use of micro-grids for access. Subsidizing power consumption for the poor households is relatively easy (they consume very little) – connecting them is a far harder task, which Saubhagya aims to help. Will it solve the problem? Maybe not 100% and it will take longer, but still worthwhile.