Power for all" has been a cherished goal of our nation. It is now recognised that electricity is one of the basic human needs and that every household must have access to electricity, since a clear co-relation exists between the use of electricity and improvement in human development parameters.

In pursuance of these goals among others, the Electricity (Supply) Act was enacted in 1948 and it entrusted to State Electricity Boards (SEBs) the task of making electricity accessible to all-"the benefits of electricity are to be extended to semi-urban and rural areas in the most efficient and economical manner...." This was further reinforced in various provisions of the new Electricity Act 2003.

The SEBs embarked upon this task in right earnest and up to the 70s, the bulk of new generating capacity was added by them. Thereafter, the main thrust for capacity addition was provided by the Central Public Sector Undertakings (CPSUs) like National Thermal Power Corporation (NTPC) and National Hydroelectric Power Corporation (NHPC). In the period to date, the country's installed capacity has increased manifold from 1,362 mw in 1947 (per capita consumption 15 units) to 122,000 mw today (per capita consumption 592 units). More to the point, at the time of independence, only 1,500 out of 5,88,000 villages were electrified. The number today is 4,75,000 or 81 per cent. While in number terms this represents a significant achievement, in reality this is not the case.

The definition of village electrification till 1997 was: "A village should be classified as electrified if electricity is being used within its revenue area for any purpose whatsoever". Thus 81 per cent village electrification does not translate into 81 per cent of households having access to electricity! This nebulous definition may have contributed to the national complacency in regard to completing the task of household electrification. The fact of the matter is that as of now the bulk of rural households (56 per cent) are still without electricity (2004-05).

In order to finally bridge this gap, the Government of India (GoI) launched the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) in April 2005. The goal of the RGGVY is to complete the rural electricity infrastructure and balance household electrification in the country in the next 5 years i.e. by the year 2009. The RGGVY is a bold master plan for completing the unfinished task of rural electrification. This is intended to be done largely at the expense of the GoI, which will provide a grant of 90 per cent of the estimated capital cost of Rs 16,000 crore required for electrification of all the unconnected villages in accordance with the 2004-05 definition of village electrification wherein specified public places, dalit bastis, and at least 10 per cent of the households are wired up. For below poverty line households, the grant will be to the extent of 100 per cent.

However, a word of caution may not be out of place. While capital and funding is a necessary ingredient, it is not sufficient for success of this enterprise. Since rural electrification is a state function, the implementation is to be done by the states. To assist the states in this task, the Centre has made available to them the expertise and services of CPSUs like NHPC, NTPC, PGCIL (Power Grid Corporation of India Ltd), and DVC (Damodar Valley Corporation). The Rural Electrification Corporation (REC) is entrusted with the task of channeling the grant funds and providing soft loans for the balance requirement. In this regard, the role of REC is similar to that of the Rural Electricity Authority (REA) in the US.

The key element of the agreement is the commitment of state governments and state utilities to introduce a revenue sustainable franchisee arrangement prior to project completion and provision of targeted and upfront subsidies as required. This implies that the last mile connection is contingent on a franchisee being in place for a village or an area comprising a block of villages to perform the functions of distribution and supply agency and collect dues, albeit subsidised, from the ultimate consumers. Families below the poverty line consuming 30 units per month or less will pay only 50 per cent of the cost of supply as mandated by the National Electricity Policy.

All this brings us back to the title of this article which may be better rephrased as "What will it take to electrify all our households". The answer is not a simple one. The RGGVY is an excellent initiative and a measure of the government's resolve to complete the unfinished task of rural electrification during this government's tenure. It is in a sense a starting point for the home run. However, the greatest stumbling block will be the bottom-up conditions where franchisees and on-the-ground agencies come into play. Rational and affordable tariffs will need to be set, and the related subsidy provided upfront. The three "Ts" of subsidy design are that they should be transparent, targeted and temporary. A subsidy ultimately has to be paid for by someone. In the case of electricity the three choices are-a cross-subsidy by other customers, the absorption of the subsidy by the supplier or by the tax payer. The World Energy Council believes that the last of these options is preferable in that it distorts the market the least.

The role of the franchisee or distribution agency referred to earlier will be to complete the last mile connections and to manage the operations on a day-to-day basis. Revenue sustainability requires that the electricity used and the expenses for maintaining the network will be paid for on a sustainable basis. Franchisees could be NGOs, user associations, co-operatives or individual entrepreneurs. Each of these will need capital and a workable business plan. Domestic capital formation is, thus, another critical area.

In order to achieve this, energy access projects need to be made more attractive. The flip side to promoting local enterprise is the encouragement of micro financing facilities to help develop electricity customers. Even in today's developed countries, the early pioneers were often relatively small local companies. It is fortunate that in densely populated India, around 90 per cent of the population live within reach of the grid. Nevertheless, there will be very different circumstances in different areas that call for a range of responses. The states and their power utilities will need to assess the feasibility of grid supply vs distributed generation for each of the villages.

Many of the distributed generation technologies for area supply application are in the pilot stages and some amount of time and effort will be needed to adapt and bring them into regular commercial service. On a more positive note, though, renewable sources are rapidly improving in terms of cost and viability but sustained efforts are called for to achieve grid quality supply in the next five years.

Given the high percentage of population within reach of the grid, healthy functioning of the grid-based distribution industry is crucial to achieving and sustaining the "access for all" target. This also means that power sector reform is one of the roads that must be travelled to reach the universal access destination. And finally, emerging out of recent experience, there is new pragmatism which recognises that power sector reform covers a wide menu, even including market interventions in certain circumstances.

This theme has been explored further in a recent report of the World Energy Council on energy market reform experience to date. In particular in developing countries, maximising the scope for competition may not be the first priority. This is not to overlook the fact that competition is the most reliable driver yet discovered of efficiency and innovation.

An electricity supply system, which does not pay for itself is ultimately unsustainable. Also, cost-reflective tariffs can only provide the basis for future investment if the money is collected. In order that electricity supply should be paid for it may be necessary to link the RGGVY to initiatives for overall commercial development and improvement of the economic conditions of the rural areas. This approach will facilitate raising of the overall living standards. Thus, a major effort will be required at the state level, where such aspects need to be developed. The people of the villages, too, need to be mobilised and involved in this task.

An example of the holistic approach mentioned above is the Confederation of Indian Industry (CII) Dungarpur Initiative. Dungarpur is a district in Rajasthan and is one of the nine backward districts identified by UNDP for a pilot programme for promoting decentralisation and capacity building for participatory planning for poverty reduction. Among the various initiatives being undertaken by the CII-Industry Group in Dungarpur is one pertaining to development and management of energy resources. This task has been taken up by one of the members of the group with expertise in energy solutions.

For working out energy solutions for an area like Dungarpur, which is of district size and comprises a number of villages, there is a need to map the energy needs, estimate the resource requirements, fuel availability and location of plants and integrate these with the development plans of the district. This requires that the villagers be taken into confidence and, if need be, even organised to supply the fuels required in a given scenario. Further, they need to be involved in the development activity, persuaded to abide by their commitments and to pay for the services received. They may also own some of the facilities installed for providing energy to them.

All stakeholders should feel involved and be invited to participate in the process of meeting their energy needs. These stakeholders are schools, healthcare facilities, small enterprises, traders/shopkeepers, equipment manufacturers, service providers and representatives of the state and district administration.

The example given above affords a flavour of what it will take to achieve village electrification in the true sense, wherein each household along with the various village institutions will have access to electricity especially in remote locations where grid connection may not be feasible. Availability of quality power supply would help unleash the full economic growth potential of rural India and the consequent increase of rural purchasing power will not only provide a great stimulus to the economy but also enable consumers of electricity to pay for their usage and thus make universal access sustainable.

In conclusion we may state that the RGGVY is a bold and timely program for ensuring complete household electrification in an ambitious time frame of five years. China achieved close to universal access over a longer time-span of two decades. India, however, is a democracy and the levers of power correspondingly less direct. Hence harnessing the forces of motivation and incentivisation becomes all the more critical.

Moreover the target cannot be achieved by the Ministry of Power alone. The collaboration of other ministries such as Finance, Education, Water Resources, Rural Development and others will be needed. While the Centre will bear the capital cost, the revenue costs and the bulk of the implementation effort will have to be borne by the states. Implementation will call for a high degree of management and governance skills.

The degree of success in various states will therefore be a direct function of their governance record. The map for India to achieve this goal is one showing multiple roads that must all be followed in parallel, and the motive power that must take us along those roads is political will. Progressive states that can get their act together and harness the energies and resources of the various stakeholders, NGOs and the CPSUs are more likely to attain the goal of 100 per cent household electrification at an earlier date than those that cannot think progressively. Finally, the corporate sector, in particular those having energy expertise, can play a vital role in making this happen.

The author is Chairman, Motorola India, and a former Managing Director of Tata Power Limited