Bihar’s Rural Electrification and the role of Decentralized Renewable Energy

As of today, 90% of Bihar’s villages are electrified, whereas only 25% of the rural households have legal connections. 20,000 transformers got burnt out in the first phase of implementation of the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) scheme. The per capita consumption of power is 130 units as against the national average of about 900 units. What went wrong with the rural electrification plans and implementation? How does Decentralized Renewable Energy (DRE) play a role in all of this?

In this blog, I have shared my experiences of understanding of how Bihar went about its rural electrification efforts, through interactions with officials in the state power sector, a distribution franchisee and end users. I sought to find answers to my questions on implementation of the RGGVY and DDG schemes, working of sub-stations, functions of distribution franchisees and end user perspectives. Finally I have drawn upon my takeaways from the interactions.

I visited Bihar from 16th Sept to 22nd Sep, 2014. I spent the first two days in Patna and the remaining days in Munger.

Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) Scheme Implementation:

When the central Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) scheme was announced, each state was asked to submit a rural electrification plan, in line with the Electricity Act 2003 and the Rural Electrification Policy. In my conversation with the Chairman, Bihar Electricity Regulatory Commission (BERC), I got the following information:

  • Bihar does not have a comprehensive implementation level rural electrification plan. (The best that I could find is this – which is just a copy paste of the policy document).
  • As a result, implementation was haphazard. The DPRs that were prepared and submitted to the MoP for release of funding contained incorrect information about the number of BPL and APL houses to be electrified. Also, a lot of villages were left out of these DPRs. This resulted in incorrect selection in transformer sizes, incorrect estimation of energy meter requirements, incorrect types of connections given and illegal theft of power.
  • As a result, 20,000 transformers got burnt out in the first phase of implementation. The number of energy meters available was insufficient; so many households did not get metered connections.
  • As of today, 90% of Bihar’s villages are electrified, whereas only 25% of the rural households have legal connections. The extent of illegal connection is unknown.
  • The state government doles out subsidies of about Rs. 2,500 Crores each year to bridge the revenue gap for AT&C losses and compensate for subsidized supply of power to rural areas. As compared to most other states, this amount is a lot lesser, but one has to keep in mind that the per capita consumption of power in Bihar is only 130 units as against the national average of about 900 units.
Criss Cross of illegal tapping of power from the grid

Criss Cross of illegal tapping of power from the grid

Decentralized Distributed Generation (DDG) Scheme Implementation:

The Decentralized Distributed Generation (DDG) scheme has not taken off yet in Bihar. In my conversation with the Chief Engineer, Bihar State Hydo Power Corporation (BSHPC), I got the following information:

  • 48 projects have been identified in 2 districts – Gopalgunj and Kamur, covering 175 villages/hamlets. They were just given the list of projects, based on DPRs submitted by assigned vendors to MoP. He didn’t know the justification of selecting these villages/regions.
  • 41 projects are identified as hybrid of biomass gasifier + SPV and 7 are only SPV based. Total capacity is 1558 kW. He said he can’t share more technical details with me since they are soon be tendered out.
  • The responsibility of making DDG happen was initially with Bihar State Power Holding Company Ltd. (BSPHCL), they couldn’t do anything for 2 years. Then it was transferred to BREDA. They also sat on it for 2 years. Then it was transferred to BSHPC.
  • They floated the tender, but they got no entries, so he has changed some terms and is going to float it again. But he’s not hopeful. Here’s why:
    • 8% of the project cost is given to the implementing agency, but at the same time an 8% entry tax is imposed on the project cost. These two cancel out leaving the BSHPC with no money to take the scheme forward (I’ve not understood this entirely).
    • The projects require to be installed on Government land, the cost of which has to be bourne by the state Government. But, there’s no Government land available for many of the identified projects.
    • Private players are to be paid 60% on commissioning and 40% for 5 years at the rate of 8% per year. This is the biggest deterrent for private players to participate, since so much capital is locked for so long.
    • The guideline says that the tariffs charged to end users should not exceed that of surrounding villages. This is an issue because households in surrounding villages are being charged Rs. 100 per month irrespective of consumption (need to verify this). So, the 8% of the project cost that BSPHCL holds for paying the revenue gap is insufficient to cover the operational costs for the private players.

Interestingly, DDG has only been implemented in AP and Chattisgarh. I’m assuming that amongst other factors, there must be no entry tax and more strict regulations on tariffs in rural areas there. Also, the State Governments must have pitched in to take care of revenue subsidies needed for the plants to sustain. It would be interesting to understand how projects have progressed in these 2 states.

Functioning of sub-stations:

Each district has substations that step down power from 33 kV to 11 kV feeders, which then go into consumer areas and get further stepped down through transformers and finally distributed. In my conversation with the Junior Engineer, South Bihar Power Distribution Company Ltd (SBPDCL), I got the following information:

  • A total of 9 sub stations cover entire Munger district. His substation serves 4 gram panchayats, a total of 70 villages.
  • The planning of the distribution lines routing and transformer siting is done at the substation level.
  • A 33 kV line connects as input to his substation, and there are four 11 kV lines on the output.
  • He claims that 75% of the households in his jurisdiction are connected but at same time results in overload of transformers.
  • He is made aware of the schedule and MW level of power that will be made available on the 33 kV line. Based on this, he decides how many MW of power will be available on each 11 kV feeder and the timings for the supply.
  • Sometimes power is unavailable on the 33 kV line for days together, so he’s unable to supply power to end users.
  • They monitor their distribution franchisees closely.

Responsibilities of Distribution Franchisees:

Distribution Franchisees (DFs) are responsible for metering, billing, bill distribution and collection for a village/number of villages. In my conversation with this Head of Shivashakti Enterprises, Distribution Franchisee for SBPDCL, I got the following information:

  • They’ve been DFs with the DISCOM for about half a year now.
  • He’s done some very meticulous work. He covers 8,000 connections and has made very detailed reports of the connections, collection status, consumption, new connections, collections, thefts etc.
  • On average he gets Rs. 6.50 per connection as an incentive for collections. He’s done a good job so far, although his payment from the DISCOM came very late.

Given that DFs understands the issues of power availability on ground and his experience with collections, they are potential minigrid entrepreneurs.

End user perspectives in an unelectrified village:

To understand end user perspectives on grid power supply and its issues, I wanted to visit an unelectrified village and an under electrified village.

Bhavikura village is an unelectrified village in which SELCO and SEWA Bharat have jointly worked to install systems in 90% of the households. In my conversation with the SHGs of Bhavikura village, Khadagpur Block, Munger, I got the following information:

  • The village has a total of about 100 households.
  • Their main occupation is agriculture.
  • When asked about why grid power is unavailable, they responded saying they were asked to pay a big amount for the grid infrastructure to be extended to the village. They could not afford this amount (the amount asked for is unclear).
  • In the same breath they pointed out that the neighbouring villages which have got grid power supply have a lot of issues with power availability, quality of power supplied and transformer burn outs, and hence are unwilling to pay their monthly bills. They were happy to have got SELCO solar home lighting systems installed instead.
  • When asked about how else they would have liked to utilize power, if they had it available, they said they’d like a TV and a fan. However, they could not afford these appliances, so there was no question of using them.
  • They had no idea about the possibility of alternative livelihood generation opportunities that were possible through power supply.
  • They said that their most pressing need now is water for irrigation. There is a check dam and a canal close to their village. An entrepreneur pumps out water from the canal and supplies it to them at Rs. 100 per hour of supply. Depending on the size of land they have, they need 3 to 6 hours of water supply. Although they don’t irrigate their lands throughout the year, this expenditure is exorbitant for them and they’d like cheaper alternatives. (Solar pumps have huge scope in Bihar. People here could benefit greatly.)
Conversation with the SEWA self help groups

Conversation with the SEWA self help groups

End user perspectives in an under-electrified village:

Dhih is an under-electrified village, on the banks of the Ganga river in Muger. We met with a group of villagers to understand the situation of the grid power supply. In my conversation with group of villagers in Dhih Village, Munger, I got the following information:

  • They estimate about 1000 to 2000 households in the village. We could get an accurate figure. The village Mukhya was not available for discussion.
  • The villagers had to collect money from all the households to get a 100 kVA transformer and distribution lines installed in the village (again we could not get the exact amount as this as done a while back).
  • All connections are unmetered. They are billed Rs. 68 per month (BERC tariff for unmetered connections is Rs. 55 for an assumed consumption of 30 units per month. Not sure why the extra Rs. 13 is added.)
  • Power supply is not assured and on average they get about 4 to 6 hours of power a day, if at all.
  • They have had couple of incidences of transformer burn outs and oil change servicing to be done. The villagers had to pay for both of these (about Rs. 20,000 each time). They admitted this to being the biggest drawback of paying for the infrastructure themselves, as they had to pay up for maintenance themselves.
  • A DG entrepreneur did set up a generator and provided one or to light points per house. They were charged Rs. 60 per light point per month. But they were unhappy with this arrangement due to the voltage fluctuations of the DG set. This set up does not exist anymore.

My takeaways from the trip:

  • Energy planning for villages needs to look at meeting and growing with people’s aspirations incrementally over the next 20 years or so. Technologies, business and service models need to be designed keeping this in mind.
  • The power sector, especially the DISCOMs are in an abysmal state. Being heavily subsidized by their respective state governments, most DISCOMs are in huge losses (annual operating losses of DISCOMs are about Rs. 70,000 crores every year and their total debt is Rs. 3,04,000 crores). There needs to be considerable reforms in this sector, to allow for proper planning, implementation, administration and maintenance of infrastructure.
  • DRE planning and implementation can be the go to approach for rural electrification in the immediate term. State and Central Government support (in the form of subsidies, viability gap funding, feed-in tariffs etc.) is critical to making this sector viable and scalable. This will attract investors and entrepreneurs into this sector. This will allow for innovations in technology, business and service models in this sector. Once scale is achieved, cost of equipments, maintenance, man power, logistics, collections etc can come down.
  • For minigrids, the Distribution Franchisees and DG set entrepreneurs are people we can approach for taking up projects in their areas, given their familiarity with the sector and energy supply respectively.
  • We need to make case studies to show viable business models of DRE and compare them to the true cost of grid extension (which includes issues of transformer burn outs, maintenance costs, opportunity costs of unreliable power supply, loss of GDP contribution from rural areas due to lack of sustainable access to energy etc over system life times).
  • Since DDG has been implemented in two states, we need to further understand how they went about it and if their implementation model makes sense.

I have written this blog as part of my role as Consultant for the Policy Team at SELCO Foundation.

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