Recently, the central government launched the Pradhan Mantri Sahaj Bijli Har Ghar Yojana (or Saubhagya).[i],[ii] The scheme seeks to ensure universal household electrification (in both rural and urban areas) by providing last mile connectivity. The scheme is expected to cover three crore households. Note that currently about four crore households are un-electrified. A rural electrification scheme has also been under implementation since 2005. In light of this, we discuss the current situation of, and key issues related to rural electrification in the country.
Regulatory and policy framework
Under the Electricity Act, 2003, the central and state governments have the joint responsibility of providing electricity to rural areas. The 2003 Act also mandates that the central government should, in consultation with the state governments, provide for a national policy on (i) stand-alone power systems for rural areas (systems that are not connected to the electricity grid), and (ii) electrification and local distribution in rural areas. Consequently, the Rural Electrification Policy was notified in August 2006.[iii]
The Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), launched in 2005, was the first scheme on rural electrification. In December 2014, Ministry of Power launched the Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY), which subsumed the RGGVY.[iv] Components of DDUGJY include: (i) separation of agricultural and non-agricultural electricity feeders to improve supply for consumers in rural areas, (ii) improving sub-transmission and distribution infrastructure in rural areas, and (iii) rural electrification by carrying forward targets specified under the RGGVY.
The total financial outlay for DDUGJY over the implementation period (until 2021-22) is Rs 82,300 crore which includes budgetary support of Rs 68,900 crore. The central government provides 60% of the project cost as grant, the state power distribution companies (discoms) raise 10% of the funds, and 30% is borrowed from financial institutions and banks.
Status of rural electrification
As of August 2017, about 1% of the villages in India remain un-electrified (3,146 villages). However, with regard to households, around 23% (4.1 crore households) are yet to be electrified. Table 1 at the end of this post shows the status of rural electrification across all states.
Issues with rural electrification
Definition of an electrified village
An electrified village is defined as one that has the following: (i) provision of basic infrastructure such as distribution transformers and lines in the inhabited locality, (ii) provision of electricity in public places like schools, panchayat office, health centers, dispensaries, and community centers, and (iii) at least 10% of the total number of households in the village are electrified.[iv]
Therefore, a village is considered to be electrified if 10% of the total number of households in the village have been electrified. This is apart from the basic infrastructure and electrification of certain public centers in the village. The Standing Committee on Energy (2013) had observed that according to this definition, a village would be called electrified even if up to 90% of households in it do not have an electricity connection.[v] It also noted that the infrastructure being provided under the scheme is highly inadequate, unreliable and unsustainable. The Committee recommended that the actual electrification requirement of villages must be assessed, and it should be ensured that the state discoms provide electricity to the remaining households in the village.
Supply of electricity
The Standing Committee had also noted that while the rural electrification scheme looks at creating infrastructure, the actual supply of electricity to households rests with the state discoms.[v] These discoms are already facing huge financial losses and hence are unable to supply electricity to the villages. Discoms continue to supply subsidised power to agricultural and residential consumers, resulting in revenue losses. Further, the average technical and commercial losses (theft and pilferage of electricity) (AT&C losses) are at around 25%. While the Ujjwal Discom Assurance Yojana (UDAY) has eased off some of the financial losses of the discoms, it remains to be seen whether discoms are able to reduce the cost-tariff gap and AT&C losses in the future.
It has been recommended that generation capacity should be augmented so that states can meet the additional demand under the rural electrification schemes. Further, the assistance to financially weaker states should be increased so that they can better implement the scheme.[v]
Electricity to below poverty line (BPL) households
Under the rural electrification scheme, the cost for providing free electricity connection per BPL household is Rs 3,000. It has been observed that this cost per household may be inadequate.[v] Due to the low cost, the quantity and the quality of work has been getting compromised leading to poor implementation of the scheme. It has been recommended that the Ministry should revisit the cost provided under the scheme.[v]
The new electrification scheme: Pradhan Mantri Sahaj Bijli Har Ghar Yojana (or Saubhagya)
The new scheme, Saubhagya, seeks to ensure universal household electrification, that is, in both rural and urban areas. Under Saubhagya, beneficiaries will be identified using the Socio Economic and Caste Census (SECC) 2011 data. The identified poor households will get free electricity connections. Other households not covered under the SECC, will be provided electricity connections at a cost of Rs 500. This amount will be collected by the electricity distribution companies in 10 instalments.
The total outlay of the scheme will be Rs 16,320 crore, of which the central government will provide Rs 12,320 crore. The outlay for the rural households will be Rs 14,025 crore, of which the centre will provide Rs 10,588 crore. For urban households the outlay will be Rs 2,295 crore of which the centre will provide Rs. 1,733 crore.
The state discoms will execute the electrification works through contractors or other suitable agencies. Information technology (mobile apps, web portals) will be used to organise camps in villages to identify beneficiaries. In order to accelerate the process, applications for electricity connections will be completed on the spot.
So far the focus of electrification schemes has been on rural areas, where typically last mile connectivity has been difficult to provide. Saubhagya extends the ambit of electrification projects to urban areas as well. While DDUGJY has focused on the village as the principal unit to measure electrification, the new scheme shifts the targets to household electrification. While the target for ensuring electricity connection in each household will be a significant step towards ensuring 24×7 power, the question of continuous and quality supply to these households will still rest on the ability of the discoms to provide electricity. Further, while the scheme provides for free connections, the ability of these households to pay for the electricity they consume may be a concern.
Table 1: Status of rural electrification across states (as of August 2017)
[i] “PM launches Pradhan Mantri Sahaj Bijli Har Ghar Yojana “Saubhagya””, Press Information Bureau, Ministry of Power, September 25, 2017.
[ii] “FAQs on Pradhan Mantri Sahaj Bijli Har Ghar Yojana “Saubhagya””, Press Information Bureau, Ministry of Power, September 27, 2017.
[iii]. Rural Electrification Policy, Ministry of Power, August 23, 2006, http://powermin.nic.in/sites/default/files/uploads/RE%20Policy_1.pdf.
[iv]. “Office memorandum: Deendayal Upadhyaya Gram Jyoti Yojana”, Ministry of Power, December 3, 2014, http://powermin.nic.in/rural_electrification/pdf/Deendayal_Upadhyaya_Gram_Jyoti_Yojana.pdf.
[v]. “41st Report: Implementation of Rajiv Gandhi Grameen Vidyutikaran Yojana”, Standing Committee on Energy, December 13, 2013, http://164.100.47.134/lsscommittee/Energy/15_Energy_41.pdf.
Recently, there have been instances of certain collective investment schemes (CISs) attempting to circumvent regulatory oversight. In addition, some market participants have not complied with Securities and Exchange Board of India's (SEBI) orders of payment of penalty and refund to investors. In August, the Securities Laws (Amendment) Bill, 2013 was introduced in the Lok Sabha to amend the Securities and Exchange Board of India Act, 1992 (the SEBI Act, 1992), the Securities Contract (Regulation) Act, 1956 (SCRA, 1956) and the Depositories Act, 1996. The Bill replaced the Securities Laws (Amendments) Ordinance, 2013. The Bill makes the following key amendments: a) Definition of Collective Investment Schemes The SEBI Act, 1992 defines CISs as schemes in which the funds of investors are pooled, yield profits or income and are managed on behalf of investors. It also exempts certain types of investments which are regulated by other authorities. The Bill introduces a proviso to the definition of CIS. This proviso deems any scheme or arrangement to be a CIS if it meets all three of the following conditions: (a) funds are pooled, (b) it is not registered with SEBI, or it is not exempted by SEBI Act, 1992, and (c) it has a corpus of Rs 100 crore or more. These provisions could potentially lead to some schemes not conventionally defined as CIS to fall under the definition. For instance, partnership firms operating in the investment business or real estate developers accepting customer advances could be termed as CISs. SEBI has been given the power to specify conditions under which any scheme or arrangement can be defined as a CIS. This raises the question of whether this is excessive delegation of legislative powers - usually the parent act defines the entities to be regulated and the details are entrusted to the regulator. b) Disgorgement (repayment) of unfair gains/ averted losses SEBI has in the past issued orders directing market participants to refund i) profits made or ii) losses averted, through unfair actions. The Bill deems SEBI to have always had the power to direct a market participant to disgorge unfair gains made/losses averted, without approaching a court. This power to order disgorgement without approaching a court is in contrast with the provisions of the recently passed Companies Bill, 2011 and the draft Indian Financial Code (IFC) which require an order from a court/tribunal for disgorgement of unfair gains. Further, the Bill specifies that the disgorged amount shall be credited to the Investor Education and Protection Fund (IEPF), and shall be used in accordance with SEBI regulations. The Bill does not explicitly provide the first right on the disgorged funds to those who suffered wrongful losses due to the unfair actions, unlike the draft IFC. c) Investigation and prosecution The Bill empowers the SEBI chairman to authorise search and seizure operations on a suspect’s premises. This does away with the current requirement of permission from a Judicial Magistrate. This provision removes the usual safeguards regarding search and seizure as seen in the Code of Criminal Procedure, 1973, the recently passed Companies Bill, 2011 and the draft Indian Financial Code. The Bill also empowers an authorised SEBI officer to, without approaching a court, attach a person’s bank accounts and property and even arrest and detain the person in prison for non-compliance of a disgorgement order or penalty order. Most regulators and authorities, with the exception of the Department of Income Tax, do not have powers to such an extent. d) Other Provisions of the Bill The Bill retrospectively validates consent guidelines issued by SEBI in 2007 under which SEBI can settle non-criminal cases through consent orders, i.e., parties can make out-of-court settlements through payment of fine/compensation. The United States Securities and Exchange Commission settles over 90% of non-criminal cases by consent orders. The Bill retrospectively validates the exchange of information between SEBI and foreign securities regulators through MoUs. The Bill sets up special courts to try cases relating to offences under the SEBI Act, 1992. For a PRS summary of the Bill, here.
