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High unemployment rate + crop failure = major challenge for rural India.


What role does rural electrification play in tackling this challenge?

About a third of the 1.3 billion people in the world with no access to electricity or modern energy – live in India. It has over 450 million people without access to reliable electricity.

The vast majority of the energy-impoverished are bottom-of-the-pyramid (BoP) consumers living in rural areas. Lack of basic infrastructure for productive activities, high unemployment rate and crop failure are perpetuating the cycle of poverty and causing an unsustainable rural-urban slum migration crisis.

The Indian government has pledged to achieve universal electrification by 2022, requiring massive investments and rapid increases in its generation capacity. Despite ambitious promises to nearly triple its renewables capacity by 2022, India’s growing economy and population means its emission are forecast to grow. According to Carbon Brief, India’s emissions will increase by over 90% to reach around 6.5 billion tons of CO2 equivalent in 2030, far exceeding not just India’s but also the global carbon budget.

Are mini-grids an ideal solution for rural electrification in India?

As over 85% of the energy-impoverished live in rural or remote areas, the traditional method of extending the national electricity grid for rural electrification is often costly and time consuming. Mini-grid technologies are one of the supply technologies that can provide decentralized, distributed and democratized energy supply cheaply and timely, with the capability to meet residential, commercial and community needs, from basic lighting to use of energy-intensive appliances for productive uses.

Mini-grids can therefore play an instrumental role in poverty alleviation, balancing affordability and reliability, whilst also favouring local micro-enterprise development, creation of jobs and livelihood opportunities within communities. The democratization of energy through local generation is especially important in rural settings in developing countries such as India where large centralized infrastructure projects experience several bottlenecks and get stuck in bureaucratic delays.

Oorja believes in a market-oriented distributed energy solution that directly engages the rural communities in producing their own clean energy. This is not only a feasible path to universal energy access but also a model that fosters local economic development and has significant potential to mitigate climate change.

We see ourselves not just as energy providers, but rather as catalysts of an eco-system where the poor are empowered and have more equitable access to education, health, clean drinking water, sanitation and sustainable agriculture.

Access to electricity also leads to significant economic gains due to the foundation it lays for increased economic activity and income generation for micro-entrepreneurs and farmers. Here we explain how:

Does access to energy translate in higher agricultural outputs?

“Until three years ago, I used a diesel pump for irrigating my 5 acres of farm land. It cost m​e INR 160 for an hour of irrigation. Now I pay only INR 80, with cheaper power provided by biomass electricity. In the future, I hope to set up a cold storage facility. That way I can store my crop for longer and sell it at the best price.” – Ramesh Vishwas, 43, Chakai village, Bihar

Definitely! Access to electricity can lead to higher agricultural productivity for a number of reasons:

  • Irrigation, which leads to huge productivity gains, is essentially impossible without mechanized pumps that are run by electricity. Irrigation better enables farmers to rotate their crops. Moreover, yields increase because it provides protection from droughts, and with the reduced risk of crop failure, farmers are more likely to invest in inputs, such as fertilizer and improved seeds.
  • Agricultural output greatly benefits from energy access because of the improved processing methods it enables. Access to modern energy services can save farmers hours a day. Agro-processing permits the storage and sale of agricultural products in larger quantities and in more refined types (at higher prices), since these products can be cooked, stored, preserved, or transformed to higher-quality forms.
  • Electrification also increases agricultural productivity due to the benefits of access to information and communication technologies (ICTs). Forecasts are invaluable for farmers and shared information about new technologies can lead to the adoption of better farming practices. And improved communication between market actors (via mobile phone or the internet) leads to better functioning markets.

What about small and micro enterprises? How does energy access benefit them?

Energy access creates a much improved environment for small and micro enterprises (SMEs).

  • Lighting enables SMEs to be able to work longer hours and to serve their customers during the evening, the most profitable hours of the day for some businesses. SMEs typically fall into one of three categories: processing, manufacturing, or service sector. They all gain some common benefits from improved energy access, most obviously, the ability to work after dark. Additionally, access to electricity allows for the use of services that create a much better environment for customers, such as electric fans and ICTs (radio and TV).
  • Processing industries are virtually impossible without access to electricity. These include businesses such as grain mills, oil mills and bakeries. All require efficient motors and, in the case of bakeries, ovens. In rural areas of Uttar Pradesh, where rice farming is the backbone of the economy, a rice mill can be a massive boon for the local economy.
  • Manufacturing industries need electricity to function. Metal works, woodworkers and furniture makers, basket makers, paint manufacturers, and construction businesses all require motors and other electrical equipment to operate, from sewing machines to incandescent lights.
  • Service-based enterprises greatly benefit from access to electricity as well. Laundry and tailoring businesses need electricity for irons and sewing machines, for example. Refrigerators are vital to shops, restaurants, and bars, and electric stoves and cookers are very useful as well. TVs and radios can also be a great draw for customers.

“When I had only a pedal-operated sewing machine I would make INR 150 per day. When electricity was brought to my village, I set up a new tailoring shop in my home. I have two electric sewing machines and a cutting machine now so I earn up to INR 500 per day. Electricity has made my life more comfortable as I was able to buy three fans. I plan to expand my business and set up a tailoring shop in Bhebra.” Sunil Kumarv Yada, 32, Mahalgao village, Bihar

  • Access to electricity leads to higher profits in energy-supplying industries. Renewable energy sources and the appliances previously mentioned have supply chains that see income gains across all levels from the increase in sales, distribution, and maintenance work. The latter provides many employment opportunities in these communities as well. Lastly, even cell phone charging can be a source of income, as clients without access to electricity will pay to have their phones charged.

Energy access is more than just a luxury or comfort: it is necessary infrastructure for economic development. On a national scale, there is a strong correlation between income and electrification rates, and no country in history has succeeded in developing without abundant energy access.

While it is true that India is the world’s fastest growing economy despite much of its population still living in the dark (between 300-450 million), it must be remembered that these gains have been enjoyed almost exclusively by the middle and, especially, the upper classes. Those at the BoP living in poverty in small villages without access to electricity have not shared in this prosperity.

For many, the best option is simply moving to the major cities in hopes of finding better opportunities there. But the arrival of reliable electricity will enable these areas to develop from the ground up due to increased agricultural productivity, the birth of new micro-enterprises, and the creation of many new jobs. When development occurs in this fashion, its roots are strong and it creates a self-perpetuating cycle of growth because of the stronger demand base. Not only does this improve the lives of everyone in such a community, it permits it to survive as a society since its youth are not forced to leave in search of jobs elsewhere. In the words of Gandhi, “the future of India lies in its villages.”

Written by John McLeod and Rose Chaparro.  

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