138 India Infrastructure Report 2007
6 ELECTRIFICATION AND BIO-ENERGY
OPTIONS IN RURAL INDIA
PART I RURAL ELECTRIFICATION
Prem K. Kalra, Rajiv Shekhar, and Vinod K. Shrivastava
INTRODUCTION
T
he genesis of rural electrification lies in India’s need
for food security. India learnt through the bitter
experience of the drought of the late 1960s that it
must be self-sufficient in food to enjoy political freedom in
the international arena. Water was a must for the rain-fed
agriculture sector but canal based irrigation systems could not
be developed in the short-term. The only immediate solution
was to have ground water-based irrigation using electrical
pumps. For that, village electrification meant grid extension
to farms and not to village habitations. Over the past forty
years as economic growth has accelerated from a rate of 3 per
cent to 7 per cent, the objective of village electrification has
changed from energizing water pumps to providing electricity
to village households living below the poverty line. Autarkic
industrial development, Green Revolution, and India’s closed
economy model of development in the 1970s and the 1980s
required large supplies of electricity which was provided by
the state. As demand for electricity far exceeded the supply
and price of electricity was capped, there were leakages,
commercial mismanagement, and rent seeking. The Indian
economy was forced to open up in 1991 and the creaking
electricity sector was then left to fend for itself.
The development and planning issues in rural electrification
and rural energy services have direct linkages to the process
and progress in rural development. Success in these areas can
be achieved by boldly confronting the difficulties that have
incapacitated the power sector for decades and by adopting a
multi-pronged approach to revitalize energy services in India.
Future efforts must implement best practices and address
setbacks in all of the following areas: distribution, power
generation, tariffs, and subsidies. Here, we review (i) role of
electricity in rural development, (ii) The Rajiv Gandhi Grameen
Vidyutikaran Yojana (RGGVY) in the light of the Electricity
Act 2003 (EA, 2003) and 73rd CAA, (iii) issues related to
electricity supply and distribution models for rural areas, (iv)
rural electrification and panchayats, (v) issues in distributed
generation and connectivity to grid (vi) funding and tariff of
rural electricity, and (vii) way forward to provide sustainable
electricity and energy services to rural population for improving
their quality of life.
ROLE OF ELECTRICITY IN RURAL DEVELOPMENT
It would not be out of place to re-emphasize that the scaled-
up objective of rural electrification at the household level is
the cornerstone of India’s economic growth as it enables basic
minimum facilities of lighting and communication. Viable
and reliable electricity services result in increased productivity
in agriculture and labour, improvement in the delivery of
health and education, access to communications (radio,
telephone, television, mobile telephone), improved lighting
after sunset, the use of time and energy-saving mills, motors,
 Electrification and Bio-energy Options in Rural India 139

and pumps, and increased public safety through outdoor 40

Share in total gross income (%)

lighting. Thus, providing electricity to village households is a 35
30
means to help meet the aspirations of the rural population. 25
Electrification rates given in official statistics do not reflect 20
changed priorities but household electrification at the national 15
10
level is still below 50 per cent (Figure 6.1.1 and Table A6.1.6).1 5
The per capita GDP and electrification rates of all major states 0
show indisputable positive correlation between household Marginal Small Medium Large Overall
electrification and rise in per capita SGDP (Figure 6.1.2). Electricity Tariff Pump Maintenance Motor Burnout
After all-weather road connectivity, a primary demand from Purchase of Water Fixed cost of pump
rural folks is electricity as it enables access to potable drinking
water, home entertainment, and freedom from drudgery; in Fig. 6.1.3 Irrigation Costs as Perentage of Farm Income—
short, a means to improve quality of life. Haryana Electricity Pumps
Irrigation, power supply, and rural poverty are strongly
interlinked in the Indian economy. Irrigated areas in India Source: The World Bank (2003).

contribute two-thirds of food grains output and provide

Cumulative number of Electrified Villages

481124
livelihood and income to more than 650 million people in
474982
India. Of the 57 million ha net of irrigated area, as much as
34 million ha is from private investments in tubewells, pump
sets, and water distribution channels. The poor frequently
273906
pay a high fraction of their gross farm income for irrigation
(Figure 6.1.3) (Modi, 2005). Irrigation pumping for
106931 agriculture is the dominant form of irrigation but it cannot
1500 3061 21750 be named as the principal cause of poor cost recovery and the
ailing financial health of the State Electricity Boards. Irrigation
1947 1951 1961 1971 1981 1991 2004
reduces poverty by increasing employment, incomes, and real
wages and reduces food prices for poor, both, urban and rural.
Fig. 6.1.1 Village Electrification in India
In un-irrigated districts of India (less than 10 per cent area
irrigated), 69 per cent of the people are poor, while in irrigated
Source: REC (2005).
districts (more than 50 per cent area irrigated), poverty level
drops to 26 per cent. Agricultural performance is fundamental
to India’s economic and social development and will critically
18.0 determine the success of efforts in poverty reduction. Hence,
MH PB a sudden and substantial shift away from current pricing of
Electrified villages (%)

16.0 AR
14.0 TN
GJ
12.0
electricity for agriculture could jeopardize agricultural activity
KTK HP
10.0
WB
AP KRL as the primary source of livelihood in rural areas.
8.0
6.0
RJ
MP The challenges for rural electrification are to:
4.0 OR UP 1. Expand access of electricity to un-electrified villages.
2.0 BH
0.0
2. Increase penetration rates in electrified villages.
0 20 40 60 80 100 3. Strengthen technical and operational performance of the
distribution network in villages.
SDP per capital (Rs ’000)
4. Provide a sustainable model for rural electrification.
Fig. 6.1.2 Domestic Product and Percentage of Electrified Household
CURRENT STATUS
Source: Census (2001).
The number of villages electrified as on March 31, 2001 was
1
508,515 (of the total number of 587,258 villages). The
The pace of village electrification has been slowing down with
only 18,500 villages electrified during the 9th Plan (1997–2002)
number of villages that remain to be electrified is thus 78,240.
compared with 120,000 during the 6th Plan. However, the same period The number of remote and inaccessible villages is estimated
saw a rapid increase in pump set energization with states declaring ‘zero’ at 18,000. There are a number of hamlets that are one to three
tariff for power supply to agriculture. km away from the main villages, with populations ranging
140 India Infrastructure Report 2007
between 50 and 200, which are often not officially listed as
villages and are not electrified. In terms of households, only
44 per cent of all rural Indian households are electrified and
only 60.2 million households out of a total of 138 million
households in the country use electricity as the primary source
of lighting (Census, 2001).
The heavy losses of the State Electricity Boards (SEBs)
over the years have had direct implications for the poor
implementation of the rural electrification programme. Utilities
have shown no interest in electrifying the areas with low per
capita income. Utilization of the funds has been inconsistent
across states. For example, achievement against allocation under
Kutir Jyoti varied from 22 per cent in Uttar Pradesh to more
than 100 per cent of allocation in Andhra Pradesh and Karnataka.
Low users’ charges with high cost of delivery and high T&D
losses, low collection efficiency, and low revenue keep the
power utilities in a vicious cycle of underperformance. Low
collection efficiency results in high AT&C losses leading to
low revenues, poor financial health, and consequently, lower
technical and operational efficiency, which further results in
low collection efficiency and so on.
There is absolutely no reliability of supply in the rural areas.
The performance reports of Electricity Board/Utilities and PFC
results show that states which have high AT&C losses are also
the ones which have lower levels of household electrification.
For example, the state of Bihar with more than 70 per cent
AT&C losses has only 5 per cent households electrified. In
the state of Jharkhand the AT&C losses are 65 per cent, with
only 10 per cent rural households electrified. On the other
hand, Himachal Pradesh, with around 17–18 per cent AT&C
losses has more than 90 per cent of the households electrified.
Goa, Punjab, and Haryana also present similar results.
According to the earlier definition a village was ‘electrified’,
if electricity was being used within its revenue area for any
purpose whatsoever. Translated into reality, even a single
transmission pole located within its precincts would ‘electrify’
a village. Hence, the numbers on rural electrification routinely
churned out, were, well, simply ‘statistics’! This definition of
village electrification was reviewed in consultation with the
state governments and State Electricity Boards and the
following new definition was adopted:
1. The basic infrastructure, such as distribution transformer
and/or distribution lines, is made available in the inhabited
locality within the revenue boundary of the village, including
at least one hamlet/Dalit Basti, as applicable.
2. Any public place like schools, panchayat office, health
centres, dispensaries, community centres, etc. avail power
supply on demand.
3. The ratings of distribution transformer and LT lines to
be provided in the village are finalized as per the anticipated
number of connections decided in consultation with the
Panchayat/Zila Parishad/District Administration who also
issue the necessary certificate of village electrification on
completion of works.
4. At least 10 per cent households in an un-electrified village
have to be electrified for a village to be declared electrified.
Clearly, even the new definition is not comprehensive
because it does not:
1. Address issues of power quality and regularity of supply,
the bane of rural electrification.
2. Spell out the policy/time frame for electrifying the
remaining 90 per cent of the un-electrified households.
3. Specifically account for economic activity in rural areas.
The growing domestic and global concerns over the
increasing divide between rural and urban areas led the
Electricity Act 2003 to enshrine rural electrification in law for
the first time. Section 6 of the act mandates the hitherto implied
Universal Service Obligation by stating that the government
shall endeavour to supply electricity to all areas including villages
and hamlets. Section 5 further mandates the formulation of
national policy on rural electrification focusing, especially, on
management of local distribution networks through local
institutions. Subsequently, the GoI has released a draft paper
on National Rural Electrification Policy, giving further boost
to rural electrification. The EA2003 in Section 4 also frees
stand-alone generation and distribution networks from
licensing requirements.
The broad goals of the rural electrification programme
(REP) are accessibility, availability, reliability, quality, and
affordability. While the REP seeks to achieve 100 per cent
household electrification by 2012, primarily through grid
extension, stand-alone systems are also envisioned for areas
where grid extension may not be possible on account of
techno-economic factors. Pursuant to the REP all state
governments are required to formulate state level strategies.
Last year (2005–6), village electrification saw considerable
increases, as presented in Tables A6.1.3, A6.1.4, and A6.1.5.
The first report of the Standing Committee on Energy
of the Fourteenth Lok Sabha in 2004–5, identified rural
electrification as an essential infrastructure input for improving
production oriented activities and speeding up the pace of
development of the rural economy. Following that the Ministry
of Power proposed creation of a Rural Electricity Distribution
Backbone (REDB) and Village Electricity Infrastructure (VEI).
This also included distribution transformers in each village
where grid access was feasible, and a decentralized distributed
generation and supply for villages where grid connectivity or
NCES (non conventional energy sources) might not be possible
or cost effective.2 The Committee, while accepting the Ministry
of Power’s new proposal, had, however, highlighted that despite
2 A total of 25,000 villages out of the 100,000 villages identified for
electrification under the RGGVY would be electrified using renewable
energy sources.
 Electrification and Bio-energy Options in Rural India 141

the availability and sanctioning of funds, the actual utilization supplied must be paid for. The scheme proposes the management
of funds for rural electrification projects was low. The Rajiv of rural distribution through franchisees which could be
Gandhi Grameen Vidyutikaran Yojana is the response of the user associations, cooperatives, NGOs, or even individual
government to the concerns of the law makers. entrepreneurs. The state governments are also required to make
adequate provisions for revenue subsidy to the utility. Thus
RGGVY, for the first time, while providing capital subsidy
RAJIV GANDHI GRAMEEN VIDYUTIKARAN YOJANA for rural electrification projects, links subsidy provision to
The RGGVY, launched by the Ministry of Power for rural revenue sustainability, barring which the Rural Electrification
electrification builds on the Kutir Jyoti Programme launched Corporation (REC) could convert the said capital subsidy
in 1988–9 and the Rural Electricity Technology Mission into interest bearing loans (Modi, 2005).
initiated in 2002. The Kutir Jyoti Scheme, started in 1989,
connected nearly 6 million households in 15 years, or
Universal Service Obligations (USO)
approximately 400,000 households will per year. The current
goal of the RGGVY is challenging because approximately 6 In terms of targets for achieving the USO under the electricity
million households will have to be electrified every year for access goals over the next 5 years, the number of un-electrified
the next four years—over 15 times the rate of electrification villages in the country is estimated at 112,401.3 The ministry
achieved under Kutir Jyoti. The additional generation capacity estimates that the number of un-electrified villages is likely to
required over the next four years to attain this accelerated pace rise to 125,000 as per the new definition of village electrification.
of rural household electrification is about 14,000 MW. It is The Census of India 2001 reports household electrification
also worth noting that nearly half of this new capacity will be at 10 per cent in Bihar, 24 per cent in Jharkhand, 32 per cent
needed just in the three states of UP, Bihar, and West Bengal. in UP and 70 per cent in MP. Several states like Himachal
The additional capacity requirement for the RGGVY would Pradesh and Punjab show over 90 per cent household
be comparable to capacity additions since 2002. These electrification (Table 6.1.1). A two-pronged approach is
requirements are over and above the additional generation required to address, first, villages that are already electrified
required to feed the economic growth rate of 8 per cent p.a.
RGGVY has the following objectives: Table 6.1.1
1. 100 per cent electrification of all villages and habitations Status of Rural Electrification
in the country.
2. Electricity access to all households. Electrified Household State Per Capita
(%) Domestic Product
3. Free-of-cost electricity connection to BPL (Below Poverty
Line) households. Punjab 91.9 16.9
For achieving the said objectives, the RGGVY envisions Haryana 82.9 15.7
creating: Gujarat 80.4 15.0
1. Rural Electricity Distribution Backbone (REDB) with at Maharashtra 77.5 16.1
least one 33/11 KV (or 66/11 KV) substation in each block. Tamil Nadu 78.2 14.6
2. Village Electrification Infrastructure (VEI) with at least Kerala 70.2 12.1
one distribution transformer in each village/habitation. AP 67.3 11.3
3. Decentralized Distributed Generation (DDG) systems HP 94.8 12.6
where the grid is not cost effective or feasible. Karnataka 78.5 13.1
MP 70 8.2
Significant features of the RGGVY Rajasthan 54.7 9.2
Chhattisgarh 53.1
The RGGVY positions rural electricity as a necessary component West Bengal 37.5 10.7
for broad based economic and human development, looking
Orissa 26.9 6.5
beyond the prevalent rural electrification framework of
North-East 33.2
increasing agricultural production through irrigation. The
UP 31.9 6.6
programme, in addition to meeting the household electricity
needs, looks at 24-hour supply of quality grid power to rural Bihar 10.3 3.6
areas for spread of industrial activity, provision of modern Jharkhand 24.3
healthcare facilities, and the use of IT. Source: Census (2001).
The RGGVY recognizes the need for revenue sustainability
for rural electrification projects and boldly states that electricity 3 This is as of March, 2004 based on Census 1991.
142 India Infrastructure Report 2007
and need intensive household electrification, and second,
extending the grid to the remaining un-electrified villages.
Critical Evaluation of RGGVY
To attain the goals set by the GoI in an efficient manner,
well-planned central-level schemes are necessary for bringing
grid connections to all rural households. Geographic isolation
and lack of infrastructure leave rural households without access
to energy services. In order to bring these benefits to the rural
poor while maintaining a profitable electricity industry, policy
initiatives must ensure that grid expansion and distributed
generation are given equal importance. For example, under
the RGGVY scheme a single household grid connection
(effectively Rs 1500/HH or $30/HH) is barely adequate for
households that are not within 25 meters of a distribution
network. A careful analysis of the cost structure is needed
since the geographic distances assumed are not supported by
data. The costs of new metered hookup are lower than the
lowest costs of rural electrification found anywhere in the world
by in approximate factor of four. Low voltage distribution
wire and poles alone can cost $1 to $1.50/meter. While India
has one of the lowest costs of extending the grid, the rising
costs of materials need to be accounted for. Hence, a pitfall
of the scheme lies in under-funding in some areas, leading
to under-utilization of funds and under-achievement of
the targets.
RURAL ELECTRIFICATION MODELS
RGGVY plans to adopt a two-pronged approach for
implementing rural electrification. In India, the major thrust
of rural electrification will be on grid extension rather than on
distributed generation. Hence, issues related to grid connectivity
will be discussed first. However, given the demand-supply
gap, grid extension by itself may not fulfil the electrical energy
needs of the rural population. Hence, distributed generation
will, in all probability, be a reality as back-up/supplemental
power even in rural areas connected to the grid.
Grid Extension
The major concerns in grid extension are (i) selecting an
appropriate model for transmitting electricity and (ii)
minimizing costs of transmission infrastructure without
compromising on the reliability of supply.
Models for Electricity Transmission
CURRENT INDIAN CONFIGURATION
Rural electrification in India is essentially a three-phase system
either from the grid or from distributed generation units.
EUROPEAN CONFIGURATION
This is a medium-voltage (MV) distribution system
characterized by widespread use of a three-phase, three-wire
configuration where consumers are generally served by relatively
few transformers of a higher capacity. Single-phase distribution
relies on supplying loads with two rather than all three (phase)
conductors. Only recently has single-wire earth return (SWER)
distribution been widely used for supplying to domestic load
in remote rural areas (Box 6.1.1).
NORTH AMERICAN CONFIGURATION
This is a MV distribution system that is characterized by (i)
the widespread use of a three-phase, four-wire configuration,
with the fourth (neutral) wire solidly grounded at numerous
points along the line and (ii) the heavy use of smaller, single—
phase transformers to serve most consumers. Single-phase
distribution relies on supplying loads with the neutral conductor
and only one of the three-phase conductors. Single-phase
distribution is widely used for supplying rural areas.
VEE-PHASE DISTRIBUTION
This is also used as an alternative to the North American
distribution system configuration in which supply is
provided by the neutral, and only two of the three-phase
conductors, increasing line capacity when compared to
single-phase distribution and permitting low-cost access to
three-phase power.
Capital Costs of Electrification
The capital cost for rural electrification consists mainly of
material costs, which, in turn, consists of the cost of conductor,
pole and pole-top assembly accessories, and transformers. For
reducing material costs, it is necessary to ensure that the poles,
conductors and line hardware incorporated in the line in the
existing design are optimally used and that the lines are
efficiently designed and constructed.
POLES
Poles are often the costliest component required for grid
extension for rural electrification. So, reduction in poles would
lead to lower cost of grid extension. The spans should be
maximized to take advantage of the strength of the conductors
while ensuring a generally acceptable degree of safety. Pole
height should not exceed that which is necessary to meet the
established ground clearance requirements and safety factors.
CONDUCTORS
One of the important options for reducing the cost of grid
extension is to reduce the size of the conductor. Conductors
should be designed to handle realistic demands and growth
 Electrification and Bio-energy Options in Rural India 143

Box 6.1.1
Single Wire Earth Return4

Single wire earth return (SWER) or single wire ground return is a single-wire transmission line for supplying single-phase electrical
power to remote areas at low cost. It is principally used for rural electrification, but also finds use for larger isolated loads such as water
pumps, and light rail. SWER is a good choice for a distribution system when conventional return current wiring would cost more than
SWER’s isolation transformers and small power losses. SWER is considered to be equally safe, more reliable, less costly, but with
slightly lower efficiency than conventional lines.
The SWER line is a single conductor that may stretch for tens or even hundreds of kilometres, visiting a number of termination
points. At each termination point, such as a customer’s premises, current flows from the line, through the primary coil of a step-down
transformer, to earth through an earth-stake. From the earth-stake, the current eventually finds its way back to the main step-down
transformer at the head of the line, completing the circuit.
SWER violates common wisdom about electrical safety, because it lacks a traditional metallic return to a neutral shared by the
generator. SWER’s safety is instead assured because transformers isolate the ground from both the generator and user. However,
grounding is critical. Significant currents (of the order of 8 amperes) flow through the ground near the earth point, so, a good quality
earth connection is needed to prevent the risk of electric shock near this point.
SWER’s main advantage is its low cost. It is often used in sparsely populated areas where the cost of building an isolated distribution
line cannot be justified. Capital costs are roughly 50 per cent of an equivalent two-wire single-phase line. They can be 70 per cent less
than three-wire three-phase systems. Maintenance costs are roughly 50 per cent of an equivalent line.
SWER also reduces the largest cost of a distribution network, the number of poles. Conventional two wire or three wire distribution
lines have a higher power transfer capacity, but can require seven poles per kilometre, with spans of 100 m to 150 m. SWER’s high line
voltage and low current permits the use of low-cost galvanized steel wire. Steel’s greater strength permits spans of 400 m or more,
reducing the number of poles to two and a half per kilometre. Reinforced concrete poles have been traditionally used in SWER lines
because of their low cost, low maintenance, and resistance to water damage, termites, and fungus. Local labour can produce them in
most areas, thus lowering costs further.
SWER lines tend to be long, with high impedance, so the voltage drop along the line is often a problem, causing poor power
quality. Variations in demand cause variation in the delivered voltage. To combat this, some installations have automatic variable
transformers at the customer site to keep the received voltage within legal specifications. When used with distributed generation,
SWER is substantially more efficient than when it is operated as a single-ended system. For example, some rural installations can offset
line losses and charging currents with local PV, wind power, small hydro or other local generation. This can be an excellent value for
the electrical distributor, because it reduces the need for more lines.

in demand over the next several years. Care should be taken to
ensure that conductors are not oversized. However, reducing
the conductor size beyond the optimal limit has two very
pronounced adverse impacts:
1. Increase in recurring costs because of energy losses through
resistive heating.
the same voltage drop and power loss. Still, a reduction of 15
per cent results from the conversion to single-phase construction
because of the use of two conductors rather than three as well
as lesser hardware and lighter construction.
DISTRIBUTION TRANSFORMERS

2. High voltage drops can occur along the line, adversely
affecting the quality of power for consumers, especially
those towards the end of the line.
Both of these impacts also depend on the magnitude of
the current transmitted by the line. It is clear that increasing
the voltage decreases the current required to meet the same
power demand. Doubling the line voltage halves the current,
which then reduces the voltage drop to half and line power
loss to one quarter. By using higher voltage, the conductor
size can be reduced for the same voltage drop and line power
loss. This reduces the line cost per kilometre by approximately
20 per cent. When a three-phase line is replaced by a single-
phase, a larger and costlier conductor is required to maintain
4 http://en.wikipedia.org
The cost of distribution transformers is typically, a small part
of the construction cost of the distribution system in rural areas.
However, although the cost for constructing a line is generally
borne by the hundreds or thousands of consumers served by
the line, the capital cost of each transformer is usually borne
by the much smaller user group it serves. Depending upon
design, this cost can be significant. Moreover, transformers
consume power 24 hours a day, independent of the load
imposed on them. Hence, the recurring costs incurred in
operating transformers can be more significant, and in order
to consider the cost of transformers, their life cycle cost, that
is, the sum of both their initial capital cost and their operating
cost must be considered.
Although the conductor for a single-phase line of European
configuration would cost 67 per cent of the cost of the three-
144 India Infrastructure Report 2007

phase configuration, only 50 per cent of the original power
would be transmitted for the same conductor size, line voltage,
and voltage regulation. For the North American design, the
efficiency decreases even furthers. Even though the rationale
of using three-phase lines for increased transmission efficiency
is valid, this applies more to high voltage transmission lines
and medium voltage lines serving larger load centres.
Appropriate Model
A cost comparison of the different configurations is given in
Figure 6.1.4. The selection of configuration depends upon load,
140
120
Cost Relative to 3-phase line
location, and population density. While SWER may be the
cheapest option for supplying electricity to, households
buildings with relatively higher loads such as Panchayat offices,
community halls and so on, single-phase, two-wire systems
may be better suited. Because of technical reasons, the above-
mentioned configurations may not be able to support
agriculture or small scale industry loads, for which development
of cost effective, single-phase to three-phase electronic converters
may be a more suitable option. The implementation of such
technologies by electrical utility services in these areas may
lead to cost reduction while fulfilling increasing demands
for better quality services. Single-phase feeders have been
considered a less costly alternative as far as installation and
maintenance is concerned. In this case, the converter output
must operate as a four-wire three-phase system, in order to
supply single and three-phase loads (Box 6.1.2). For higher

100 loads, the evaluation of single- phase with three converters versus
three-phase system with four wire system may provide insights
80 depending upon various factors for cost savings.
60
For cost effective implementation of grid extension, studies
indicating technical and financial comparisons of various
40 configurations carried out by competent authorities with respect
to Indian villages should be made public. In addition, the studies
20
should also be carried out while indicating clearly the quality
0 and reliability indices. It is well understood by experts in the
3-phase 3-phase Phase- Phase- SWER area that to carry out an exhaustive comparison, load profiles
4 wire phase neutral
and mix for villages for ten to fifteen years must be computed.
Fig. 6.1.4 Cost Comparison of Transmission Systems Even though the choice of technology can reduce the cost
of grid extension, issues related to electricity supply have
Source: Malengret et al. (1995). mainly to do with commercial sustainability of the service.

Box 6.1.2
Single-phase versus Three-phase Power Supply

Single-phase power supply is adequate for most domestic appliances. However, there are farms, hospitals, workshops, and home industries
where three-phase motors and rectifiers would be beneficial. Additionally, improved quality of supply can also be obtained as the
converter can dynamically compensate for supply variations as well as impedance voltage drops due to load transients and harmonics
due to non-linear loads.
Three-phase equipment is generally more efficient, less expensive, and more readily available than the single-phase equivalent.
Single-phase motors have inferior characteristics such as low starting torque, very high starting currents and pulsating torques which
lead to mechanical failure and noise. In addition, three-phase supply enables the use of a simple star-delta starter which reduces the
starting currents for loads such as pumps and fans. Single to three-phase converters are easily available.
The use of two-wire, single-phase configuration of either European or North American variant provides several ways of reducing
the cost of grid extension for rural electrification. A smaller length of conductor is required (even though a somewhat larger conductor
or a higher voltage might be needed, depending on the projected demand). Fewer pole-top assemblies are required (furthermore a
cross-arm and braces are not required if the North American configuration is used). In case cross arms are used, wider spacing of the
pole-top insulators permits longer spans, and therefore, fewer poles are required between conductors before being limited by clearances
(unless provision must be made to later convert to a three-phase line; in this case using mid-span line spacers is another option
sometimes used). Fewer conductors would mean less transverse wind-loading and may allow the use of smaller diameter poles. The
stringing of lines, installation of pole-top hardware, and mounting of transformers are easier and do not require the use of any heavy
equipment, and consequently, reduce cost. SWER could be an acceptable model for supplying power in residential units.

Distributed Generation
Distributed generation is an integral part of the RGGVY to
achieve its target. Many states have started using distributed
generation for electrification of remote villages (Table A6.1.3).
Even before it was enshrined in the EA2003 Act, many remote
areas used micro-hydel plants to provide electricity in villages
(Figure 6.1.5). The Janaki Chatti Micro-Hydel Committee
is an outstanding example of a rural electricity co-operative.
However, due to shortage of parts and trained mechanics,
villagers used to go without lights for many days when there
was any breakdown of generator or turbine.
We have referred to distributed generation earlier without
outlining its status, characteristics, costs, and efficiency
parameters. Just to reiterate, distributed generation falls within
the framework of EA2003 and it is attractive for electrically
remote villages because it has many benefits:
1. The generator can be sited close to the end-user, thus
decreasing transmission and distribution costs and
electrical losses.
Fig. 6.1.5 Notice of the Janaki Chatti Micro-Hydel
Committee at the Panchayat
Electrification and Bio-energy Options in Rural India 145
2. Sites for small generators are easier to find.
3. Distributed generators offer reduced planning and
installation time.
4. Because the distributed generation units are distributed,
the ‘system’ may be more reliable. One unit can be
removed for maintenance or service with only a moderate
effect on the rest of the power distribution system. This
is especially important for new technologies where the
long-term reliability is not proven.
5. Newer distributed generation technologies offer an
environmentally clean and low noise source of power.
6. Newer distributed generators can run on multiple types
of fuels. This allows flexibility and reduction in cost of
the infrastructure required to get the fuel to the generator.
7. The preferred fuel source differs in various parts of the
world. However, the required quality of the selected fuel
may be more important with certain new distributed
generation technologies.
8. Newer distributed generators can run on fuels generated
from biogasification. Biomass (wood, hog waste, agricultural
by products) is a truly renewable source of fuel in most
developing countries, and especially, in agricultural regions.
9. Power is readily available and in has improved quality
and reliability as compared to power produced from
central generating stations.
10. Depending on the nature of fuel used, electricity prices
could be lower than power from central plants.
Status of Distributed Generation in India
The present installed capacity of distributed generation is
about 13,000MW (10,000MW diesel, 3000MW renewables).
The majority of this is accounted for by diesel engines that
are used for back-up power (in the event of grid failure) and
operate at very low load factors. The share of the energy
generation from distributed generation is marginal (about
2–3 per cent of the total generation). Apart from the diesel
engines, the distributed generation options that have been
promoted in India are modern renewables. Figure 6.1.6 shows
the installed capacities of different renewable distributed
generation technologies in India.
Characteristics of Distribution Generation
Distributed generations can be characterized on the basis of the
fuel, engine, capacity, and cost. Table 6.1.2 indicates technology
and achievable power per module. In India, depending upon
the size of the village, electricity requirements and population,
different options for distributed generation are available. In
Himachal, J.K., Punjab, and Haryana, where requirements
may be much higher compared to Orissa, M.P., and Bihar
the combined cycle or Internal Combustion Engine can be
146 India Infrastructure Report 2007

1600 considered. Possible applications, and the relative merits and

1400 demerits of different distributed generation technologies are
Installed Capacity (MW)

1200 listed in Table A6.1.1. All technologies listed in Table A6.1.1

1000 may not be (i) fully tested, or (ii) economical for rural
800 electrification at present. Cost and efficiency comparison of
600 distributed generation technologies are listed in Table A6.1.2
400 for various technologies.
200 While it is important in the context of distributed
0 generation to demonstrate availability of technology, it is also
Combination
Wind

Small Hydro

Bio Cogen

Gasifiers

Solar PV
Waste Energy
important to focus on operational issues related to (i) mini
grid of distributed generation and (ii) integrating distributed
Bio

generation technologies to the existing grid. There are technical

issues like islanding,5 short circuit levels, protection coordination,
Fig. 6.1.6 Installed Capacities of Renewals in India and switching in/out methodologies. The interconnection of
distributed generation with the distribution network requires
Source: Banerjee (2006). a closer look to minimize safety and reliability risks.

Table 6.1.2 Mini-Grids for Distributed Generation Systems

Technologies for distributed generation
A mini-grid refers to mini-power plants that supply 220 volts
Technology Typical available size per module 50 Hz three-phase AC electricity through low-tension
Combined cycle gas T. 35–400 MW distribution networks to households for domestic use,
Internal combustion engines 5kW–10 MW commercial activities (such as shops, cycle repair shops, flour
Combustion turbine 1–250 MW mills), and community requirements such as drinking water
Micro-Turbines 35 kW–1MW supply and street lighting. They use state-of-the-art batteries
and inverters to ensure long life and reliable field performance.
Renewable
Mini-grids can be classified in three different classes as
Small hydro 1–100 MW
follows:
Micro hydro 25 kW–1MW 1. Mini-grid with only renewable generation.
Wind turbine 200 W–3MW 2. Mini-grid with a mix of renewable and diesel generators/
Photovoltaic arrays 20 W–100 kW distributed generation.
Solar thermal, central receiver 1–10 MW 3. Mini-grid based on only distributed generation.
Solar thermal, Lutz system 10–80 MW The major challenges are financing models because in most
Biomass, e.g. based on of the cases the government provides the capital cost and
subsidy-sustainability becomes the major concern. Second,
Gasification 100 kW–20 MW
there are technical issues related to quality and stability. Among
Fuel cells (phosphoric acid) 200 kW–2MW
mini grids with only renewable generation, continuity of fuel
Battery storage 500 kW–5MW supply can be an issue. Since fuel supply varies seasonally, the
Source: Linden (1999), IEA, Duffie et al. (2006). stability of input can be achieved by the hybrid model where
electricity is partially generated with diesel generators. Also
the mini-grid uses inverters and battery systems which affect
used. As the size of the village gets smaller and smaller, battery
the quality of supply. Mini-grids solely based on the diesel sets
storage systems can be deployed. However, fuel transportation
have issues related with environment and cost of generation.
like gas or diesel can become a bottleneck. Punjab, Haryana,
The renewable cost is generally subsidized so the cost may be
and UP, where cows and cattle dung collection and its use is
lower. The insulation and protection coordination becomes
prevalent, biomass may be a possible solution. In states like
a major challenge because of varying sources of generation.
Bihar, Orissa, and Rajasthan where growing of plants and
Supervisory Control and Data Acquisition (SCADA) systems
seeds is easy because of fallow land, bio diesel may be made
for such mini-grids are available but benchmarking of design
available locally.
The cost of electricity can be reduced significantly if 5The concept of islanding is to prevent the potentially hazardous
distributed generations can run on locally available fuels. One situation where a distributed generation system may still be feeding
must keep in mind that local fuel may vary seasonally. Further, electricity into the grid during a power outage while a lineman may think
environmental impact and capital cost are also required to be that the line is dead. Islanding prevents this situation from occurring.
 Electrification and Bio-energy Options in Rural India 147

and performance has to be established. Maintenance, repair, generating a very clean output; furthermore, they are able
and replacement in mini-grid are causes for concern because to perform the function of harmonic filter.
of non-standardization of equipment used in the mini-grids. 7. Reverse power flow may cause over-voltage problems.
Selection of a proper power factor of the distributed
generation unit is one countermeasure. It is necessary to
Interconnection between Grid and Distributed conduct further studies on the effect on distribution line
Generation Systems voltage variation. Short-circuit current from a distributed
generation unit may cause malfunction of over-current relays
Grid interconnection may be important in certain areas where
and fuses. It may be necessary to develop a new fault detection
excess electricity from distributed generation6 can be fed back
system. One obstacle may be the need for ensuring safety of
to the grid. Some of the important technical issues in this
distributed generation units. The possibility of operating as
area are:
active filters reducing distribution system harmonics could
1. The clear specification of the required performance
make distributed generation units with electronic interface
characteristics of the distributed generation scheme once
more attractive from the point of view of quality service.
it is connected to the host electrical network. This would
typically include voltage regulation requirements, response
to network faults, and voltage fluctuations, protection and Criteria for Selection
control requirements, and so on.
For electrification, rural areas can be classified as (i) near-grid,
2. The clear specification of the performance type testing
(ii) grid-remote, and (iii) not far from a grid. Three options
that will be required prior to operational acceptance of
exist for rural electrification: grid connectivity, distributed
the distributed generation system by the host network.
generation, or a mix of both. Distributed generation means
3. The influence of grid operation on the performance of
modular electric generation or storage, located near the point
distributed generation is also an important issue. In India,
of use. These are primarily stand-alone systems for exclusive
the grid system itself exists in non-ideal conditions.
supply to a small community. On the face of it, the choice of
Therefore, the full responsibility of malfunctioning can
the electrification model seems obvious: grid connectivity for
be assigned to distributed generation. Hence, clear cut
near-grid and distributed generation for grid-remote rural areas.
specifications must be defined for the Grid Code of
Unfortunately, given the state of the power sector (shortages,
distributed generation. For example, weak grid and poor
poor quality and irregular supply, poor maintenance record)
protection coordination can damage distributed generation
and the costs and sustainability issues associated with distributed
due to travelling of disturbances on the grid.
generation, selecting a model for rural electrification is not
4. Maintenance and inspection of distributed generation
straightforward. So, how does one identify the appropriate
must be done on a regular basis, and therefore, repair and
option? Some important parameters could be:
replacement policy should be part of technical specifications.
5. Most of the new distributed generation technologies are
connected to the network via an electronic interface. The 1. Infrastructure Costs
class of rotating machines is represented by reciprocating
For grid connectivity, the infrastructure costs are directly
engines, gas turbines, and some wind turbines. There are
proportional to the distance of a rural area from an existing
several substantial differences in application and influence
grid. Hence, remoteness from a grid, along with the land
on the network of the two different systems. For example,
topography, becomes a key decision point. Another obvious
short circuit current for the induction and synchronous
factor affecting economies-of-scale operation and hence, costs,
generator can reach 500–1000 per cent of rated power
is the load that will be connected to the grid.
current, while converter connected generator at the same
site will produce only about 100–400 per cent current.
6. Distributed generators may introduce harmonics. In case 2. Operation and Maintenance (O&M)
of inverters7 there has been particular concern over the
O&M includes both the financial and service aspects. More
possible harmonic current contributions they may cause.
specifically it relates to (i) technical losses, (ii) speed of
Fortunately, these concerns are in part due to the older
addressing faults, and (iii) component replacement costs. The
inverter design. Most new inverter designs are capable of
ability to handle non-technical losses in the grid, given the
6Some
intense politics and the rigid caste/class structure in village
sugar mills feed their distributed generation power to the
environments, could be an important consideration. The cost
grid.
7Inverters convert low voltage DC, for example from a solar of fuel, especially for distributed generation technologies,
photovoltaic cell to high voltage AC which can run domestic appliances. becomes an important factor.
148 India Infrastructure Report 2007
3. Nature of Load
For agro-industry and irrigation, where the load requirement
is both high and continuous, grid electricity is preferable with
distributed generation providing back-up power. In an
agriculturally predominant rural sector, grid electricity can
also be diverted to households where the primary use is for
lighting and television. A word of caution is warranted here:
fixed tariffs could lead to large-scale use of electricity for
cooking. There may be a need to separate household and
industrial loads. Household loads are normally single-phase,
while industrial loads are three-phase.
4. Quality and Regularity of Supply
Inadequate and irregular grid power supply has a well-known
cascading effect, not only on the groundwater levels, but also
adverse effects on transformers and loads connected to the
grid. Moreover, the ‘poor’ quality of electricity means higher
costs, both in terms of ‘rugged’ equipment and more frequent
maintenance requirements.
5. Sustainability
The issues to be addressed here are: life cycle of the electrical
power source and scalability. The basic issue here is longevity
of the selected rural electrification model. Clearly, sustainability
is a function of fuel cost and supply, tariffs, environmental
degradation and so on. Scalability refers to the expansion of
the distribution network to accommodate increased load in
a rural area with minimum cost. Scalability is important in
the light of the RGGVY’s objectives of initially electrifying
only 10 per cent of the households.
ALTERNATIVES IN POWER DISTRIBUTION
IN RURAL INDIA
In Indian conditions, most of the market driven electricity
distribution models may not work in the rural sector. In fact,
the models envisaged in Electricity Act 2003 need to be adapted
to local realities to succeed due to heavy or full subsidy on
electricity in rural areas. Inculcating payment practices is an
important component because the rural consumers often do
not pay the bill and under political pressure, the government
waives it off at a later date. Given thinly dispersed rural
population with limited purchasing power, electricity
distribution models need to be different from urban models.
GoI, through the REC, is pushing for ‘franchisee model’. Apart,
from a franchisee model (Table A6.1.4), co-operative model
and ‘stand alone rural energy service company are two
models which can be useful in the Indian context and fall within
the EA2003.
Section 5 of the Electricity Act 2003 states—‘The Central
Government shall formulate a national policy, in consultation
with the State Governments & the State Commissions, for
rural electrification and bulk purchase of power and
management of local distribution in rural areas through
Panchayat Institutions, users’ associations, cooperative societies,
non-governmental organizations or franchisees’.
Franchisee Model
The major problem of rural consumers is meagre financial
resources (which limit their freedom to consume electricity),
low propensity to save, domestic debt burden, frequent waiver
of electricity dues by the government, unsatisfactory customer
service and intermittent power supply, causing distrust of the
utility. SEBs have started using the franchisee model to recover
costs from consumers in rural areas. A franchisee of an electricity
service company provides the services to consumer with respect
to meter reading, billing, and collection. One of the successful
examples is the Vidyut Pratinidhi of BESCOM (Box 6.1.3).
Rural Electric Cooperatives
The USP of rural electric cooperatives has been to include
the village residents as shareholders. The broad objectives of
the rural electric cooperatives are to:
1. extend the electrical network in their areas quickly and
economically;
2. provide proper service to the consumers taking into account
local conditions;
3. support the wider programme of development of the area
for increasing agricultural production and stimulating the
growth of rural industries; and
4. ensure local participation in the management of rural
distribution of electricity.
The success of the Bangladesh rural electrification
programme, which is in line with the US model, is a good
example. The major issue here is the functional autonomy of
the cooperatives, with the government providing financial and
technical assistance as well as laying down some the ground
rules for the operation of cooperatives. In Asia, two different
cooperative models are functioning successfully in the
Philippines and Bangladesh (NRECA 2002).
US Model
The salient features of the rural electrification model in USA
are listed below:
1. Farmers were required to form cooperatives. Representatives
to the cooperatives were locally elected.
2. Cooperatives had to follow certain rules such as
maintenance of reserve funds.
 Electrification and Bio-energy Options in Rural India 149

Box 6.1.3
Gram Vidyut Pratinidhi
B. R. Vasantha Kumar, Vasuki and Karthikeya Pisupati

Bangalore Electricity Supply Company Ltd. (BESCOM), a fully owned Company of Government of Karnataka, was incorporated on
1.06.2002. It covers an area of 41,092 sq km with a population of over 168 lakh and serving over 55 lakh consumers. The company
has three operating zones—Bangalore Metropolitan Area Zone, Bangalore Rural Area Zone, and Chitradurga Zone.
The drought conditions that prevailed in the state in 2001–2 and 2002–3 paved the way for deterioration in billing and collection
efficiency levels in rural areas. The drought situation also encouraged some of the unscrupulous rural consumers to resort to theft of power. As
a result of this situation the power purchase cost increased across the Company on the one hand (as more units had to be supplied to the
drought afflicted rural consumers for irrigating their lands) while, on the other, revenues of the company from rural areas started declining.

THE GVP MODEL FRAMEWORK

BESCOM in early 2003 decided to involve the local unemployed and qualified rural citizens as Gram Vidyut Prathinidhis (GVPs) in
some of the distribution activities of BESCOM within the Gram Panchayat area so as to carry out some of the commercial functions in
electricity distribution. The idea behind this innovation was that in the eyes of rural consumers, the credibility of a local person will be far
higher as compared to a utility employee. By involving such persons for the commercial activities, BESCOM felt that it could create a
‘Win-Win’ situation for both the parties i.e., utility as well as the rural consumers. BESCOM, on its part, would increase its commercial
efficiency and the consumers on their part could expect a better consumer service from BESCOM if a local person was involved.
Eligibility criteria to become a GVP are that the person should be a resident of the panchayat, he/she should have an ITI or
engineering diploma or secondary level education with knowledge of billing and collection. He should be able to provide 15 days
Revenue Billing as Bank Guarantee for the Period of Contract.
The responsibilities of a GVP include meter reading, billing, bill distribution and revenue collection, depositing the collections
with the utility, registering complaints and forwarding to Utility, facilitating attendance to the grievances of Low Tension consumers
Viz. Domestic, AEH, Commercial, Small and Medium Industries up to 40 H.P. (excluding water supply, streetlights) and providing
feed back to the utility on a regular basis.
A draft contract document outlining terms of contract was prepared setting out the rights and obligations of BESCOM i.e.
ensuring non-discriminatory behaviour towards the GVP in case of power supply shortage, responsibility for all O&M activities in the
gram panchayat area, adequately supporting the GVP with the necessary hardware required for metering. The legal status of a GVP is
not of an employee of BESCOM.

RESULTS
Based on the highly satisfactory performance of GVPs, improvement in the levels of customer satisfaction and revenue billing and
collection efficiencies in the pilot areas BESCOM decided to extend the pilot project to all the rural areas of BESCOM. As of now
over 948 GVPs have been appointed in 6 phases and are working across 6 districts of BESCOM (Table B6.1.5.1).

Table B6.1.5.1
Phasing in of GVPs in BESCOM
Particulars Phase-I Phase-II Phase-III Phase-IV Phase-V Phase-VI
Month Aug. 03 Oct. 03 Dec. 03 March 04 June 04 Jan. 05
No’s employed 21 183 202 288 133 121
Progressive Total 21 204 406 694 827 948

As of August 2005, out of 948 GVPs appointed, 935 are working in the rural areas of BESCOM. Services of some Gram Vidyuth
Prathinidhis were terminated as their performance was not satisfactory and some others resigned on their own due to personal reasons. As
on May 2006, 880 GVPs are working with average collection 125 per cent to 130 per cent to the baseline target. More than 70 per cent
of the GVPs have been collecting more than the base line target. Since the GVP is a local resident and is visible to the public, cases of
power theft have come down in the rural areas. Besides, as the GVP has to achieve the baseline target month on month he is motivated to
bring cases of theft to the notice of BESCOM as any non-achievement of baseline target by him for a consecutive period of three months
would be detrimental to him. As per the MOU signed by BESCOM with the GVP, non-achievement of baseline target for a continuous
period of 3 months entails termination of contract with the GVP. GVPs are acting as informal communication channels between the
Company and the Consumers. Sensitive decisions like increase in hours of load shedding, rostering, disconnection of agriculture installations
for non-payment, are informally communicated to the rural consumers through the GVPs besides administrative action.
Overall, the GVPs have facilitated improved electricity supply in villages, consumer satisfaction and financial performance of
BESCOM. Besides, it has provided direct employment to approximately 1000 educated youth in rural Bangalore region.

Note: Views expressed here are of the authors’ of the box.

150 India Infrastructure Report 2007
3. For infrastructure creation, loans were given at low interest
rates with 40-year repayment periods.
4. Parties were given loans on the area coverage basis and not
point-to-point basis. That is, every unit in a particular area
had to be electrified. Even here cooperatives were preferred.
5. Loans, with long payback periods, were given for wiring
and purchase of standardized equipment to increase
demand. This facilitated load promotion leading to
economies of scale.
6. The electricity authority fulfilled a supervisory role for
tasks such as inspection of infrastructure.
Philippines Model
In the Philippines the boards of cooperatives were elected
locally. However, the planning and operation was handled by
professional managers who were guided by the NEA (National
Electrification Authority). Here, loans were not made to the
co-ops, but NEA built the systems and then obligated the co-
ops to generate the revenue to pay back loans. The operating
budget of the NEA depended on the revenues generated by
the cooperatives.
Started in the mid-1970s and continued through the 1980s,
the cooperative structure started crumbling. A World Bank
project performance audit in 1985 found a growing degree
of corruption, weak oversight, and dramatically worsened
performance in billings and collection rates. Co-ops were used
by directors and managers as stepping stones to political power
and appointments were sought and granted for this purpose.
In some cases, co-ops’ funds were diverted to political or
personal ends, leaving them deep in debt. Much of the blame
was placed on the Marcos era when democratic rule was
virtually suspended. During the period, the report indicated,
NEA’s strong leadership and oversight role was subverted by
the worsening political environment.
However, a number of the co-ops appeared to be immune
to this trend. The report found that twenty-two of the co-
ops were operating as well-managed commercial entities, and
this was attributable to the presence of dedicated professional
managers. With the help of donors led by USAID, the World
Bank, and Japan’s OECF, the co-ops were restored to their
earlier state. In 2002, there were 119 electric cooperatives
scattered throughout the Philippines islands, with a combined
5 million service connections that provided electricity to some
30 million people or 85 per cent of the rural population.
Bangladesh
The Bangladesh co-operatives, known as ‘Palii Bidyut Samities’
(PBS) were modelled on similar lines as the Philippines.
However, the REB (Rural Electrification Board) directly
controls the financial operations of the co-ops. Co-ops are not
independent private business entities and do not retain or
control their operating margins. REB has established and
‘energized’ 67 PBSs to date, constructed over 125,000
kilometres of line, and made 3.8 million service connections,
giving electricity to over 15 million people. The programme
serves only 20 per cent of the country’s rural population, but
new construction is proceeding at a rapid pace, providing
350,000 new connections a year. At the co-op level, the results
are also quite impressive. There have been no defaults on debt,
and bill collection rates have remained in the range of 97 per
cent throughout the programme (government users are least
compliant). Average system losses, both technical and non-
technical, are 16 per cent.
Indian Experience
Rural Electrification Corporation has so far sanctioned forty-
one Rural Electrification Cooperatives in the country spread
over twelve States. As on date, thirty-three are in operation
as eight societies (three in Rajasthan and one each in the
States of Bihar, Gujarat, Jammu & Kashmir, Uttar Pradesh,
and Orissa) have since been taken over by the respective State
Electricity Boards (SEBs). The thirty-three rural electrification
Cooperatives Societies, presently in operation, are located
in the states of Madhya Pradesh (17), Andhra Pradesh (9),
Tamil Nadu (3), Maharashtra (1), Karnataka (1), and West
Bengal (2).
With a few exceptions the rural electric cooperatives are
working under severe financial, institutional, and organizational
constraints and appear to be struggling for survival. Reasons
for this state of affairs vary from society to society. It is
observed that these arise primarily out of certain internal and
external drawbacks that these societies are presently saddled
with. These can be broadly classified as:
1. Lack of freedom to fix tariff on commercial basis for
different types of consumers in their area of operation.
2. Unfavourable load mix that is often forced on these
societies on account of SEB’s proximity and influence with
the state government.
3. As outcomes of the Cooperative Societies Act, the
management of these societies is highly susceptible to
fluctuations in fortunes of political parties operating in
the area, thereby affecting objectivity and professionalism
in their own decision making.
4. Regulatory powers given to government under the Act
for checking irresponsibility and delinquency in functioning
of these bodies are at times misused to further the state
governments’ own political priorities and compulsions.
5. Subjective and politically coloured functioning of the
top cooperative management permeates downwards,
resulting in inefficiency and corruption creeping in at
the operational levels.

As a result what one often sees is narrow political
compulsions giving rise to subjectivity and irresponsibility
within these organizations, very often matched only by similar
subjectivity and irresponsibility by authorities overseeing and
regulating functioning of these bodies. In spite of these
limitations there are a few successful co-operative societies.
Anakapalle Rural Electric Co-opeartive is an example of a
successful rural electricity co-operative (Box 6.1.5).
Proposed Model for India
Given its success, the Philippines or the Bangladesh model
appears to be the logical choice for India. Both these countries,
in essence, have decentralized rural electrification cooperatives
with strong central coordination through their rural
electrification utilities. The major issues therefore are:
(i) autonomy in the functioning of the co-ops and (ii) setting
up of transparent systems to prevent politicization. The
predominant objective should be to keep politicians and party
politics out of the picture. Here one can draw from the AMUL
model (Manikutty, 2002). The village level activities should
be controlled by a co-operative with all residents of the
village as members. These members should select a managing
committee for overseeing and supervising the activities of the
co-op. The major functions of the co-ops could be:
1. Monitoring the implementation of infrastructure for
electrification.
2. Ensuring timely O&M.
3. Collecting dues from the residents.
4. Organizing education and training of residents for energy
efficiency and conservation.
5. Providing inputs for capacity addition.
High level of planning is essential right from the outset to
make the cooperative model a success. As in the Bangladesh
model, detailed guidelines for financial management, engineer-
ing, and operations, which the cooperatives must follow, should
be formulated. This role was carried out by the Rural Electri-
fication Board in Bangladesh (Dubash, 2004). Who will carry
out this role in India? Rural electric supply and distribution has
been the responsibility of an array of institutions. Historically,
SEBs have been involved with developing and implementing
rural electrification investments. Of late, central and private
utilities have also become involved in rural electrification.8
National Hydroelectric Power Corporation (NHPC) has taken
up rural electrification projects in West Bengal, Bihar, Jammu
and Kashmir, Orissa, and Chhattisgarh. NTPC Ltd is taking
up Distributed Generation projects in remote un-electrified
villages with the objective of demonstrating sustainable
business models for such projects. Reliance Energy Ltd
too has entered into an agreement with the Uttar Pradesh
8 The Hindu Business Line (15 December 2005 and 20 May 2006).
Electrification and Bio-energy Options in Rural India 151
Government to electrify over 600 villages near Agra, Aligarh,
Hathras, and Mathura. REL plans to work for 100 per cent
electrification of these villages, along with construction of
seven 33 KV substations in the four districts, by March 2007.
Mentoring and guiding the cooperatives can therefore, in
principle, be accomplished by the utility companies.
But, how does one ensure that the utilities, particularly the
SEBs, do not meddle with the activities or harass the cooperatives?
Dealing with utilities will not be easy for village co-ops on an
individual basis. Hence, there may be a need to create a regional
committee, which comprises of Chairmen of the village co-
ops, an administrative, and a utility official at the district level.
The functions of the district committee could be:
1. Dispute resolution.
2. Capacity planning.
3. Interfacing with the service providers.
4. Negotiating bulk rates for both distributed generation and
grid supply.
Is the Cooperative Model Feasible in India?
There is a general feeling that the villagers are not capable of
running their cooperatives, partly due to their illiteracy and
partly due to village politics. However, several examples of
co-operatives exist which illustrate that with the help of NGOs,
villagers have found and managed solutions to their own
problems. This is especially true when their collective interests
are at stake. The Aravari River Parliament is an inspirational
example that shows how rural areas can effectively manage
their own affairs (Box 6.1.4). Anakapalle Rural Electricity
Co-operative is an outstanding example of a successful co-
operative in electricity distribution in rural areas (Box 6.1.5).
Integrated Rural Services Company
An integrated rural service company is the third type of model
which can distribute electricity in villages. While the concept
of energy service companies (ESCOs) is very well established,
and in many cases successful, primarily in developing countries,
the concept of rural energy service company (RESCO) is
relatively new. RESCOs do exist in the form of cooperatives
and private/public energy service providers. However, in
developing countries, RESCOs have been surviving on
government subsidies, because the scale of operation is small
and widely/thinly dispersed, while the cost of services is very
high. Thus, the real challenge lies in finding ways to deliver
affordable services to rural communities that allow covering
the cost.
When the utilities find that it is very costly to create peaking
facilities, they diversify into new activities such as demand side
management. When a business venture becomes less profitable,
it tries to diversify into similar activities and integrate them
152 India Infrastructure Report 2007

Box 6.1.4
The Arvari River Parliament

Arvari is a small river in the District of Rajasthan. The river had been reduced to a monsoon drain over the decades, while the region
was reeling under chronic drought condition. The process of rejuvenation of this river was started in the year 1987 by local groups and
inhabitants through small water harvesting structures, called Johads (especially in the rural areas of Rajasthan), Johads are traditional
earthen dams built to harvest each single drop of rainwater falling on the ground.
From1996 onwards the river regained its full flow and became perennial. As soon as the river had been revived and fish were seen to be
multiplying, the state government awarded the contract of commercial fishing in the Arvari to a private contractor. This evoked stiff resistance
from the local people who had made it their mission to revive and sustain the river. While most of the local inhabitants were vegetarian and not
really interested in acquiring the fish harvest for themselves, they questioned the very basis of this governmental highhandedness and asked,
‘Who owned the river? If today it is the fish, tomorrow it could be the water’. The government, through the contractor, was intruding into the
community’s domain—its right over the use of water which had been developed as a resource by the user group through painstaking effort.
To discuss all these matters a Jan Sunwai (Public Hearing) was organized on 19th December 1998 on the banks of River Arvari.
There was a unanimous decision to form a River Parliament to protect the rights of the people who brought the river back. This River
Parliament would work towards the management and conservation of the river drawing up its own rules, regulations and laws keeping
the community’s needs and priorities in mind. The decisions taken by the Parliament would be binding upon the user community.
So Arvari Parliament was formally formed on 26th January 1999 and the Arvari Sansad met for the first time in Hamirpur on that
day. It had representation from 72 villages. This Parliament framed 11 rules for the use of Arvari waters. It meets four times a year and
if required they can meet up in the face of any emergency. It has 142 members nominated by the respective village assemblies. Every
village up to 500 hectares in size appoints one member. A Coordination Committee comprising members selected by the Parliament
handles the operations and ensures that the rules are observed.
The laws, rules and regulations for the proper management, conservation and utilization of the Arvari river, are framed upon the
following considerations:
1. regulation of surface water irrigation from Arvari river and irrigation from the wells.
2. ensuring that crop production and marketing are free from middle men and setting up an equitable system, which fulfills the
needs of the local people.
3. prohibiting sale of water and protecting the fish present in the river.
4. prohibiting sale of land to non-members and taking decisions regarding these issues as and when they arise.
5. working towards greening of the river basin and protecting the surrounding area from damage due to excessive mining.
6. prohibiting hunting of animals and illegal felling of trees in the Arvari River Area.
7. exploring various traditional methods of water conservation to revive these practices towards future sustainability of water resources.
8. preventing over-exploitation of water and promoting water conservation.
9. establishing an active system for the management of the river.
10. delineating the role of the Jal Sansad (water Parliament) and Village Gram Sabha towards the management of the water sources
present in the villages.
Subsequently, a liquor company expressed interest in setting a beer factory in the region as barley is the main crop here and water was
available in plenty. The villagers, under the auspices of the Arvari Sansad, got together to ensure that no industrial concern exploited the
river’s resources.

Source: Kishore (2003).

Box 6.1.5
Anakapalle Rural Electric Co-op9
Vijay Mahajan, Preeti Sahai, and Sandeep Pasrija

The Anakapalle Rural Electric Cooperative Society Ltd. (ARECS) in the Vishakhapatnam District of Andhra Pradesh was formed
in 1974 with a mission ‘to make electrical energy available to its members to promote the economic development in the area’.
In 1976, the Cooperative took over distribution operations and maintenance from the State Electricity Board. Thirty years
later, with over 96 thousand members, the cooperative has achieved 100 per cent village electrification, increased the number
of service connections by 2400 per cent, and is debt free and profitable. The expansion and outreach that the ARECS has

9Thiscase study is based on a presentation made by Sri Raghav in a workshop held at the Institute of Rural Management, Anand from
Rao, Managing Director, Anakpalle Rural Electric Co-operative Society, July 24th to 27th, 2006 (Rao, 2006).
 Electrification and Bio-energy Options in Rural India 153

achieved in a span of twenty years resulted from an amalgamation of community ownership, a supportive government framework
and debt financing.

EVOLUTION
In addition to the initial cooperative share capital, the AP State Government invested a start-up capital of Rs 45 lakh in the cooperative.
While this gave it an initial boost, it had to return this amount in twenty-five yearly instalments. REC issued an initial loan of Rs 115
lakh which was used for the first project undertaken by the cooperative and a second loan of Rs 51.64 lakh was issued in 1981. As both
the transmission and consumer tariffs were set by the state (currently A.P. Electricity Regulatory Commission), the viability of ARECS
rested on efficiency in distribution (both technical and non-technical) and consistency in bill collections from consumers and healthy
demand growth.
During the first ten years, based on the amount of energy purchased and sold by the cooperative, line loss was reduced by 1/5th
from 31.13 per cent to 24.33 per cent. There was a fourfold increase in revenue demand, and ARECS used loans to expand distribution
capacity to accommodate the 400 per cent increase in overall consumption. By this time, all 153 villages and nearby settlements were
being serviced by ARECS. Table B6.1.5.1 below captures ARECS’s outreach at various points from inception to date.
The loans from 1985 till 2004 (when all debts were repaid) of almost Rs 6 crore along with the equity due to growth in membership,
went towards further expansion. The actual geographic outreach, while saturated by 1985, did not stop growth in demand, supply and
infrastructure expansion. A consistent line loss decrease of approximately 5 per cent for each ensuing 5 year period highlights an
emphasis on efficiency and collections. By 2006, the inherited line loss of 31 per cent was reduced to 15.42 per cent and the number
of service connections increased from 3707 to 97,107.

Table B6.1.5.1
The growth of ARECS in Terms of Outreach, Demand, and Supply
Taken over from 31–3–1985 31–03–1995 31–03–2005 31–03–2006
AP SEB on
Particulars 1–11–1976
No. of Villages Electrified 47 153 153 153 153
No. of Hamlets Electrified ... 138 138 138 138
Weaker Section Colonies ... 58 58 58 58
HT Line km 143 274.22 414.86 1139.59 1169.49
LT Line km 220 670.74 1721.96 3064.45 3200.39
Transformers No. 88 208 430 1034 1094
KVA 5350 13424 30636 83978 89571
Total Service Connections* 3707 10925 61904 87566 92107
Value of existing assets (Rs in lakh) 22.2 NA NA NA 3355.57
1977–8 1984–5 1994–5 2004–5 2005–6
Consumption (Units in lakh) 28.45 127.34 345.38 740.21 809.65
Demand (Rs in lakh) 16.56 60.3 274.68 1150.01 1261.33
per cent Line Loss 31.13 24.33 20.28 15.69 15.42
Note: * Service connections include agriculture, industrial, domestic, commercial, street lights, and miscellaneous.

OPERATIONS
The ARECS currently provides the 97,107 service connections over an area covering 1115 sq km. The cooperative currently earns
monthly revenues of Rs 1.4 crore, and the operations are supported by a staff of 123 employees. The cooperative has realized the right
mixture of technical capacity, effective processes for collections and monitoring, customer support, and steady expansion.
Customers have access to Consumer Service Centres (CSC) at seven locations across the service area of five mandals. These centres
provide operations and maintenance services, problem resolution as well as monitoring and addressing of accumulating arrears and
billing conflicts. Assistant Project Engineers oversee the O&M related issues, while the Junior Accounts Officers and support staff
focus on revenue collection.
In addition to these services, the cooperative conducts regular Member Education Programmes and has two General Body Meetings.
These efforts focus largely on membership involvement in the cooperative and the various activities that are undertaken.
154 India Infrastructure Report 2007

Strategic decisions over the past three decades have also ensured the health and longevity of the cooperative. As an example,
agriculture related consumption (on average over the past 3 decades) is 37 per cent of total consumption and ranks second only to the
42 per cent of domestic consumption. As electricity demand related to agriculture requires reliable supply for specific hours in a day,
the cooperative observed its adverse impact on the other types of consumption (domestic, commercial, industrial, street lights and so
on) which require an even supply of power during the entire day. To isolate the unique demand requirements for agriculture, Rs 3.5
crore was invested to separate the agriculture related load feeders from the other load feeders. This has ensured better service to the
larger customer base while accommodating the needs of agriculture, an important economic activity in the area.

FINANCIAL ARRANGEMENTS
As a service provider of rural electricity, ARECS enjoys good financial health. The assets, over the past 30 years, have supported the
increased demand, and their value has grown from Rs 22.20 lakh to Rs 3355.57 lakh. The Cooperative’s equity stands at Rs 117.71
lakh, with 90 per cent of the contributions coming from its 96,140 members. With monthly revenue of Rs 1.4 crore, 95 per cent of
the revenue is generated on a monthly basis demonstrating successful collections.
The Rural Electrification Corporation has lent Rs 759.3 lakh to ARECS for five separate projects from 1977 to 1999. ARECS repaid
the entire debt eight years ahead of schedule in 2003 using surplus funds from operations. A majority of the initial equity of Rs 45 lakh
contributed by the state of Andhra Pradesh was returned ahead of schedule in 1996 with the State Electricity Board choosing to keep Rs
10 lakh as share capital. Today, a debt free ARECS has cumulative profits of Rs 95.03 lakh. It is worth noting that despite both, costs
(transmission tariffs) and revenue rates (consumer tariffs) being set by the A.P. Regulatory Commission, the Cooperative has demonstrated
financial viability. Yearly audits both validate and ensure the financial health of the Cooperative.

LESSONS FROM ARECS

The operations, growth, and financial health of ARECS shed significant light on the power of user involvement and the impact of
community based institutional arrangements on the delivery of infrastructure services and its consumption.
The Government played a critical role in providing the necessary start up equity to transfer the distribution infrastructure to the
Cooperative. As this equity came in the form of a twenty-five year loan that was eventually repaid by the cooperative, it can be seen as
largely catalytic in nature.
While the generation and transmission were beyond the scope of ARECS, the Rural Electrification Corporation provided the
necessary debt financing to enable the cooperative to meet increasing demand and for strategic projects to improve distribution and
customer service. The community investment, in the form of shares in the Cooperative, combined with the start-up contributions
from the state government provided sufficient equity to take on these loans.
The cooperative society was able to establish a culture of payment for service and responsive customer support. Factors such as a
50 per cent decrease in line loss from inception till today and a substantial increase in user demand, with the change in management
from state government to an institution of the people, strongly suggest that the rural customer base responded favourably to customer
service and was more willing to pay user fees. This same institution also used loans to fund and implement the successful expansion of
distribution infrastructure without any subsidies or financial support from the government.
While prompt and complete payment for bulk power purchase provides a sustainable financial relationship with the transmission
company, ARECS’ performance with distribution infrastructure also demonstrates the potential rural demand and its ability to pay,
and therefore, the viability for private financing to enter into the distribution, transmission and generation of electricity.
ARECS clearly demonstrates and substantiates the importance of user involvement in the rural context. The institutional arrangements
do influence the user’s demand, participation and contribution to infrastructure. The government is capable of supporting such an
arrangement, providing the necessary regulatory framework and filling the financial viability gap. Finally, we have seen the demonstration
of success when interests of the service provider and the user merge and as an outcome, create scope for private financing to further the
outreach of infrastructure to rural India.

Note: Views expressed here are of the authors of the box.

with upstream and downstream activities of the business
venture. Similarly, a company in a rural area may start with
the aim of providing comprehensive rural service to cater to
all major needs of rural communities. Such a rural service
company (RUSCO) would not only provide the rural services
but also promote opportunities for rural community for
starting rural industries. The RUSCOs may also provide raw
materials for rural industries and buy out the finished products
to sell to other market outlets. The reason for thinking in
this direction is that for any business to survive and sustain,
it must consider the market characteristics where it plans to
operate, as well as adjust appropriately and continuously to
market developments. In other words, for any rural service
company to be successful, it has to be designed in a way that
creates the potential for its financial viability. In this context,
it has to consider:
 Electrification and Bio-energy Options in Rural India 155

Box 6.1.6
RUSCO—A Better Channel for Rural Subsidies

Many developing country governments are providing substantial subsidies for agriculture activities and rural services. Subsidies are
available for farm/agriculture inputs, such as, fertilizers, electricity, water, and so on. Furthermore, most of transportation facilities and
activities are funded by the government without enough revenue to cover costs. While there is a need to rationalize the various types
of subsidies, governments may begin thinking about policies and strategies that would promote the establishment of the RUSCO-type
organizations as they may fit in their respective rural areas and conditions, as well as develop frameworks on handing over of the
existing rural services facilities to this type of institutions. It is important to note that assets would have to be transferred to RUSCOs
at a nominal reasonable cost, which may be collected over a long period of time.
As RUSCOs’ ownership structure may vary from rural not-for-profit cooperatives to for-profit private businesses, the subsidization
of existing and new physical assets is a delicate policy issue that needs careful attention.
Considering the rural development status in many developing countries, it has to be said that subsidies are still a must for the
delivery of many rural services. However, they must be judiciously planned and targetted. Subsidies may be channelled through local
governments to the RUSCOs. The major advantages of utilizing RUSCOs as the primary channel for subsidies for rural services are
the following:
1. Less administrative burden and lower cost results in higher effectiveness.
2. More transparency and accountability results in less corruption and higher efficiency.
3. Better targetted to those eligible and most in need.
4. Clear focus on only some of the services to rural populations.
5. Opportunity to avoid use of subsidy for RUSCOs’ operation purposes.
An important point to be noted in the context of providing subsidies through RUSCOs is that utilizing RUSCOs as a channel
for rural subsidies would very well create the potential for achieving more positive impact because of the synergized economic
and social effect that various subsidies may bring about when offered as a package for integrated provision of two or more subsidized
services.

1. The market segment and economy of scale—the minimum
number of households to be served in order for the
RUSCO to break even.
2. The appropriate ownership structure that fits into local
conditions.
3. What subsidies are available (if any), and for how long.
4. The prevailing institutional, regulatory, and legal framework.
Furthermore, lack of management resources is another
factor that influences the need for integrated services delivery
in rural areas by RUSCOs (Box 6.1.6).
RURAL ELECTRIFICATION AND PANCHAYATS10
Role of Gram Panchayats
The 11th schedule to the Constitution of India lists rural
electrification including distribution of electricity as an activity
which can come under the purview of the Panchayati Raj
Institutions (PRIs). Though a number of constitutional
provisions exist to support these institutions to augment their
funds, the financial position is not so good with respect to
most of the Gram Panchayats. This is mainly because of poor
revenue collection, inadequacy of trained personnel, diversion
of funds and misuse of resources, and lack of accountability
and transparency11.
The relevant entries relating to electrification in the Eleventh
Schedule are Item 14, rural electrification, including distribution
of electricity and Item 15, development of non-conventional
energy sources. This would mean that in any strategy meant
to provide electricity, and particularly household electrification
in rural areas, the support and active participation of Panchayats
is crucial to the success of rural power sector reforms.
Panchayats as Consumer of SEB/ESCOMS
The most common form of engagement between the SEB/
ESCOMs and the panchayats is that the latter is the customer
of the former—the panchayat is supplied power for the
running of water supply projects and streetlights. This is the
case both, in states where the function of electricity distribution
has been devolved to panchayats and those where this has
not happened.

10We are thankful to T.R. Raghunandan for outlining various roles 11‘Role of Local Communities and Institutions in Integrated Rural

which Panchayats can play with respect to rural electrification within Development,’ Asian Productivity Organization, Japan. (www.apo-
the framework of 73rd CAA and the Electricity Act 2003. tokyo.org)
156 India Infrastructure Report 2007
Most connections to water supply and streetlights owned
and maintained by the Gram Panchayats are not metered.
Therefore, billing of these installations is based on assumed
consumption or on the capacity of the installation. In both
cases, the availability of electricity is assumed for a certain
period every day, e.g. an eight-hour supply for streetlights.
Considering the fact that in most rural areas the electricity
supply is abysmally low, the Gram Panchayats lose out when
installations are un-metered. They are often charged for
electricity that they have not used.
Because gram panchayat installations are more often than
not un-metered, bills are also not submitted to the Gram
Panchayats. These are submitted directly to the state
government, often with usurious levels of interest attached.
State governments make bulk deductions from the grants that
ought to go to Panchayats such as State Finance Commission
funds (in some states, deductions are known to have been
made from Central Finance Commission allocations too,
inviting criticism from the CAG) and other untied funds, in
order to make payments to SEB/ESCOMs. Even in the states
that commit to give untied funds to Panchayats, prior
deductions totally undermine any such intention. For example,
in Karnataka and Tamil Nadu, the at-source deductions on
account of electricity bills on unmetered installations have
been as large as 50 per cent of the total amount due from the
state governments to the Panchayats.
The system of bulk deductions on a pro-rata basis is a
huge disincentive for reform, for both the SEB/ESCOMs
and the Gram Panchayats. SEB/ESCOMs have no incentive
to expedite metering or billing of gram panchayat installations
because they anyway make a killing through prior deductions.
Panchayats are the ultimate soft target, whose funds can be
poached upon at the will of the SEB/ESCOMs. In addition,
since bills are not submitted, there is absolutely no accountability
for the SEB/ESCOMs to improve supply to panchayats. Even
if they are billed, gram panchayats have no incentive to pay
their bills because those who have done so, continue to suffer
as the untied funds due to them are still cut to pay for the dues
of another panchayat.
Finally, the system of prior deductions has pitted the SEB/
ESCOMs against the panchayats in a deeply adversarial
relationship. Both perceive the other with mistrust, which is
hardly a conducive climate to start any kind of distribution
reform involving collaboration between the two.
Therefore, reforming the system of supply of electricity
and its billing and payment between the SEB/ESCOMs and
the gram panchayats is imperative. Apart from this being an
important confidence building measure, this has a larger
implication in as much as it would also immensely benefit the
panchayats because it would prevent the arbitrary diversion
of funds that are meant for them.
Panchayats as Franchisees of SEB/ESCOMS
Gram panchayats could progressively undertake billing and
collection of electricity dues of all consumers within their
area. Already several SEB/ESCOMs have proven models of
outsourcing of billing and collection to private entrepreneurs,
with training and a commission system included as part of
the package. These models could be made available to gram
panchayats also.
Panchayats could also keep track of the complaints and
assets of the ESCOMs and inform the technical staff of the
SEB/ESCOMs of the complaints for quick redressal. A really
difficult problem for SEB/ESCOMs is to persuade consumers
such as irrigation pumpset (IP set) owning farmers to permit
the fixing of meters on their installations. A gram panchayat,
which is treated as an ally would be a great asset for the
SEB/ESCOMs in influencing and convincing people
about these reform measures. With proper guidance, gram
panchayats could identify and report to SEB/ESCOMs cases
of unauthorized installations or theft of electricity.
It would be open for the SEB/ESCOMs to offer to the
gram panchayats incentives for undertaking these activities.
These incentives could even be in the form of a set-off against
their own electricity dues.
Gram Panchayats as Distributors of Electricity Supply
As distributors of electricity there would be deepening of the
collaborative relationship between the SEB/ESCOMs and
gram panchayats because there is part transfer or leasing
of distribution assets to gram panchayats, which could,
through association with a mutually agreed private entrepreneur,
undertake asset maintenance and management and distribution
of power, along with the work of billing and collection. (This
is similar to a RUSCO except that the distributor of electricity
is a gram panchayat).
A panchayat may undertake generation of power along with
distribution. A relatively simple model for this is to run the
entire system of generation and distribution as a local vertically
integrated stand-alone system within the framework of the
Electricity Act 2003. The Act allows rural local bodies to
generate and distribute electricity in their area without
requiring a licence. Several opportunities exists for panchayats,
to tie up with Independent power producers for local area
distribution of electricity, with generation being through a
host of non-conventional energy sources.
This is a good model, especially, where the grid has not
reached as yet. The venture of the gram panchayat would be
much in the manner of water supply from spot sources at the
gram panchayat level. In places where there is already grid
penetration the gram panchayats could undertake generation,

and distribute the generated power through the existing grid.
Business models providing for open access on the SEB/ESCOM
grid (again something permitted under the Electricity Act 2003)
can be developed. One model could be that such additional
investments could be financed with the SEB/ESCOMs
supporting the gram panchayat so that the latter is incentivised
to substitute SEB/ESCOM power supply (inevitably at a loss),
with the power generated locally.
Already, in a few states, there have been local initiatives
on the part of gram panchayats participating in electricity
distribution. For instance, in Tamil Nadu, several gram
panchayats have already commenced generation of electricity
through Biomass gasification and other renewable sources.12
The power is being used first for their own streetlights and
water supply requirements (Table A6.1.3). Similarly in
Karnataka, capacity building of gram panchayats has already
been undertaken for the purpose of engaging them in the
above process. Again in Karnataka the reconciliation of
electricity bills and putting in place a system where there are
no prior cuts of financial transfers to panchayats on account
of electricity bills, has also been put in place. Nagaland (even
though it is a Schedule 6 area) has frameworks where there is
active involvement of the local community in local power
generation and distribution. Therefore, good practices are
emerging, which now need to be scaled up through
dissemination and networking of practitioners across states.
For revenue sustainability, such models are best developed
locally rather than at the national level. A possible revenue
model, particularly in those states that are pumping considerable
subsidies into providing nearly free power to certain classes
of consumers, would be to channel such subsidies into non-
conventional energy and local grids. This could be done by
the electricity company paying the local grid (operated by a
partnership between the Gram Panchayat and a local
entrepreneur) a part of the money that it saves by avoiding
grid supply to that area. However, this model will only work
in those states that have a reasonably good grid supply at
present. Also combining services such as water and power, or
health service and power, or entertainment and power is a good
idea. Generation and power conservation should both carry
the same incentive package, so that there is equal incentive
to use power well and, hence, there is a need to have grid
connectivity to continue to have electricity available when
the distributed generation system is down.
12Tamil Nadu has taken the lead under the remote village
electrification programme where grid extension is not feasible or cost
ineffective. The state wants to generate 500 MW through wind energy
and the rest by means of biomass and solar energy. 94 villages are going
to be electrified during FY06 using solar streetlights and solar home
lights. So far 154 villages in the state have been electrified using
renewable energy sources (The Hindu, August 6, 2006).
Electrification and Bio-energy Options in Rural India 157
Gram Panchayats as Facilitators
Given the politicization of panchayats, it may be important
to consider village cooperatives as commercial entities, with
the panchayats functioning as facilitators. The GPs can assist
in conflict resolution and put pressure on the local population
to follow the ground rules laid down by the village cooperatives.
Other PRIs such as panchayat Samitis (at the block level) and
zilla parishads/zilla panchayat (at the district levels) can assist
in (i) lobbying with the utilities and government, (ii) providing
inputs for capacity planning etc. One important matter where
PRIs can assist is the selection of 10 per cent households that
will be electrified under the RGGVY.
CRITICAL ISSUES IN RURAL ELECTRIFICATION
Funding
The main sources of funding for current rural electrification
programmes are:
1. Rural Electrification Corporation;
2. Plan allocation to the states;
3. Funding support from government as loan and grant;
4. Institutional financing bodies like commercial banks; and
5. International financing agencies like OECF.
REC was established as a public sector undertaking in
July, 1969. Initially, the principal objectives of the corporation
were to finance rural electrification schemes and promote rural
electricity co-operatives for funding rural electrification projects
across the country. The tasks assigned to the corporation have
occasionally been expanded. The main objects currently are:
1. To subscribe to special rural electrification bonds that may
be issued by the SEBs on conditions to be stipulated from
time to time.
2. To promote and finance rural electricity co-operatives in
the country.
3. To administer the money received from the GoI and other
sources such as grants.
4. To promote, organize, or carry on the business of
consultancy services and/or project implementation in any
field of activity in which it is engaged in India and abroad.
5. To finance and/or execute works on small/mini/micro-
generation projects, to promote and develop other energy
sources, and to provide financial assistance for leasing out
the above sources of energy.
6. To finance survey and investigation of projects.
7. To promote, develop, and finance viable decentralized
power system organizations in cooperative, joint, private
sector, panchayat, and/or local bodies.
The REC is the implementing agency of the RGGVY.
The projected cost of rural electrification under the RGGVY
is Rs 14,750 crore to meet the targets (Table 6.1.3).
158 India Infrastructure Report 2007
Table 6.1.3.
Cost estimates for Village Electrification under RGGVY
S. Particulars Amount:
No. Rs in crore
1 Electrification of 125,000 un-electrified vill- 8,125.00
ages which includes development of backbone
network comprising Rural Electricity
Distribution Backbone (REDB) and Village
Electrification Infrastructure (VEI) and last
mile service connectivity to 10 per cent
households in the village @ Rs 6.50 lakh/village
2 Rural Households Electrification (RHE) of 3,510.00
population under BPL i.e. 30% of 78 million
un-electrified households or 23.4 million
households @ Rs 1500 per household as per
Kutir Jyoti dispensation
3 Augmentation of backbone network in 4,620.00
already electrified villages having
un-electrified inhabitations @ Rs 1 lakh
per village for 462 thousand villages
Total (1+2+3) 16,255.00
Outlay for the scheme 16,000.00
Subsidy component@ 90% for items 1 & 3 14,750.00
and 100 per cent for item 2
Component of subsidy to be set aside for 160.00
enabling activities including technology
development @1% of outlay
Source: REC (2005).
The government would provide 90 per cent of the cost
through subsidy and the remaining 10 per cent as loan. The
figure of Rs 16,255 crore is on the lower side as it is for only
10 per cent of the households—the minimum requirement
in the RGGVY.
What is also not very clear is whether the infrastructure
for grid extension being implemented now covers only the
minimum standards set by RGGVY, or takes into account
100 per cent electrification. If planning is only for the present,
the marginal cost for extending rural electrification beyond
the RGGVY stipulations would be exorbitantly high. Hence,
it is important that a proper funding plan be put in place,
otherwise RGGVY could just end up being a linear extension
of the rural electrification schemes of the past. Clearly, the
government has to bear the brunt of the infrastructure costs.
Tariffs for Rural Electricity
The rural population in the country is thinly dispersed and
even the electricity requirements for irrigation and rural
industries are wide spread. This leads to low energy density and
high cost of energy supply. Further, the income level of rural
population is very low compared to urban population, which
creates a need for subsidy. However, subsidization also has its
attendant problems. No state, even with the help of grants
from multilateral/bilateral/other private donors, can provide
subsidies to all of the rural population for long periods of time.
Importance of Cost Recovery
Cost recovery is probably the single most important factor
determining the long-term effectiveness of rural electrification
programmes as with any other rural service such as water.
When cost recovery is pursued, most of the other programme
elements fall into place. All successful programmes have placed
strong emphasis on covering their costs, though there is wide
variation in how it can be approached.
Energy supply organizations dependent on operational
subsidies are critically vulnerable to any downturn in their
availability. In most successful programmes, a substantial pro-
portion of the capital has been obtained at concessionary rates
or in the form of grants. To ensure long-term sustainability of
the programme operating costs must be recovered through rev-
enues, otherwise, the financial condition of the service provider,
worsens day by day and the system becomes unsustainable.
Charging the Right Price for Electricity
There is a widespread belief that electricity tariffs need to be
extremely low, often well below true supply costs, if rural
electrification is to benefit the rural people. The facts do not
support this. Where there is already demand for lighting,
television, refrigeration and motive power, in the absence of
a grid supply, these services are obtained by spending money
on kerosene, LPG, dry-cell batteries, car battery recharging,
and small power units, all of which are highly expensive per
unit of electricity supplied.
Rural electrification tariffs set at realistic levels do not
prevent people from making significant savings in their energy
costs, as well as obtaining a vastly improved service. Charging
the right price allows electricity companies to provide power
supply in an effective, reliable, and sustainable manner to an
increasing number of satisfied consumers.
Building Tariff Structures for Rural Electrification
Broadly speaking a tariff structure which can be sustained
under political and social considerations would be performance-
based tariff, starting from tariff based on ‘cost recovery’ to
‘cost to serve’. This means moving from short-term location
marginal tariff to long-term location marginal tariff. This
implies that a beginning should be made with recovery of
average per unit cost. In the long-term, system cost, cost of
expansion, and cost of quantity and quality should be
recovered. This also implies minimizing subsidies and cross
subsidies. This transition means that tariff would increase
over a period of time and may reduce after a few years when

the system gains from performance efficiency, both technical
and financial.
This requires a multi-year tariff policy so that efficient
mechanisms can be implemented to restrict accumulated
technical and commercial losses to less than 10 per cent. In
the short-term, it may make electricity unaffordable in parts
of villages. Therefore, rural poor may have to be charged
differently. At present most of the rural electricity is being
charged at a fixed rate and duration of supply is both limited
and of poor quality. The quality issue needs to be addressed
from both the demand and supply side. On the demand side
single-phase to three-phase conversion and over rated pump
sets and money generation from water market are the
contributing factors. On the supply side, the frequency and
voltages of the three-phases are the culprits. Generally speaking,
voltage decreases over long distances, thereby drawing higher
currents, leading to higher power losses. The result is an
unnecessary increase in power requirement.
Under RGGVY, duration and quality of electricity to rural
households is aimed to be brought at par with urban areas.
This leads to the application of the same criteria for tariff in
villages as in urban areas. The cost plus tariff should be
eliminated in urban areas and one has to move to cost to
serve which includes quantity, quality, reliability, and future
strengthening and expansion of the system. Further, building
technical efficiencies, creation of mini-grid and other sources
of electricity may change the scenario for the better.
Presently, reduction in tariff or no increase in tariff can
be achieved by creation of slabs in quantity usage of
electricity and time of usage. If possible, type of usage can
also be built in by accounting for sanction load. Two part
tariff may not serve the purpose because it charges for
connected load and usage of electricity. The main reason is
that duration of electricity supply is so erratic that consumers
might be simply paying for fixed charge without electricity
being available to them. Hence, the (i) minimum duration
and (ii) quality of electricity supply should be assured before
the laws about tariff are enforced.
Tariff structure in rural areas should account for distributed
generation and non-conventional energy sources based
electricity generation. These may cost higher than grid supply
in the absence of subsidies. Therefore, the promise made may
not be realizable because of the nature of supply mix. This
means that in villages cost to serve may be higher than urban
areas. The population density is sparse in most of the villages
therefore, cost to serve plainly from grid may turn out to be
higher. Pricing of electricity in villages needs to be related to
area of irrigation, type of crop, and cost of pumping water,
as well as to types of village industry.
At times, serious environmental degradation takes place due
to availability of cheap electricity. Government concessions in
setting up industry near villages should be abolished and the
industry should be charged the same rates as urban electricity.
Electrification and Bio-energy Options in Rural India 159
To calculate the cost to serve one needs data like type and
time of usage, quality, quantity and duration of supply.
Collection and segregation of data is not possible at present
but we need to start the process, especially where new projects
are being implemented.
Tariff structures should reflect the features supporting
sustainability and sufficiency of electricity along with
competitiveness for economic growth. The tariff policy should
also allow for factors such as fuel prices, variation in foreign
exchange rate, and gap in demand and supply. In short, as
we move in the direction of cost to serve, tariff should
gradually change from fixed cost to cost recovery based on
quantity and quality, and ultimately, to performance-based
tariff. Renewable and distributed generation should have a
different kind of tariff structure reflecting consumer category,
voltage levels, producer category, population density, and local
fuel availabilities. ‘Green’ electricity should either be provided
tax exemptions for a limited period, or other fiscal incentives
to offset initial high investments, after which a single-tariff
regime should prevail in the interests of economic efficiency.
Capacity Additions
Planning new capacity additions should be viewed in a long-
term perspective. Starting afresh every time there is an increase
in load has negative cost implications. Consequently, accurate
load forecasting, for both, industrial and household loads in
rural areas, is a must. Normally, the advent of electricity in a
village is bound to have a multiplier effect, both in terms of
economic activity and in quality of life. For example, the
advent of agro-industries would lead to the proliferation of
cold storages. In fact, load forecasting should draw from the
economic development plan of the state/region. Consequently,
a modular approach to capacity addition is desirable.
To check the robustness of the planned rural electrification,
simulation of various scenarios must be carried out to evaluate
its performance. These simulations may include steady state
and transient conditions so that influence of starting or shutting
of DGs, short circuit currents flow under different faults, small
disturbance, load change, and stability can be analysed and
compared with standards.
Prioritization
The sequencing of electrification of rural areas is important.
Although this decision may largely be political, socio-economic
factors must be built into the decision-making process. For
example, rural areas with greater potential for economic
activity must be given priority.
Operations and Maintenance
Minimizing the lead time for identifying and repairing faults
is the key to success, particularly of the grid extension model.
160 India Infrastructure Report 2007

Box 6.1.7
Meters for Recording bi-directional flow of Electricity

Net purchase and sale: In this arrangement, two unidirectional meters are installed. One records electricity taken from the grid and the
other records excess electricity generated and fed back into the grid. Here, different tariffs may be applicable to both incoming and
outgoing electrical flows. There will be a possibility that because of the differential tariffs, a rural consumer may end up paying the
utility even though it has injected more electricity in the grid than it has drawn from it.
Net metering: This is the most advantageous arrangement for the owner of a distributed energy system. A single, bidirectional meter
is used to record both electricity drawn from the grid and the excess electricity the distributed energy system feeds back into the grid. The
meter spins forward when electricity is drawn from the grid, and it spins backward as electricity is fed into the grid. Since the net amount
of electricity drawn from the grid is only priced, the advantage with respect to the net purchase and sale meters becomes obvious.
However, it must be pointed out that in the near-future, given the demand-supply gap, reverse flow into the grid is not a major
possibility except from some commercial units such as sugar plants.
Even under the RGGVY if the BPL families have their houses electrically connected, they may not have the financial means to pay
their electricity bills. One option is subsidy by the government, which is impractical considering the numbers and the obvious ‘leakages’
that would occur. Here, the Gram Panchayats may play a proactive role by setting up a scheme whereby, the bills of the rural poor may
be waived in lieu of services rendered to community welfare through manual labour and so on.

Long lead times would literally restore status-quo-ante, 1. Load reduction or shedding with pre-announced hours
thereby negating the benefits of rural electrification. The use in the short term.
of IT to identify, and even predict faults, is an essential 2. Increase in the capacity of network with ancillary services.
ingredient for success. 3. Adding to generation capacity in the long term.
The demand side measures should be worked out for
Benchmarking different types of customers like domestic, commercial, and
industrial. For example, if the domestic grid is separated,
Benchmarking is essential to monitor the quality of supply domestic load on daily basis and total energy on a monthly
and can identify potential areas where performance is lacking. basis may be fixed towards demand side management. Some
Typical benchmarking parameters are as follows. innovations are required in implementing demand side
management because in rural areas demand will be seasonal,
Area Performance Measure Effect Measured even for industrial units. Hence, for load planning, the need
Operational SAIFI Frequency of outages for both continuous and limited hours power supply must
be ascertained. This, in turn, will reduce the cost of power
Performance CAIDI Duration of outages
supply and minimize the frequency of unscheduled shut-
Aggregate technical & Effectiveness in downs. Tariff models to encourage load planning are discussed
commercial losses minimizing unrecoverable in the section on pricing.
energy cost
Technical losses Efficiency of distribution
infrastructure Metering
Unplanned outages/ Relative impact of outages In order to arrive at tariffs and pricing structures, the type of
total outages on customers and system metering arrangement plays a very important role. One possible
Service restoration Responsiveness of scheme would be to install meters (i) in each household and
time distribution maintenance commercial/agricultural unit and (ii) in a distribution
Annual replacement Role of transformer transformer. The advantage of this scheme would be that thefts
rate of distribution failures in maintenance and technical losses could be monitored. In situations where
transformers (%) effort the distributed generation is connected to the grid, and where
there is a possibility of bi-directional flow of electricity, either
two uni-directional meters or single bi-directional meters
Load Planning could be used. While extensive installation of meters may
Because of the demand-supply gap, adequate power may not appear prohibitively expensive initially, it is important from
be available in rural areas. Some of the measures to address the long-term planning perspective, accounting for future
this issue could be: scenarios. Therefore, to make full and efficient use of technology

and financial support available one may consider the best
specifications for metering, SCADA, and call centres.
Collection of Electricity Bills
Pre-paid meters, just like pre-paid cell phones, is possibly the
best way to ensure that customers pay their electricity dues.
However, installing such meters in each customer’s premises
may not be financially viable. One viable solution is to have
regular meters in each customer’s premise, along with a
centralized pre-paid meter. It will now be the responsibility
of the village co-op to buy the pre-paid card, in the absence
of which electricity in the concerned rural areas will be cut-
off. A major advantage of the suggested measure will be to
ensure compliance and minimize thefts, primarily due to
public pressure.
WAY FORWARD
Implementation of the Electricity Act 2003 to pave the path
for sustained district and state level planning, with emphasis
on monitoring and decentralized accountability will encourage
the private sector to participate in the power sector and take
on a profitable role as a franchisee for installation and/or
distribution of power in rural areas. This will also encourage
formation of RUSCOs, independent franchises, and village
panchayat owned franchises.
With the RGGVY, universal access to power in villages is
on the horizon. Perhaps recognizing the capacity constraint,
the REC and MoP are encouraging franchisee development
for the maintenance of distribution systems and for the
collection of tariffs at the village level. The SEBs have to redefine
their role to focus on increasingly managing and supervising
contracts between public and other (NGO, co-operatives, and
private) providers as well as with users and ensuring the legal
rights and obligations of parties in terms of service and tariffs.
Managerial and technical capacity to engage with franchisees,
inspection of installation, verification of delivery of service
to standards, performance monitoring, and establishing bulk
power purchase agreements with generators can be developed
as the BESCOM example illustrates.
As the franchisee and co-operative models develop, a
subtle approach to reforming agriculture pumping tariffs
would come into play. A move towards greater cost recovery
must be accompanied by reliable service that meets the needs
of agriculture. A two-step approach which can bring
sustainability to village electrification and reduction of AT&C
losses is needed. The first step is to separate the three-phase
supply from household single-phase supply and then energize
the agriculture pump load in accordance with the local
agriculture needs and during off-peak hours to reduce costs.
This will allow the system to better meet the needs of
Electrification and Bio-energy Options in Rural India 161
agriculture, even while, reducing the supply of electricity to
agriculture. This would, in effect, reduce wasteful use of energy
and groundwater (Shah et al. 2003).
The next step would be to move towards agricultural
subsidies that are provided directly to the consumer in the form
of a ‘smart card’ that incorporates low tariffs for the first block
of ‘lifeline’ consumption. Smart-card metering technology
makes it possible to provide the subsidy directly to the consumer
as opposed to the service provider. Metering technologies using
smart cards are already used in South Africa. Higher cost
recovery would pave the way for facilitating greater generation
capacity as well as reducing the adverse impact on industry
of higher tariffs and poor quality supply (Modi, 2005).
Service providers should promote the use of smart prepaid
card based electric meters. This technology makes it possible
to implement lifeline tariffs for the poor (ensuring a social safety
net). Along with the safety net, government should emphasize
energy-efficient lighting, such as compact fluorescent lamps,
as experimented in Orissa.
For domestic supply in rural areas, the RGGVY scheme
has set an ambitious challenge. For this to succeed, a political
climate will need to be created that empowers the regulators to
enforce the rules of the EA2003. This will ensure that rural
household connections receive reliable service, at least during
evening hours when domestic rural supply is most needed.
One way to carry out this tricky balancing act, while generation
capacity constraints and AT&C (aggregate technical and
commercial) loss reduction requirements are met, is to
supplement timed evening hour supply. Reliable 24 ¥ 7 supply
to schools, clinics, hospitals, water schemes (where needed),
telecom facilities, government offices, rural markets, and small
businesses (such as grinding and agro-processing) is essential.
Many of these institutions are public facilities and a close
dialogue with the district officers and the representative local
bodies is needed to ensure that the supply to these institutions
is reliable, and that costs of supply are accounted for through
transparent ‘subsidies’ or funds transferred between the
appropriate government body and the service provider.
Rural electrification is the key that unlocks the vast economic
potential of rural India. However, rural electrification is truly
a task of mammoth proportions. Consequently, there is need to
efficiently plan, manage, and implement the rural electrification
programme. It requires learning from international experiences,
but adapting our solutions to the ground realities of rural India.
This ambitious programme strengthened by the EA2003
framework can be implemented and can meet its demanding
targets. We would like to stick our neck out and say that the
lynchpin to maintaining the 8 per cent growth target and
accelerating it to 10 per cent p.a. in near future lynchpin is
achievable if the RGGVY targets are met; this will also meet
the aspirations of millions of rural folks and improve their
quality of life.
162 India Infrastructure Report 2007

ANNEXE
Table A6.1.1
Comparison of Distributed Generation Technologies
Technology Applications Pros Cons Scale
Diesel Engines • Mills
• Pumps
• Refrigeration • Easy maintenance • High fuel costs Millions of households
• Lighting, electronics, • Continuous operation • CO2emissions
and communication
Small Biomass • Mills
• Pumps
• Refrigeration • Continuous operation
• Lighting, electronics, possible • Noxious emissions 10 million households
and communication • No fuel cost
Mini-Hydro • Mills
• Lighting, electronics, • Long life, reliability • Site-specific 50 million households
and communication • No fuel cost • Intermittent
Wind • Mills • Site-specific
• Pumps • Intermittent
• Lighting, electronics, • No fuel cost • High cost of batteries Less than 10,000
communication households
Solar (PV) • Basic lighting and • No fuel cost • High cost of batteries 1.1 million households
electronic equipment • Little maintenance required
Batteries • Basic lighting and • Small initial investment • High cost of batteries Millions of Households
electronic equipment • Cost of battery charging

Table A6.1.2
Cost and Efficiency for Distributed Generation Technologies
Engine Gas Turbine Micro turbine
Generator Generator Generator Photo-voltaic Wind Turbine Fuel Cells
Despatchable Yes Yes Yes – – Yes
Fuel Diesel or Gas Gas Multiple Gas Sun Wind Gas
or Liquids
Efficiency, % (1) 35 29–42 27–32 6–19 25 40–57
Energy Density, kW/m2 50 59 59 0.02 0.01 1–3
Capital Cost, $/kW 200–350 450–870 500–1000 6600 1000 3000 (1000
(500 in 2001) expected when
fully
commercialized)
O&M Cost, $/kWh (2) 0.01 0.005–0.0065 0.005–0.0065 0.001–0.004 0.01 0.0017
Electrical Energy Cost, 0.07–0.09 0.06–0.08 0.06–0.08 0.18–0.20 0.03–0.04 0.06–0.08
$/kWh (3)
Energy storage Required No No No Yes Yes No
NOx (lb/BTU)
Nat Gas 0.3 0.01 0.01 N/A N/A 0.003–0.02
Oil 3.7 0.17 0.17 N/A N/A –
Heat Rates, Mills 10–15 5–10 5–10 N/A N/A 5–10
BTU/kWh
(contd)
 Electrification and Bio-energy Options in Rural India 163

Table A6.1.1 (continued)

Engine Gas Turbine Micro turbine

Generator Generator Generator Photo-voltaic Wind Turbine Fuel Cells

Expected Operating 40,000 40,000 40,000 – – 10,000–40,000

Life, Hrs.
Technology Status Commercial Commercial Commercial Commercial Commercial Commercial
in 2001
Notes: 1. Efficiencies of renewable energy technologies should not be compared directly with those of fossil fuel technologies since the fuel
is limited.
2. O&M costs exclude cost of fuel. There are no fuel costs for wind systems or photovoltaic.
3. Natural gas fuel is used for calculating energy costs except for wind and solar power.
Source: Cooperative Research Network, Summer 1999.

Table A6.1.3 Table A6.1.5

Remote Villages Electrification by MNES during 2005–6 Villages Electrified During Last Ten Years
S. No. State Villages electrified during 2005–6 Year No. of villages electrified
1 Arunachal Pradesh 40 1996–7 3843
2 Jharkhand 29 1997–8 3207
3 Manipur 3 1998–9 2780
4 Meghalaya 1 1999–2000 2093
2000–1 1218
5 Mizoram 7
2001–2 4111
6 Uttaranchal 164
2002–3 2626
7 West Bengal 49 2003–4 2781
Total 293 2004–5 3884
Source: MNES (2006). 2005–6 9819
Total 36362

Table A6.1.4
Status of Installation of Franchisee (As in July 2006)
NIT Issued Operational
S. No. State RGGVY Villages Other Villages RGGVY Villages Other Villages
1 Assam 816
2 Bihar 14730 20091 360
3 Chhattisgarh 1188 18532
4 Karnataka 17925
5 Nagaland 285
6 Punjab 12278
7 Rajasthan 1350 16 44
8 Uttar Pradesh 6000 876 2363
9 Uttaranchal 5321
10 Madhya Pradesh 114
11 Andhra Pradesh 5
12 West Bengal 883
13 Haryana* 1 district
Total 21918 52251 1780 27231
74169 29011
Note: * No. of villages for the district for which NIT issued in Haryana is not available.
NIT is Notice Invitation for Tender.
164 India Infrastructure Report 2007
REFERENCES
Banerjee R. (2006) ‘Comparison of options for Distributed
Generation in India’, Energy Policy 34(1), pp. 101–111, 2006.
Census (2002) Primary census of various states, Registress General
of India, New Delhi.
Dubash, N.K. (2004). ‘Electrifying Rural India: The Search for a
Viable and Sustainable Approach’, Silver Jubilee Symposium on
Governance in Development, Institute of Rural Management,
Anand, Dec. 14–19, 2004.
Duffie John A., and William A. Beckman (2006). Solar Engineering
of Thermal Process, John Wiley and Sons.
Kishore, A. (2003). ‘Development through Self-reliance, Reviving
Hope and Prosperity through Traditional Harvesting Systems:
Alternative to Big Dams’, UNEP, Geneva, (http://www.unep.org/
dams/files/Isses-basedworkshops/OACasestudies.pdf)
Linden H.R. (1999). ‘Let’s Focus on Sustainability, Not Kyoto’,
The Electricity Journal, 12(2), Elsevier.
Malengret Michel, Garth Naldrett, Johan Enslin (1995). Applying
Parks Transformation to a Single to a Three-Phase Converter, Power
Electronics Specialist Conference, 1995, IEEE, Volume 2 (June
1995).
Manikutty S. (2002). ‘Gujarat Co-Operative Milk Marketing
Federation (GCMMF) Asian Case Reserve Journal, Singapore
MNES (2006) Annual Report 2005–06, Ministry of non-
conventional Energy sources, New Delhi.
Modi, Vijay (2005). ‘Improving Electricity Services in Rural India’,
CGSD Working paper No. 30, Centre for Globalization and
Sustainable Development, Columbia University, New York.
NRECA (2002). Experiences in Cooperative Rural Electrification and
Implications for India,’ NRECA International Ltd.,
Rao, V.R. (2006). ‘Brief Presentation of Sri Raghava Rao, Managing
Director. The Anakapalli Rural Electric Co-op Society Ltd;
Kasim Kota: Visakhapatnam District: Andhra Pradesh: India’,
mimeo, The Anakapalle Rural Electric Coop Society Ltd.,
Anand.
REC (2005). Powering Rural India, Speech of the chairman of REC
at the 36th Annual General Meeting held on September 22,
2005, Rural Electricity Corporation, New Delhi.
Shah, Tushaar, Christopher Scott, Avinash Kishore, and Abhishek
Sharma (2003). ‘Energy, Irrigation Nexus in South Asia:
Improving Groundwater Conservation and Power Sector
Viability’, Research Paper #70. International Water Management
Institute: Battaramulla, Sri Lanka.
World Bank (2003). ‘Why are Power Sector Reforms Important for the
Poor?’, The World Bank, New Delhi
 Electrification and Bio-energy Options in Rural India 165

PART II BIO-ENERGY OPTIONS AND RURAL INDIA

Avinash Kumar Agarwal

GLOBAL ENERGY SCENARIO
The world’s increasing dependence on foreign oil poses
problems for the economy that go far beyond those associated
with oil deficits, oil prices, and volatility. Tenuous links to
geopolitics have been made in the debate about our ability to
quench our thirst for oil. The world is facing an energy crisis
of immense proportions as availability of cheap oil comes to
an end. Petroleum resources of most of the non-OPEC countries
have already peaked or are going to peak in the near future
(Figure 6.2.1).
Figure 6.2.1 suggests that oil production from Indian
facilities has already peaked in 1995 and at production will
be lower while India witnesses steep increases in demand.
Oil production from the non-OPEC countries is going to
decline from now onwards, and as a result, the world will be
entering a regime dominated by OPEC countries, as most of
the oil available in future will be from them (Figure 6.2.2).
Global oil production on a per capita basis has been
consistently declining at a rate of 1.20 per cent per year since
1979 (Figure 6.2.3). This rate is bound to dip steeply in view
of peaking oil resources around the world and soon the world
may face a grim energy challenge as far as petroleum resources
are concerned (Figure 6.2.4).
These trends emphasize that the energy resources based on
petroleum are rather limited and it is high time for us in India
to brace for the oil shocks in the coming years. One of the
ways to ensure energy security is to invest in developing
renewable sources of energy.
RENEWABLE ENERGY IN INDIA
Renewable energy sources offer viable options to address the
energy security concerns in a country, especially in rural areas.
There is significant potential in India for generation of power
from renewable energy sources, such as wind, small hydro,
biomass, and solar energy. Therefore, special emphasis has been
laid on the generation of grid quality power from renewable
sources of energy. In the past ten to twelve years, the capacity
of small hydro projects up to 3 MW (megawatt) has increased
fourfold from 63 MW to 240 MW. There exists an established
potential of 19,500 MW, including 3500 MW of exportable
surplus power from bagasse-based cogeneration in sugar mills
and 16,000 MW of grid quality power from other biomass

Non-OPEC, non-FSU Oil Production Has Peaked and is declining

MMBbl/D
40000 History
Norway 01

35000 Australia 2000

United Kingdom 99
30000 Ecuador 99 Yeman
Coloumbia 99 Oman
China 98 Neutral Zone
25000 Mexico
Argentina 98
Brazil
Malaysia 97 Angola
20000
Jordon 97
Syria 95
15000 India 95
Egypt 93
Indonesia 77
10000 NGL
Romania 76
Alaska
Canada (conv)
Rest USA
5000
Germany 67 GCM
Austria 55 Texas
0
1900 10 20 30 40 50 68 70 80 90 0 10

Fig. 6.2.1 Oil Production of most of Non-OPEC and Non-FSU countries

Source: ASPO (2006).

166 India Infrastructure Report 2007

2006 Peak
History
32.00
1999
World Oil
1 Forecast
1979 2000–2040
th =
Grow ear
/y
1973 0.75%

OPEC/non-OPEC
Production [Gb/year]

1 Crossover event:
2008
OPEC
Non-OPEC
16.00
3 2 3
2

1979 OPEC
1 3 dominance
2
2 OPEC
Non-OPEC
3

0.00
1960 1980 2000 2020 2040

Fig. 6.2.2 Global Oil Production of Most of Non-OPEC and OPEC Countries

Source: ASPO(2006).

6.00 Peak 1979

De
1.2 cline =
0%
/yea
r
Oil Production
Production per capita (b/c/year)

Per Capita (o) 1973

3.00 1999

1920
History

0.00
1920 1940 1960 1980 2000

Years

Fig. 6.2.3 Global Oil Production Per Capita Per Year

Source: ASPO (2006).

 Electrification and Bio-energy Options in Rural India 167

History

1999
Peak 1979
Slope
12.00
Slide BLACKOUTS
11.15

Energy Production 2000

32.00
Production per capita (boe/c/year)

Per Capita

Clif
2006

f
6.00 2008
WW II
Great
Depression
2012

3.32

Industrial Civilization 100 years

1930 2030

0.00
1920 1955 1990 2025 2050

Years

Fig. 6.2.4 Global Oil Production Per Capita Per Year and Future Projections

Source: ASPO (2006).

resources. Grid-interactive solar photovoltaic power projects 1. Wood and saw dust.
aggregating to 2.49 MW have so far been installed and other 2. Agriculture residues: rice husk, bagasse, groundnut shells,
projects of 0.8 MW capacity are under installation. Wind coffee husk, straws, coconut shells, coconut husk, arhar
power development in the country has been spurred by a mix stalks, jute sticks, and so on.
of fiscal incentives and promotional measures. Consequently, 3. Aquatic and marine biomass: Algae, water hyacinth, aquatic
generation from wind power projects has been increasing over- weeds and plants, sea grass beds, kelp, coral reef, and so on.
time from 0.03 BkWh (billion kilowatt hour) in 1970 to 2.2 4. Wastes: MSW, municipal sewage sludge, animal waste,
BkWh in 2002 (Reddy, 2003). industrial waste, and so on.
Due to the variety and diversity of biomass, sufficient data
and documentation regarding availability and consumption/
Potential of Biomass for Rural Energy
utilization patterns is not easily available. Although biomass
Worldwide photosynthesis activities are estimated to store meets a major part of the total energy requirement, it does not
seventeen times as much energy as is consumed annually by find an appropriate place in the overall energy balance of India.
all nations of the world. Even if the energy required for
collection, processing, and conversion into other useful forms
Availability of Agro-Residues
is taken into account, biomass still holds the promise to meet
the complete energy needs of the world, if managed and used Agricultural residues can be divided into two groups, namely,
effectively in a sustainable way. crop residues and agro-industrial residues. Crop residues are
Biomass can be classified into two types: woody and plant materials left behind in the farm after removal of the
non-woody. Non-woody biomass comprises agro-crops and main crop produces. The remaining materials could be of
agro-industrial processes residue. Municipal solid waste or different sizes, shapes, forms, and densities like straw, stalks,
MSW, and animal and poultry wastes are also referred to sticks, leaves, haulms, fibrous materials, roots, branches, and
as biomass as they are biodegradable in nature. The main twigs. The agro-industrial residues are by-products of the post-
biomass sources are: harvest processes of crops such as cleaning, threshing, linting,
168 India Infrastructure Report 2007

sieving, and crushing. These could be in the form of husk, depends upon the agro-climatic conditions, all agro-residues
dust, straws, and so on. The major crop residues produced in are not available in all parts of the country (Table 6.2.3).
India are straws of paddy, wheat, millet, sorghum, pulses, oilseed Agro-residues, however, do suffer from two major constraints:
crops; maize stalks and cobs; cotton stalks; jute sticks; sugar high moisture content and relatively low bulk density. These
cane trash; mustard stalks. The agro-industrial residues are constraints inhibit their economical transportation over long
groundnut shells, rice husk, bagasse, and cotton waste and distances, thereby necessitating their utilization near the sources
coconut shells. The quantity of agricultural residues produced
differs from crop to crop and is affected by seasons, soil types, Table 6.2.1
and irrigation conditions. Agricultural Crop Residue Production in India
Production of agricultural residues is directly related to
Production (million tonnes)
the corresponding crop production and the ratio between
the main crop product and residues varies from crop to crop, Crop residue 1994 2010 (Projected)
and at times, even with the variety of the seeds in one crop Field-based residues
itself. Thus, for known amount of crop production, it may be Rice straw 214.35 284.99
Wheat straw 103.48 159.98
possible to estimate the amounts of agricultural residues Millet stalks 19.42 17.77
produced using the residue-to-crop ratio. It may be noted Maize stalks 18.98 29.07
that with improved agricultural farming techniques, production Cassava stalks 0.36 0.40
of crops increasing consistently in the past three decades. Cotton stalks 19.39 30.79
Correspondingly, the availability of agricultural residues has Soybeans (straw + pods) 12.87 34.87
Jute stalks 4.58 1.21
also been changing with time. Some past and future projected Sugar cane tops 68.12 117.97
data for various agro-residues at the national level are given Cocoa pods 0.01 0.01
in Table 6.2.1. Groundnut straw 19.00 23.16
However, most agricultural residues are not found through- Sub-total 480.56 700.22
Processing-based residues
out the year but are available only at the time of harvest. This
Rice husk 32.57 43.31
makes collection easy, but creates storage problems if the resi- Rice bran 10.13 13.46
dues have to be saved for use during lean period, especially due Maize cob 2.59 3.97
to its low bulk density. The amount available depends upon the Maize husks 1.90 2.91
harvesting time, storage-related characteristics, storage facility, Coconut shells 0.94 1.50
Coconut husks 3.27 5.22
and so on. The broad periods of availability of some important Groundnut husks 3.94 4.80
agricultural residues are given in Table 6.2.2. In India, normally Sugarcane bagasse 65.84 114.04
two crops—kharif and rabi—are taken into consideration. Coffee husk 0.36 0.28
Therefore, availability of crop residues is expected to be spread Sub-total 121.54 189.49
evenly over the year. As a result, crop residues of one kind or the Total 602.10 889.71
other are available throughout the year. Since crop production Source: Iyer et al. (2002).

Table 6.2.2
Seasonal Availability of Agricultural Residues
Availability period
Residue January February March April May June July August September October November December
Arhar stalk
Maize stalk
Maize cobs
Cotton stalk
Mustard husk.
Jute sticks
Rice husk
Groundnut
shell
Source: Iyer et al. (2002).
 Electrification and Bio-energy Options in Rural India 169

Table 6.2.3 1. Supply-side approach or production cost method, and

Region-wise Availability of Various Crop Residues in India 2. Demand-side approach or an opportunity cost estimation.
Region Crop residues available In the supply-side approach, the contribution of the costs
of production, harvesting, collection, transportation, and
North (Punjab) Sawdust rice husks, rice straw, and
mustard stalks. storage are taken into account to arrive at a reasonable estimate
of the minimum monetary value of agro-residue. This method
North-east (Assam) Jute and mesta sticks and rice husks
does not take into account the quality of the agro-residue such
West (Gujarat) Cotton stalks, arhar stalks, castor
as its energy content (calorific value) and the effect on efficiency
waste, groundnut shells, maize stalks,
and maize cobs
for its utilization, during energy conversion to meet the energy
requirements. Against this in the demand-side approach, the
Central (Maharashtra) Sawdust, groundnut shells, arhar stalks,
maximum affordable cost (monetary value of opportunity
cotton stalks, sugarcane waste, and
maize waste. cost) of agro-residue as biofuel for a given energy application
is calculated based on the amount and the cost of fuel(s) that
South (Tamil Nadu) Rice husks, sawdust, groundnut shells,
tamarind shells, coir pith, sugarcane is likely to be substituted by biofuels. This MAC (maximum
waste, and coffee husks affordable cost) of the agro-residue is essentially the monetary
South (Karnataka) Rice husks, sawdust, groundnut shells, value of an equivalent amount of fossil fuel that can be
coffee waste, coir pith, and sugarcane replaced by the use of agro-residue as biofuel. It is:
waste. 1. a measure of equivalent monetary worth of agro-residues,
2. a basis for the comparison of the prices of two or more
Source: Mande (2005).
agricultural residues for a given application, and
3. an upper limit to the price of agro-residues beyond which
of production. Unlike fossil fuels, which are concentrated the use of fossil fuel may be a better economical/financial
sources of energy and chemicals, the management strategy option.
for utilization of agro-residues has to be different. These are, A rough calculation suggests that it makes a financially
therefore, most appropriate for decentralized technological attractive proposition to use agro-residue by transporting it
applications in rural environments. The processing of the to a longer distance (say, 50 km) rather than transporting coal
agricultural produce and utilization of agro-residues, therefore, from 300 km for use as fuel. Similarly, if coal were to be
can contribute their maximum share to rural development. transported over a distance of 1500 km for use, then it would
With worldwide shortage of wood, especially in the be economical to transport agro-residue over a distance of
developing countries, and the need for afforestation to maintain 300 km distance by tractor trolley (Table 6.2.4).
the global ecological balance, there is an increasing demand
for proper utilization of agro—and forestry residues to replace Table 6.2.4
wood. At present these residues are either grossly underutilized Comparison of Agro-residue Cost Estimation
or completely unutilized due to in-situ burning in fields as a (Supply and Demand Side Approaches)
means of disposal. Development of technologies to utilize Cost of agro-residue as biofuels (rupees/tonnes)
this major resource and its management need to be emphasized
Production cost Maximum affordable
to meet the growing energy demands at the domestic level as method cost method
well as of rural small-scale/cottage industrial sectors.
300 1500
50 km 300 km km km
MONETARY VALUE OF BIOMASS On from from At from from
Agro-residue farm farm farm pithead pithead pithead
Biomass, both woody as well as agricultural, has acquired Arhar Stalks 338 502 698 669 903 1840
considerable importance as a biofuel, used directly in several Cotton Stalks 353 894 1089 622 840 1712
applications such as domestic cooking, industrial process Groundnut Shells 145 564 759 720 972 1979
heating, electrical power generation, and also in briquetted
Jute Sticks 729 590 786 700 945 1926
form. In order to formulate and implement long-term strategies
Maize cobs 363 309 505 660 891 1816
for efficient and economic utilization of biofuel as the energy
Maize Stalks 426 517 713 652 881 1794
source for energy conversion and utilization, it is important
Mustard Stalks 288 528 723 703 949 1933
to estimate its monetary value for the end user. The following
Rice husk 399 453 648 506 683 1391
two approaches can be used for determining the monetary
value of biofuel: Source: Tripathi et al. (1998).
170 India Infrastructure Report 2007

ELECTRICITY FROM BIOMASS TECHNOLOGIES
The technologies used for producing power from biomass,
range from the conventional to the cutting edge of research.
The choice of technology can drastically affect the economics
of biomass electricity and limit the size of the plant producing
it. Table 6.2.5 summarizes various technological options
available for biomass-based electricity generation.
Decentralized Biomass-based Power Generation
Conventional biomass-based thermal power plants are normally
suitable for large megawatt-level capacity. However, as biomass
generally has low energy density, it favours small, dispersed
plants for converting biomass into other energy carriers. Thus,
a modern megawatt/gigawatt capacity conventional steam-
turbine electricity plant is unlikely to be fuelled by biomass
since it would draw its fuel from an enormous area, incurring
prohibitive transportation costs. It is also clear from Table
6.2.5 that for decentralized, small-capacity power generation
using biomass, Otto or Diesel cycle IC (internal combustion)
engines and Sterling cycle systems are more suitable.
Biomass gasifier based system converts solid biomass into
the more user-friendly gaseous form, which can be used directly
in IC engines to generate power. Table 6.2.6 compares biomass
combustion with the gasification system for power generation,
giving their advantages and disadvantages. It is seen that
though biomass gasification is not right for grid interaction,
it is more suitable for decentralized, small-capacity biomass-
based power generation due to its many advantages over the
combustion-based system such as low capital investment,
higher operational process efficiency at smaller capacities and
less power consumption.
Biomass Gasification
In a gasifier, a solid fuel is converted into gaseous fuel (producer
gas) by a series of thermo-chemical processes such as drying,
pyrolysis, oxidation, and reduction. If atmospheric air is used
as the gasification agent, which is the normal practice, the
producer gas will consist mainly of carbon monoxide, hydrogen,
and nitrogen.
The calorific value of the producer gas is about 1000–
1200 kcal/Nm3 (kilocalories per normalized cubic meter).
Approximately, 2.5 Nm3 of producer gas is obtained from the
gasification of one kg (kilogram) of biomass. This gas can be
used for the generation of motive power, either in dual fuel
engines or in diesel engines, with some modifications. Engines
operating on a spark-ignition system (such as petrol engine)
can be made to run entirely on producer gas, whereas those
using CI (compression ignition) systems (such as diesel
engine) can be made to operate with about 60 per cent-80 per
cent diesel replacement by gas. Normally, for producing
one kWh (kilowatt hour) unit of electricity, using the gasifier
based system, about 0.9–1.1 kg of biomass is required in the
dual-fuel-mode operation and about 1.5–1.8 kg biomass is
required in 100 per cent gas engine operation. The gas can
also be burnt directly for applications such as cooking in hotels,

Table 6.2.5
Comparison of Biomass Electricity Generation Systems
Rankine cycle Otto/Diesel cycle Sterling cycle
Wood Briquetted H2/
Alternative Technology Steam Organic based Biomass Air He
Acceptability of different biomass Yes Yes No Yes Yes Yes
Constraints related to installed capacity Heavy Moderate Moderate Moderate Heavy Mod-
erate
Cost Constraints Moderate Heavy Moderate Moderate Moderate Heavy
Constraints related to collection of biomass Heavy Not severe Not severe Not severe Not severe Not
severe
Level of development within the country Very little Very little High Fair Fair –
Indigenous development Good Poor Good Good Good Very
poor
Amenability for decentralized use Poor Good Good Good Good Good
Cost of maintenance High High Moderate Moderate Moderate High
Energy requirement for pre-processing Low Low Moderate High Low Low
Space requirement High High Low Moderate Low Low
Water requirement High High Low Low Low Low
Source: Mande (2005).
 Electrification and Bio-energy Options in Rural India 171

Table 6.2.6
Comparison between Biomass Combustion versus Gasification-based Power Generation Technologies
Suitability parameter Gasification Combustion
Plant capacity Economical at small scale levels (up to Economical only at large-scale levels
500 kW) (1 MW upwards)
Biomass Single biomass with less material handling Multi raw material with expensive raw material
system and quite efficient with wood chips handling systems
Absence of deposition of metal vapours, oxides, Deposition of metal vapours, oxides, etc., in
etc., in case of pulverized fuels. case of pulverized fuels.
Investment cost Higher on retrofit and low otherwise (average High (average 35–40 million rupees per MW)
25 million rupees per MW)
Process and overall efficiency High for small scale system High for large-scale system
Maintenance More Less with standard Practices
Infrastructure Small Huge
Power consumption Less More
Emission control (NOx, SOx) Superior Possible
Grid interaction Not recommended Very good
Labour force Small Huge
Skilled personnel Not very much Required
Captive plant feature Highly suitable for small-scale level Suitable for large-scale level
Remote and rural application Very well adapted Not recommended
Operational experience in India Quite common in India for rural electrification Quite common in India on the large scale
purposes on a small scale
Inadequate experience for large-scale, grid- Adequate experience for large-scale, grid
connected systems connected systems
Technology status Developing, near commercialization Well developed, advanced, and commercialized
Source: Mande (2005).

production of hot water and steam in small industries, and
drying of a variety of agricultural and industrial products.
BIOFUELS
Biodiesel is a renewable fuel, and technically speaking, biodiesel
is vegetable oil-methyl/ethyl ester. Biodiesel molecules are very
simple hydrocarbons containing no sulphur, ring molecules,
or aromatics associated with fossil fuels. Advantages of using
biodiesel can be divided into technical and socio-economic
categories. Technical advantages of using biodiesel are very
low sulphur content, no aromatics, no net carbon dioxide
addition to the environment, and about 99.6 per cent
biodegradability within twenty-one days. It is also a renewable
source of transportation energy.
Socio-economic advantages of using biodiesel are energy
security, economic and social cohesion, healthy environment,
upliftment of the rural communities, employment generation,
rejuvenation of wasteland, and so on. Although biodiesel
offers several advantages, technical, environmental, and socio
economic, it has some disadvantages such as slightly lower
energy content (5–7 per cent less than the distillate fuel),
slightly adverse effects on engine components (due to olefins,
traces of glycerides), relatively faster engine oil degradation and
marginal increase (1–6 per cent) in NOx (oxides of nitrogen)
emissions from conventional compression ignition engines.
The economics and the price of biodiesel based on the long
run marginal-cost principle are dependent on and sensitive
to many factors like land area of seed production, per-hectare
seed yield, by-product generation from the process, sale price
of by-products, etc. Any policy directive should consider the
proper channeling and marketability of the byproducts for a
viable cost of production of biodiesel to make it competitive
to other fuels for the benefit of end-users of this alternative
fuel. The mandatory blending requirement and assurance of
buy-back of biodiesel from the end-users can be a policy
measure to support the economical and financial viability of
biodiesel production. This has to be done through defining
the role of each player in various segments of biodiesel
production by addressing tax and import duty concessions,
if necessary, to make the production of biodiesel sustainable,
considering the future energy security needs of the country.
172 India Infrastructure Report 2007
Development of Jatropha as Biodiesel Crop
Jatropha curcas has been identified for India, by many experts,
as the most suitable TBO (tree-borne oilseed) for the
production of biodiesel, in view of the non-edible oil available
from it, shorter gestation period, hardy nature, high seed/oil
yields, and the possibility of its plantation throughout the
country. However, as Jatropha is not a native species of India,
no systematic studies were undertaken earlier regarding tree
improvement. Initiatives have been taken during the last two
years to increase the compact area under genetically improved
Jatropha species, which can produce better quality and quantity
of oil besides being high-yielding. But these initiatives have
to be more result-oriented and should focus on state-wise survey
and collection of Jatropha seeds, tree improvement/variety
diversification for desirable characteristics, multi-location trials
for agronomical studies in rain-fed, irrigated, alkaline soils,
standardization of agro-forestry models to make Jatropha
plantation economically viable, disease and pest management,
and intercropping with other value-added crops, that is,
medicinal plants, fruits, and so on.
Recognizing access to energy by the poor as a major barrier
to the rapid growth prospects of India as well as its vulnerability
to volatile international oil prices, the Government of India
has, in recent times, laid major emphasis on biofuels, in
particular, Jatropha-derived biodiesel. Public sector oil
companies have offered an assured buy-back price for biodiesel
at 25 rupees per litre. A detailed project report, recently prepared
under the Ministry of Rural Development (MoRD), identified
various end-uses for non-edible straight vegetable oils (SVOs)
produced from plants, such as Jatropha, including their direct
use for transport applications and power generation on a
decentralized basis apart, from conversion of the SVOs to
biodiesel for purposes of blending with petro-diesel.
Large tracts of wasteland can be placed under such plantations
for production of biodiesel. Under alternate assumptions of
productivity of such plantations and efficiency with which
oil could be extracted, biodiesel could meet as much as 40
per cent of India’s diesel requirements by the year 2030.
As such, prima facie, biodiesel seems to have the potential
to contribute significantly to India’s energy security. However,
a clear choice needs to be made on the priorities of use of the
SVOs produced from plants such as Jatropha. The use of
SVO for decentralized applications, with R&D (research and
development), could go a long way in securing access to energy
in the remote rural areas, either in the form of a fuel providing
motive power or for conversion into electricity to feed into
local mini-grids. Alternately, the SVO could be converted
into biodiesel for purposes of blending into petro-diesel, thereby
saving foreign exchange. Irrespective of the end-use application,
there is an urgent need for the government to support a targeted
R&D programme that should address plantation models,
enhancing plant productivity and resilience of oil extraction,
environmental and social impact assessments, and institutional
models, to maximize local socio-economic benefits.
The National Mission on Biodiesel (NMB)
The report of the Planning Commission (2003) highlighted
the increased acceptance and usage of biodiesel worldwide as
a solution to the problem of environmental pollution and
energy security, reducing imports of petroleum, rural
unemployment, and the demands of an agricultural economy.
A number of new initiatives have been taken up by
many corporate organizations, NGOs, and individuals for
the promotion of biodiesel. However, in the absence of a
national policy on biodiesel, these efforts have not yielded
tangible results.
The MoRD has been designated as the nodal ministry for
implementation of the recommendations of the Committee,
especially for launching the NMB to look into Jatropha
plantation throughout the country. As part of the
demonstration project under the NMB, Jatropha plantations
are to be raised on 0.4 million hectares of land in various states
across the country with funding from the GOI as against a
target of 11.19 million hectares of land required for achieving
20 per cent biodiesel blending with diesel. Seed-collection
centres/oil expellers are required to be established to procure
seed and extract oil. The oil produced in these centres will be
transferred to transesterification plants to produce biodiesel.
Thereafter, the biodiesel will be blended with petrodiesel by
oil companies and marketed through their retail outlets. The
demonstration project is planned to be implemented by
involving various stakeholder ministries of the government,
dealing with agriculture, rural development, environment and
forests, petroleum and natural gas, and so on. Phase II of the
mission may consist of self-sustaining expansion of the
programmes, and is, thus, proposed to be people-driven, with
the government playing the role of a facilitator. All stakeholders
in the mission, including private entrepreneurs, are aggressively
preparing themselves to strengthen the important links in
the biodiesel manufacturing chain, that is plantation sector,
oil expelling, transesterification, marketing and distribution,
R&D, capacity building, and education and awareness.
Current Status of Biodiesel in the Country
The Ministry of Petroleum and Natural Gas (MoPNG)
announced a biodiesel purchase policy in October 2005. It
prescribes that companies shall purchase biodiesel of standard
quality through its notified centers at Rs 25 per litre. Depending
upon the market conditions, the oil companies will be free
to review the price every six months. The policy recognizes
the vital role that PRIs can play in the promotion of biodiesel.
 Electrification and Bio-energy Options in Rural India 173

The Petroleum Conservation Research Association
(PCRA) has opened the National Biofuel Centre (NBC) at
its headquarters in New Delhi that has ‘root-to-canopy’
information to educate the masses. The PCRA has also
introduced a biodiesel bank that recognizes the efforts of various
bodies in promoting biodiesel. The bank awards credit points
for work done on propagation, promotion, R&D (research
and development) efforts, imparting training, and developing
plants and machinery to promote biodiesel. Uttaranchal has
constituted the Uttaranchal Biofuel Board for the promotion
of biodiesel in the state. Chhattisgarh has formed the
Chhattisgarh Biofuel Development Authority, and the Andhra
Pradesh government has set up a task force for the same (Box
6.2.1). Several other states have either formed task forces or
promoted NGOs to take up plantation. The National Oilseeds
and Vegetable Oils Development Board has implemented an
R&D network programme in the country to develop practices
for cultivation in nearly 1800 hectares in the country. The
Department of Biotechnology has initiated the Biofuel Mission
and the Jatropha Mini Mission to select good germplasm,
develop quality planting material, and standardize agro
techniques. The Council of Scientific and Industrial Research
has initiated a network programme for genetic enhancement
in association with the industry under its prestigious New
Millennium Technology Leadership Initiative programme. The
National Botanical Research Institute, Lucknow, in association
with Biotech Park, Lucknow has initiated efforts to educate
farmers, industry, and entrepreneurs to develop a model nursery,
and model plantation; and to effect certification of seeds for
their oil. It has also entered into partnership with the Indian
Institute of Petroleum, Dehradun, for providing end-to-end
technology to industry. TERI, New Delhi has been involved
with the cultivation of Jatropha on degraded sites, and the
promotion of Jatropha for biodiesel on an industrial scale.
lIT Kanpur is involved in testing engine efficiency, long-
term durability test, vehicular field trials, particulate, and
pollution issues related to biodiesel while lIT Delhi is working
on the protocols of machines for various operations involved
in producing biodiesel. Several NGOs and the industry have
plunged into the biodiesel programme and are cultivating
Jatropha for seed production.
The country has nearly 63 million hectares of wasteland,
out of which 33 million hectares has been allotted for tree
plantation. The collective efforts of farmers, NGOs, contract
farming, industry, and international promoters can produce
sufficient feedstock to achieve a biodiesel mix of five per cent
in conventional diesel. This is a sustainable development
process leading to large-scale employment of rural human
power. Also, it will reduce the foreign exchange outflow for
importing crude oil, the cost of which is continuously rising
in the international market.
Issues in Large-Scale Plantation
Many government departments, multinational oil companies,
NGOs, rural communities, and large and small farmers have
undertaken large scale plantation in the last decade. The
government sector has started many initiatives to encourage
and support such plantations by different stakeholders on
private, community, and government wastelands. Subsidies

Box 6.2.1
Biofuels in Chhattisgarh, Uttaranchal and Andhra Pradesh

CHHATTISGARH
In line with the National Mission on Biodiesel the Chhattisgarh state government took up an exhaustive programme for planting
Jatropha on almost one million hectares of fallow land available in the state by 2012. This includes the land lying unused for want of
desired soil character or irrigation. To start with, the Government of Chhattisgarh set up a Chhattisgarh Biofuels Development
Authority, in January 2005 for the promotion of biofuels programme in the state.
The state has about 44 per cent forest cover, which produces numerous types of underutilized TBOs (Tree Borne Oilseeds) such as
Jatropha, karanja, mahua, and kusum in abundant quantities. This provides ample opportunities for the promotion of the biofuels
programme in the state. It is projected that by undertaking the plantation of Jatropha/karanja on one million hectares of fallow land
in Chhattisgarh, the following production will accrue.
1. Jatropha seed: 10 million tonnes
2. Biodiesel: three million tonnes
3. De-oiled cake (bio-manure): seven million tonnes
4. Glycerol: 0.5 million tonnes
5. Biogas: 3500 million cubic metres
6. Electricity: 700 MW (megawatt)
Though the above are only estimated figures, they reflect the huge potential available in Chhattisgarh for setting up biofuel
projects through private investments.
174 India Infrastructure Report 2007

Policy Initiatives of Chhattisgarh Government

The Government of Chhattisgarh is targeting fallow land as well as barren/unused land belonging to farmers for the plantation of
TBOs so that the set objectives are achieved in the minimum possible time. The various policy initiatives taken by the state government
included supply of Jatropha saplings to farmers, land allotment policy for investors and support price for purchase of TBOs. To ensure
that the farmers planting Jatropha on fallow land get proper price for their TBO produce, the state government has declared a support
price for procurement of the same. The support prices are fixed for Jatropha seed (Rs 550 per quintal), karanja seed (Rs 450 per
quintal) and Jatropha/karanja oil (Rs 18 per kilo).
Once the targeted area of one million hectares is brought under Jatropha plantation by the year 2012, various socioeconomic
benefits accruing out of biofuel programme to the state will witness improvement of the environment, improved soil fertility of
barren land, achievement of energy security goals locally, and saving of the appreciable costs being incurred on transportation
of fuel at present. Besides, it will also generate employment at the village level through extensive installation of oil expeller/
transesterification units.

UTTARANCHAL
Of the total geographical area of the Uttaranchal state, 65 per cent is forest land. Of this, approximately 45.74 per cent is under forest
cover and the remaining 19.26 per cent, including that of Van Panchayats, is partly degraded. The degraded forests are leading to
massive soil erosion and ecological imbalances. Thus, there is a need to implement the biofuel programme in totality.
The state has undertaken an ambitious scheme of biofuel species plantation in an area of 200,000 hectares. For managing the
biofuel species plantation, the state has constituted the Uttaranchal Biofuel Board on public-private partnership basis.
The biofuel programme has been divided into two phases. The first phase starting from 2005–6 will cover 100,000 hectares of
Jatropha (Jatropha curcas) plantation. The second phase, in which another 100,000 hectares of Jatropha plantation will begin from
2011–12, will be completed in the next four years.
It is estimated that one rural family with two hectares of Jatropha plantation can generate Rs 28,000 per year (after five years of
plantation), which is sufficient to run the household. Unlike diesel and kerosene subsidies running into several hundred crore rupees,
biodiesel is not subsidized and it is one of the best fuels for remote villages. Jatropha plantation provides a net annual energy yield that
is equivalent to about one tonne per hectare of crude oil imports and 2000 units of electricity generation through gasification of oil
cakes. Jatropha plantation will impact positively 100,000 rural families, revitalize unproductive land, and generate carbon credits in the
Uttaranchal state and other significant revenues by offsetting the social costs of fossil fuels. It also has a potential of providing employment
in the far flung areas of the state.

ANDHRA PRADESH
In Andhra Pradesh, the plan of action for biofuel programme started with identification of areas, which have not received rainfall
beyond 600 mm during nine of the last eighteen years. The government has listed out ten such districts namely Anantpur, Chittor,
Kurnool, Mahbubnagar, Medak, Nalgonda, Nellore, Ongole, and Ranga Reddy. The share of wasteland here is about 53 per cent. The
required oil-expelling and transesterification capacity is 9600 TPD (tonnes per day) and 3000 TPD, respectively. The state has a total
of about 15,714 hectares of land earmarked for plantation purpose, and the total cost for the programme is about Rs 45 crore. Of the
15,714 ha earmarked, irrigated land comprises 7400 ha and rain-fed area extends up to 8,000 ha. Seedlings are being supplied to the
farmer free of cost. In addition, the government is also providing adequate land preparation facilities. AP has enabled seed procurement
by adopting a committee approach involving the best institutes in the country. About 37 tonnes of good quality seed from across
sixteen sites have been collected. About 178,000 seedlings in the ten districts have been raised, which go directly to the farmers from
the nurseries of the research institutes.
Research and development is under the auspices of premier research institutions like Central Research Institute for Dryland
Agriculture, International Crops Research Institute for the Semi-Arid Tropics, Hyderabad, Directorate of Oilseed Research, Hyderabad,
National Bureau of Plant Genetic Resources, New Delhi, Indian Institute of Chemical Technology, Hyderabad, and Acharya
N G Ranga Agriculture University, Hyderabad. The institutes are involved in the collection of high-quality germplasm and carrying
out other necessary experiments within a mandate period of three years to bring out the best plant material and also the best
agricultural practices.
As Jatropha is a cash crop, failure can have a devastating effect on farmers. A step forward in providing safeguards has been taken
by involving ICICI Lombard, which has already covered about 2800 farmers with weather insurance. A risk fund is proposed to
guarantee minimum income to Jatropha growers in case of yield loss. Guaranteed buy-back price (with an adjustment clause) for
farmers through tripartite agreements to cover income/market risks is also proposed to be drawn between growers, industry, and
biodiesel board.

for purchase of seeds, planting stock, planting operations,
and a buy-back policy for biodiesel are some of the incentives
to support a successful biodiesel mission. However, initial
efforts produced mixed results due to lack of information
and systematic research, as also knowledge gaps. Subsequently,
many research organizations have undertaken programmes
to standardize technical and biological aspects such as nursery
techniques, planting models, cultural operations, harvest
methods, and genetic improvement programmes to identify
superior genetic material to maximize yield.
These research findings and on-hand field experiences have
resulted in significant improvements in knowledge related to
commercial production from large-scale plantations. For
example, the myths on irrigation requirements, and their
correlations with seed yield have been cleared. Bio-fertilization
with the use of mycorrhiza and protection from pests and
diseases also enhance yield even on marginal and highly
degraded soils. However, more efforts are required to answer
questions related to variation in yields, and refinement of
plantation models and cultural operations.
Limitation of Vegetable Oils as Diesel Fuel
Vegetable oils when used as diesel fuel have various technical
limitations such as high viscosity, poor atomization, poor
volatility, thermal cracking in diesel engines, poor oxidation
stability, polymerization in combustion chamber leading to
deposits, injection fouling by deposits, fuel line and filter
clogging, polymerization of triglycerides in lube oil, and so
on. Hence, modification of vegetable oils is necessary for
efficient and trouble-free engine operation. One way to modify
vegetable oils to produce diesel is to transesterify them.
BIO-ETHANOL PROGRAMME
Society as a whole will benefit from an ambitious, global
ethanol introduction as a renewable alternative to diesel.
However, many myths such as lower calorific value, cetane
number, production potential of ethanol, associated with
sugarcane ethanol are impossible to ignore. Predictably, staunch
opposition comes from fossil fuel industry. Ethanol fuel is an
option which can cohabit with traditional fossil fuels, improving
long-term security of supply. Although the US Environment
Protection Agency declares that temporary use of such fuels
will not cause major damage to engines, the same cannot be
said regarding tailpipe emission control systems as ethanol
fuelled vehicles emit significantly large quantities of unregulated
pollutants such as aldehydes.
Biofuel programmes in developed countries are very often
treated as a domestic issue: a deficient strategy that provides
ammunition for the defenders of fossil fuels in terms of
Electrification and Bio-energy Options in Rural India 175
reliability and potential. The real issue is that there are import
barriers in developed countries to introducing biofuels, as with
many other agricultural products. Biofuels such as alcohol
are energy sources produced in rural areas to primarily service
the energy needs of cities that can afford to pay. Often, biomass
programmes are established to produce energy for the poor
living in rural areas. These programmes have their merits but
are limited economically because of size, given that the buyers
have little purchasing power or are not even involved in the
commercial market.
Although incentives to domestic production act in the
learning curve effect, there is also a need to counteract the
pressure from inefficient suppliers and to increase production
efficiency worldwide, including progressive trade liberalization.
This will allow developing countries to produce biofuels not
only for domestic consumption, but also for obtaining revenues
from biofuel exports.
WAY FORWARD
Biomass gasification is one of the upcoming renewable energy
technologies in India and its contribution to overall energy
supply is likely to increase rapidly in future. Though biomass
can offer a decentralized and environment-friendly (with net
zero carbon-di-oxide emissions) energy option, biomass
gasification is still perceived as a cumbersome and unreliable
technology for decentralized power generation. Therefore,
in spite of the government’s programme for its promotion,
since 1984, vast potential still lies untapped. The major
problem faced in the acceptability of the biomass gasifier as a
decentralized power plant is due to its cumbersome and
unreliable long-duration operation, the main reasons being
fuel bridging and clinker formation within the gasifier and
the hampering of smooth fuel movement calling for constant
attention of the operator. Also, ineffective cooling of gas results
in lower efficiency and the presence of high tar and particulate
content in gas calls for frequent shutdowns for maintenance.
Therefore, there is a need to develop low-tar gasifier designs
and gas cleaning-cooling systems with minimal waste water
generation. Unfortunately, there is no organized market for
biomass trading and this is a major barrier in developing
biomass-based energy systems on a large scale. A key factor
that can influence the future of biomass energy is the
development of a market for biomass energy resources and
services. Long-term penetration of biomass energy in the
industrial and power sector depends on the cost of delivered
energy as well as reliability of technologies. The future of
biomass energy lies in its use with modern technologies.
India needs to take separate approaches for successful
implementation of biofuels programme in the country’s different
segments. Vegetable oils can be utilized as they are or by
176 India Infrastructure Report 2007
converting them to methyl/ethyl esters i.e. biodiesel. Agricultural
engines like pump-sets and farm machinery engines are simpler
engines in terms of construction and they can be very well
maintained by villagers. Hence, they may use SVOs with a
modified maintenance schedule, whereas more sophisticated
engines like transportation engines need to use more refined
fuel such as biodiesel. Transportation engines are expensive
engines and affect the urban air-quality. Their population is
quite large and concentrated in urban areas, hence, they should
use biodiesel, which is a more refined and standardized fuel.
For production of biodiesel, a multi-pronged approach
seems more practical, where transesterification may be carried
out by oil refineries in an organized manner and the biodiesel
premixed with diesel at the refinery before distribution. The
process of transesterification can also be carried out by
cooperatives at the district headquarters level, which will cater
to the district, thus generating employment in rural areas
and avoiding the fuel transportation related costs. This will
also reduce the energy dependence of rural areas. SVO can,
however, be used in villages for decentralized power generation
as well as agriculture farm machinery in remote areas and
rural areas. Bio-mass based energy options have the potential
to change rural areas, especially, those having large tracts of
fallow and barren land.

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