At 28,000MW of additional demand, the extra power needs to be paid for by either the consumers or the government.
Though it is true the official definition of ‘electrification’ of a village is antiquated—just electricity being supplied to a pole in the village meets the criterion—there can be little doubt that achieving 100% electrification is a big one; on the flip side, the fact that it took 70 years tells you just how glacial India’s progress has been on certain key indices. And despite the government giving itself the bulk of the credit, all governments in the past have played a role since, by the time the BJP came to power, the proportion of villages that were not electrified was down to a few percentage points—though it may be true, as various party spokespersons have pointed out, the villages that had not been electrified were truly remote and were the most difficult to access. And now that this watered-down target has been achieved, power minister RK Singh has said that it will take till December 31, and all households within each village will have electricity—that is, India will genuinely have 100% electrification by the end of the year.
If that happens, three months ahead of the initial deadline under the Saubhagya scheme, this will be momentous. It is important, however, to appreciate the costs of the scheme go well beyond the cost of connecting the households to the grid; since a large share of the unconnected households are in poor and fiscally stressed states, it is not clear if the state governments can bear the costs. Estimates vary on the costs. If you take a minimum consumption of 100 units a month in the 3.6 crore households that are yet to be electrified and bake in a 20% or so transmission and distribution loss, that’s a total of 5,400 crore units of electricity that are needed. At even the 2015-16 cost of supply of `5.4 per unit—there is no official number after that—this translates to a cost of Rs 29,160 crore. That means either the consumers or the state governments have to bear this cost. If you assume, and that seems logical, that once there is 24×7 power, other households will also use more electricity—right now, they don’t get 24×7 supplies—the costs rise. For 11 crore rural households, even a 25 unit extra monthly consumption implies a cost of Rs 22,275 crore.
The central government has, separately, indicated that an additional capacity of 28,000 MW will be enough to take care of demand—this was said in the context of the fact that there is enough spare generating capacity to meet the demand. At even a 40% plant load factor (PLF), that translates to a `52,980 crore cost and `79,470 crore at a 60% PLF. These are all estimates, but the important point to keep in mind is that, while desirable, 24×7 electricity implies that state governments need to run a very tight ship. Signing PPAs with power plants for 28,000 MW of capacity will be a big relief to power plants and the banks for whom the plants are on the verge of becoming NPAs; and it will be much more if 24×7 electricity is supplied all over the country. But this also means that the old escape route of shutting off power supplies when the state electricity boards (SEBs) were cash-strapped is no longer an option—in case the SEBs don’t buy power, they will have to pay the suppliers a capacity charge for all the PPAs signed. Which means that SEBs, and electricity regulators, need to ensure tariffs are raised regularly; and, to keep this to a minimum, loss levels pared significantly. The power minister has done well to force this change, and needs to ensure the SEBs are up to the challenge.