Rural enterprises overlooked in Saubhagya's success story: Study

The study bares Saubhagya's overarching focus on household electrification, perhaps unintentionally prioritizing 'ghar' over 'dukan'

The Pradhan Mantri Sahaj Bijli Har Ghar Yojana or Saubhagya scheme has a flip side to it despite achieving near 100 per cent electrification of households. A sizeable chunk of commercial rural enterprises are still cut off from grid-connected power as the scheme’s thrust is eminently on rural households, a study says.

The study commissioned jointly by Smart Power India, a subsidiary of the Rockefeller Foundation, in collaboration with the Initiative for Sustainable Energy Policy at Johns Hopkins School of Advanced International Studies (USA) shows that only 65 per cent of the micro rural enterprises in the surveyed states of Bihar, Odisha, Rajasthan and Uttar Pradesh were serviced by grid-connected power.

While the study gives accolades to the government for the massive electrification drive, it bares Saubhagya’s overarching focus on household electrification, perhaps unintentionally prioritizing ‘ghar’ (home) over ‘dukan’ (enterprise).

Enterprises that have better access to reliable electricity rely less on diesel, can offer better services and stay open longer—increasing income for that entrepreneur, and creating prosperity within communities. They are, in effect, engines for growth within the rural economy, the report observes. So, why a multitude of rural enterprises still cannot access grid-connected power?

Jaideep Mukherji, chief executive officer at Smart Power India, explains: “The Saubhagya scheme explicitly aims to provide free electric connection to all households. Commercial rural enterprises are not a part of this mission. By providing free electricity connection to households, the government has removed the entry barriers to access an electric connection. However, for commercial rural enterprises, the upfront connection cost for the electric connections remains, and it is prohibitive for many, particularly those with lower electricity needs."

Unlike rural households that are connected for free, the enterprises need to fork out Rs 2,800 as the upfront cost for grid connection.

Mukherji said there was a strong case of prioritizing the micro-enterprise connections as they were potentially paying customers and were already paying for the fuel, like diesel.

The choice of electricity source for a rural enterprise varies with the type of commercial activity and the scale of operation. The use of the grid, as well as non-grid-electricity sources, is highest among enterprises engaged in services such as mobile repair, photo studios, and cybercafés. These enterprises largely stack several sources of electricity, driven by a higher need for reliable electricity access.

The woes of rural enterprises are strikingly pronounced in Bihar and Uttar Pradesh. One in two enterprises in these states uses non-grid electricity sources.

“In Bihar and UP (Uttar Pradesh), the rural enterprises use and pay for alternatives, including expensive options such as diesel. As a customer segment, they are not identified and served by electricity providers. In addition, the micro-enterprises’ existing investment in non-grid private generation equipment obviates the need for grid-electricity. Many rural enterprises continue to use diesel generators because they do not find grid-electricity reliable and adequate, especially during the evening hours because of outages”, says Mukherji.

Odisha is an outlier in the trend- 94 per cent of the rural enterprises use grid-connected power. Rajasthan, the other surveyed state, also has a stellar performance with 91 per cent of its village-based enterprises having access to grid electricity. Odisha has topped the ranking by fixing supply-side bottlenecks- ensuring quality and uninterrupted supply of power with minuscule outages, resulting in a higher number of satisfied commercial consumers.

Bihar and Uttar Pradesh have the antithesis of Odisha’s power supply scenario. Rural enterprises are not motivated to join the grid as frequent power outages and quality issues in power supplied stick out like a sore thumb. The initial grid connection cost is also prohibitive for the micro enterprises whose electricity consumption is limited.

Smart Power India feels this is an opportunity squandered by electricity distribution companies (discoms). As against domestic consumers, the non-farm rural enterprises offer a steady electricity demand with a promise for higher compliance with billing.

“In this phase of electrification, it is an opportunity lost, considering the discom is not capitalizing on potentially paying customers. Servicing rural areas with a larger quantum of energy, which goes beyond basic household lighting is crucial. With electricity available, there will be greater opportunities for rural micro-enterprises to build upon existing ventures and embark upon new enterprises that were hitherto unviable because of the dearth of electricity. In addition, it can make the market more attractive for the supplier. Now that the grid infrastructure has already reached the village, the discom should progressively bring the micro-enterprises into its fold”, Mukherji said.