Union Budget 2019: The successful drive to provide electricity access to all villages and households, setting aside the debate on its completeness, is a major game changer for the power sector and the economy. In the last decade, over one lakh villages were electrified (representing one-sixth of all villages) and in the last year alone, over 220 lakh households (representing 8.5% of all households) were connected. This vastly expanded the consumer base of the power utilities; a transition they managed well. Even as the peak demand went up by 60% (2009-19), peak shortage shrunk from 12% (2009) to 0.8% now.
A remaining concern is whether utilities supplying power to these marginal consumers can afford to do so. The under-recovery i.e., gap between unit revenue and unit cost of energy supplied is widening again, foreboding a future bailout. Discoms must open up to decentralized energy resources to reduce some of the transmission losses and invest in new technologies to improve operational efficiency. They will look to the government to reinvigorate these programs and support it with budgetary allocation.
[Notes to graph: 1. The dip in 2004-05 reflects change in definition of village electrification
2. The total number of villages used for the entire graph is as per the 2011 census]
Source: CEA reports
Households are switching from other fuels to electricity, at least at the prevailing tariffs. Electricity use by Indian households, in the last decade, jumped from 3.3% to 5.3% of global residential consumption. This is more so in the non-urban areas where adoption of electric appliances adds to this trend (the National Sample Surveys show that 20% of rural household expenditure on energy in 2012 was on electricity, up from 4% in 1983). The government could promote energy efficient appliances, electric transport and rural enterprises in the budget to tap the economic benefit.
With the power lines drawn, the government must now focus on the greater goal of maintaining affordable power supply to the rural areas and tapping the power of electrification for its social and economic development.
By Kameswara Rao, Partner – Energy & Utilities, PwC India