Power Consumption in Rural India Plummeted by Nearly 70% During Lockdown: Interview
Cash-strapped rural India preferred spending on essential goods and services instead
The lockdown announced in India to curb the virus was one of the longest in the world, and as a result, millions of migrant workers were forced to make their way back home, having lost their livelihood in cities.
While the lockdown affected the entire country, the implications were more pronounced in India’s rural areas, which is already at a disadvantageous position compared with the rest of the country.
Power is designated as an essential service by the Ministry of Home Affairs, and power generators (including renewables) in the country have been ordered to maintain an uninterrupted supply of power across states. The power demand and supply situation, which is already weak in the rural areas, worsened during the lockdown. Power consumption plummeted as people were cash-strapped and prioritized other essentials like food over power.
Smart Power India, a subsidiary of The Rockefeller Foundation, conducted surveys to understand the impact of the lockdown on mini-grid consumers in rural areas of Bihar and Uttar Pradesh. The findings revealed a drastic change in consumer behavior during the lockdown. As the financial crisis hit rural families in the lockdown, Smart Power launched a Customer Voucher Scheme (CVS) to offer financial assistance to the mini-grid customers in the wake of the COVID-19 pandemic.
Mercom interviewed Jaideep Mukerji, CEO, Smart Power India, to get a nuanced understanding of the change in power demand and supply situation as seen in rural areas during this period and the underlying factors. SPI works in the space of rural electrification and collaborates with renewable mini-grid developers to ensure access to reliable electricity in rural India.
Would you say the impact of lockdown on the rural economy has been different from the rest of the country? If yes, please elaborate.
Yes, this is true to some extent, but the entire country has faced severe disruptions following the nationwide lockdown announced in March this year. However, the intensity of the impact and disruptions may vary depending on the size of economic activities in each state and the direct impact on the dependent population. Even today, close to 60-65% of India’s population resides in villages and relies on agriculture and allied activities for livelihood. Naturally, the impact of lockdown on this segment has been reportedly more severe. Agricultural supply-chain, for example, was disrupted, and the farm produce did not reach the markets on time. This has caused significant economic loss to the farmers across the country. Also, in the initial few weeks, there was an acute shortage of essential goods and services in rural areas majorly because of the restrictions imposed on the interstate and intra-state transport services and travel. This was further compounded by the large-scale reverse migration in the aftermath of the lockdown.
Therefore, to understand and assess the ground realities in mini-grid villages and the impact of the lockdown commissioned two surveys. The surveys, as anticipated, pointed to a significant drop in cash flow in the villages, which gave us a sense that rural economic activities have been hit badly. As a result, households started prioritizing their spending on essential items such as food, shelter, and safety over electricity. This, in turn, led to a fall in electricity consumption almost by 70 percent.
In short, lockdown may have impacted the country in varying degrees, but the economic damage caused to rural India is more pronounced, and the pace of recovery too will be sluggish.
Can you summarize the findings from the survey conducted by earlier this year to assess power demand in rural areas?
Smart Power India had conducted two surveys to analyze the impact of lockdown on mini-grid consumers. The surveys were done along with five Energy Service Companies (ESCOs) in the villages of eastern Uttar Pradesh and Bihar. Due to financial stress, we observed that electricity consumption dropped by almost 70% as people started spending on essential goods and services. While commercial electricity consumption saw a drastic fall, household demand went up as people largely remained indoors.
Due to the lockdown, there was also a delay in addressing mini-grid customers’ complaints. Earlier, when we received a complaint, the issue would be resolved within two to three hours, but the time has now increased to over a day.
Consumer Survey 1.0 was conducted during the first phase of the lockdown and analyzed impact until April 15. The second survey was done to analyze the effect of subsequent lockdowns on mini-grid customers until May 20.
Key findings from the survey:
- Lockdown disrupted the quality and reliability of power supply across regions
- The surveys revealed that in the absence of a steady flow of income, rural households were mostly relying on government support. Welfare initiatives such as PM Garib Kaylan Yojana, Jan Dhan Yojana, and old-age pension funds help the mini-grid villages during the COVID-19-induced lockdown. The provision of free ration and cooking gas will play a crucial role in easing the economic burden on rural households in the short term. Grid-connected electricity supply witnessed a major drop due to the lockdown restrictions
- Grid supply in UP improved from 12 hours/day in the first phase to 15 hours/day in the subsequent phases of lockdown.
- On the other hand, in Bihar, the grid supply reduced from 20 hours/day to 15.5 hours/day from the first phase of lockdown to subsequent phases, respectively.
- In the absence of grid-connected electricity supply, mini-grids continued to drive rural India’s need for electricity supply and fared better. Mini-grid services improved in the later phases of lockdown but were still affected in areas under containment zones.
How did the lockdown impact the performance of mini-grids in villages?
As lockdown affected the grid-connected electricity supply, mini-grids provided reliable power. Even though mini-grid services remained disrupted in areas under containment, consumer satisfaction continued to be high. Despite the services, Mini-Grid Operators (MGO) suffered significant losses in revenue collection as many customers could not pay their electricity bills on time. The revenue collection in April was only 25% of the MGOs usual monthly average. We were fully aware that a lack of employment and a subsequent shortfall in income will definitely affect the customers’ ability to pay the electricity bills. As a result, all ESCOs deferred their bill collection during the lockdown period and communicated with the consumers through their registered mobile numbers.
Can you explain the rationale behind the introduction of the Customer Voucher Scheme for rural power consumers?
We launched the Customer Voucher Scheme (CVS) to offer financial assistance to the mini-grid customers in the wake of the COVID-19 pandemic. The scheme will have a significant positive impact on over 125,000 lives in 200 mini-grid villages. The mini-grid customers will be able to redeem the vouchers against their monthly electricity bill issued by MGO for three months.
The vouchers are tied to the customers’ electricity bill payment obligation to mini-grid operators. When we conducted the surveys, we realized that mini-grid villages were under immense financial stress as cash balances have been depleted due to the lockdown. This led Mini-Grid Operators to find the most stressed customers either default on their payment or request for disconnection, or trade down on their service packs. The Customer Voucher scheme was initiated to work at two levels: reducing the burden on customers to pay off their electricity bills and help MGOs retain the mini-grid customers during the lockdown. The scheme also aimed to ensure continued on-time payment behavior once cash flow improves.
The mini-grid customers can redeem the vouchers against their monthly electricity bill issued by MGOs. We have provided all information regarding the CVS to customers in advance via tele-calling. The scheme is working in close connection with MGOs. MGOs upload monthly customer billing, mobile number data on the SPI server, and the SPI server send voucher details to customers through text SMS. Customers using even basic mobile phones get a unique voucher ID. The SPI further reconciles voucher details submitted electronically by MGO field agents and reimburse the amount to MGOs. The voucher amount varies for each customer segment based on their monthly electricity billing.
Tell us about the role solar has played in rural electrification?
India achieved 100% rural electrification by and large through grid-connected electricity supply as the adoption rate was higher among rural households. Thus, the electric grid emerged as the primary source of electricity and lighting for many. But in areas where grid services could not reach, renewable sources of energy gained precedence. Non-grid sources such as solar home systems, rechargeable batteries, mini-grids, and diesel generators now form an important part of the rural electricity mix. Solar energy has helped to power the rural communities in the form of solar freezers that increase the shelf life of dairy products, to solar-powered computer labs in schools, to mini-grids that power entire communities. These innovations demonstrate the immense potential of solar energy in rural electrification. But as of February 2019, only sixteen percent of households and 40% of enterprises were using non-grid sources. If employed at a larger scale, solar energy can further help provide electrification to the last mile. Solar has played a significant role in providing reliable, accessible, and affordable power to rural households.
What would you say about the power demand-supply gap seen in villages since the lockdown?
Thirty years ago, only 20% of all households and a mere 15% in rural areas were connected to the grid. In the past decade, India has witnessed a massive transformation in electrification and declared 100% electrification across the country in 2018.
I think we need to be considerate of the fact that any situation that disrupts the cash flow in villages, the demand for electricity is bound to deteriorate. Since 100% of electrification is a very recent phenomenon in India’s villages, people tend to prioritize food and shelter over electricity when there is a cash crunch. Also, we have seen in the lockdown how, despite achieving almost 100% village electrification, rural customers still lack quality and reliable electricity access.
On the other hand, the lack of reliable electricity during the lockdown not only posed a problem at the household level but also impacted the various micro-level rural enterprises and agricultural activities. Non-availability of electricity in business/productive hours significantly hindered economic activities.
At such a time when there is a huge gap between demand and supply, grid and mini-grid operators should work together to provide power to customers. Offering some schemes or reducing billing costs can further help narrow the demand and supply gap.
What recommendations would you make to the government to further improve access to electricity in rural areas?
The government should introduce the decentralized distributed generation. It will bring in innovation to remote rural areas and help in providing affordable and reliable electricity to all customers through off-grid and grid integration models.
The government should also start promoting smart grids and smart metering, which will bring in investments in technology & innovation that will contribute to providing affordable and reliable electricity to all customers. Smart grids and metering ecosystems will also introduce transparency through real-time monitoring of electricity supply, thus enhancing customer service.
Also, currently, different models are being followed for the appointment of distribution franchisees across states. This has led to mixed outcomes of the success and failures of the franchisees. Thus, building upon past learnings, a robust framework may be formulated, comprising a standard set of models and bidding documents for distribution franchisees. The performance monitoring parameters of distribution franchisees should also be clearly laid out in the guidelines to enhance electricity supply and customer service.
Tell us a little about Smart Power India’s activities to promote rural electrification?
Smart Power India, a subsidiary of The Rockefeller Foundation, was established in 2015. Ever since our inception, we have been extending power to those without sufficient access, with the goal of ending energy poverty and transforming the livelihoods of the underserved. We are working to build and nurture ecosystems that promote sustainable and scalable models for delivering electricity access. We aim to spur economic development in villages through access to reliable electricity.
Over the past four years, we have worked with a wide range of stakeholders to develop the ecosystem. We have done this through the distributed renewable energy mini-grid approach on the one hand and working closely with the government in improving the quality and reliability parameters of on-grid electricity. We have worked closely with a wide range of stakeholders critical to developing the ecosystem needed to build, catalyze, create, and scale-up the distributed renewable energy mini-grid market. We have supported mini-grids by:
- Providing electricity to 220 villages in India across the states of Uttar Pradesh, Bihar, and Jharkhand, impacting over 93,000 people
- Serving over 185 electricity-based micro-enterprises which have been directly incubated by SPI across these 220 villages
We have also supported the mini-grid sector’s policy engagement to align incentives between government, investors, and ESCOs. SPI is now working towards improving the quality of on-grid electricity supply and services in rural areas in collaboration with the state governments and DISCOMs.
The power sector, along with the other sectors, has been hit hard by the coronavirus pandemic and the subsequent lockdown. Find out all about the pandemic’s impact on the renewable sector on Mercom’s live updates page by clicking here.
Ankita is an editor at MercomIndia.com where she writes and edits clean energy news stories and features. With years of experience in the news business, Ankita has a nose for news and an eye for detail. Prior to Mercom, Ankita was associated with The Times of India as a copy editor for the organization’s digital news desk. She holds a Bachelor’s degree in Psychology from Delhi University and a Postgraduate Diploma in journalism. More articles from Ankita Rajeshwari.