It is no secret that aggregate wealth in India rises each year – and so does inequality. The simplest way to start explaining this is the rural-urban wealth disparity. As a Guardian article explains: “Twenty-first-century India often resembles the Dickensian tale of two cities. For some, it is the best of times; for millions of others, living in the shadow of prosperity, survival is a daily struggle.” Indeed, as this Scroll piece confirms, years of evolution in understanding poverty has culminated in nothing. Not only is the income disparity high between urban and rural areas, the disparity in income in both rural and urban areas has been on the rise.
Graph sourced from: Scroll.in.
One can see the high growth in income in the top deciles in both urban and rural areas and relatively, almost imperceptible growth in the bottom deciles, respectively.
Now, if we are to assume that basic subsistence is granted (for areas facing water shortage, this may not be the best approach), one of the most important parameters to development is the availability of electricity. More precisely, with respect to the rural scenario, we mean lighting: my field experience leads me to believe that our low-income rural kin most ardently need lighting and will only admit to wanting a fan for summers in an uncertain, shy tone.
How is lighting related to development? According to a report on the relation between rural electrification and rural development, the slow progress towards electricity availability in rural areas in developing countries is in part due to “failure to raise the incomes of rural households” and “effectively design tariffs and adapt regulatory systems that can make electricity more affordable to poorer communities.”
Lighting and its effects on Prosperity and Development
Lighting in rural areas contributes to an increase in prosperity: there is a mine of research collated which suggests the same. It is not hard to figure out: cities have lights on throughout the night whereas villages, due to poor alternatives of lighting, lead ‘unproductive and unentertaining’ evenings.
Particularly in India, the repercussions in this layer of the BoP (Bottom of Pyramid)are not limited to short term micro-enterprise related gains: children in an Indian household – even those living below the poverty line are encouraged to excel at studies. These families truly believe that education is the way out of poverty. While engaged in these areas, the Re-emerging World team has seen strong suggestive evidence of the following during each field visit: if the un-electrified household can afford just one lantern (and lanterns aren’t reliable (durable) and cheap: they can be only one at a time), on any given evening, it is likely that the student in the household is entitled to it – not the woman in the kitchen, not the household in the common area. Quite obviously, education suffers in households which fail to acquire lanterns.
Ineffective large scale electrification programs
Mainstream electrification efforts fall short due to simple infrastructural problems: ineffective implementation across states implies the power lines pervade only across villages near pucca roads. Even in these villages, defunct poles stand without repair for months together. The result? Six states, including those like Bihar, Uttar Pradesh, Odisha, Jharkhand (states which, incidentally, rank low on other development indicators as well) have rural “un-electrification” rates above 50% (90% in Bihar, 76% in Uttar Pradesh, 64% in Odisha, and 68% in Jharkhand).
Incidentally, these villages boast of a higher level of growth and income than those without electricity altogether. In providing increasing access to electricity only to villages which are more affluent, electrification and its economic benefits never reach a large population of the underdeveloped villages they are intended for. The electricity instead goes to “wealthier villages and wealthy households, farms, and businesses within these villages.”
How aid/social enterprise efforts miss their mark
Through decentralized off grid efforts, solar power for lighting is a solution which can most easily be retrofitted for the problem of rural electricity unavailability. Think of retailing of solar lanterns, no-frills solar home systems for those who can afford them, and even mini-grids in some places.
The lanterns have been affordable through progressive decrements in prices for some time now. Established brands have evolved their offerings to range from INR 750 a mere 1.5 to 2 years ago, to cheaper products priced between INR 450 to INR 550 now. Some other companies have further evolved products priced at INR 300. And yet, these remain inaccessible to the poorest in villages: the daily wage labourers, a large percentage of who are landless Dalits (Scheduled Castes).
In villages where infrastructure exists, these are often the households which could not afford to pay for installation, a one-time investment
of up to INR 1200 (observed in a village in Gaya, Bihar). In households without electricity, these are the ones unable to purchase even the cheapest solar lanterns. Indeed, their subsistence level daily wage of INR 150 to INR 200 (as observed in Bihar, Maharashtra) keeps them under a critical level of income, essentially, a barrier between them and quality lighting, and related socio-economic benefits.
The Energy Poverty Penalty
The average cost of kerosene, available to up to 2.5 liters at INR 20 per family per month from the Government’s public distribution system program (PDS), and after that in the ‘open’ market at INR 40-INR 45. Several households spend between INR 250 to INR 300 for a 4-5 member household (observed in rural areas of Bihar and Maharashtra) to up to INR 400-INR 450 for larger households. In contrast, the households with electricity connection pay not more than INR 200 a month.
The households which are unable to purchase solar lanterns (and these lanterns typically function for several years, or are covered under a warranty for 1-5 years), spend up to INR 200 on the purchase of a rechargeable Chinese lamps. These last no longer than 2 months for many, lesser for some. In the long term, that’s a much higher cost for lighting: another form of Poverty Penalty (here’s an interesting article about this omnipresent phenomenon).
The Solution
In the words of Gopal Kumar Yadav, “paying INR 2 to INR 3 a day is really helpful for my family.” He is a 12th grade student who has a busy day: he is a milkman in the mornings, a school student by the day, and also a seasonal wage worker for farm owners across seasons, to supplement his family’s income. He had a cell phone, but has stopped using it: “Charging it quite a hassle for me.”
For a handful of others like him in rural Gaya, lighting is now available through renting of a charged solar lantern at the rate of INR 3/day, or INR 90/month. In this pilot, users deposit the lanterns in the mornings and pick them up in the evenings at around 6pm in the villages at the house of an appointed local entrepreneur, mostly rural housewives and home-based business-owners in rural Gaya, Bihar, India. These entrepreneurs in turn rent a solar kit and up to 20 lamps charged off 40W or 80W panels. In the end, the business is profitable for the entrepreneurs. Some villages have up to 4 of the entrepreneurs. The innovative modular design technology on offer may even make it possible for entrepreneurs to exchange electricity in the future. Imagine a mini grid powered by households: rural India could just be mobilizing on this technique before urban India.
Through this model, the social enterprise Rural Spark has employed one of the most effective approaches to provide lighting to the lowest income groups in any village. Lighting a Billion Lives (LaBL) has already used this approach of providing lighting at a nominal daily fee of about INR 100 a month to reach 0.73 million people. Clearly, daily renting of high quality solar lights is the only way to reach the most economically backward sections of the already underdeveloped rural areas of India.
However, the challenge of viability for social enterprises still remain: village level entrepreneurs will need affordable, and in that way, innovative loan products. For the social enterprises in question, this will require partnering with a well-connected organization already involved in microfinance.
Once the right Aid/Grant-Investment dynamics of the funding involved for these social enterprises is perfected, this model of low-risk leasing of products through an easily scalable network of affordable micro-grids (managed by local energy suppliers or LESs, as they’re called in the Rural Spark model) will finally be able to hit the mark for Rural Development through Rural Electrification.
Read our market assessment report for Rural Spark’s pilot on their website here.
