Thursday, June 4, 2020

Beyond lighting: Rural electrification programs for enterprise development

Providing better electricity access to India’s vast population has long been a priority for the government and policy makers. Several government schemes such as Rajiv Gandhi Grameen Vidyutkaran Yojna (RGGVY), Deen Dayal Upadhyaya Gram Jyoti Yojna (DDUGJY) and Pradhan Mantri Har Ghar Sahaj Bijli (Saubhagya) Yojana have been implemented to support rural electricity infrastructure. According to a World Bank Report, India has led the developing world in addressing rural energy problems over the last decade .
By early 2019, 99 percent of India’s rural villages had been electrified, which showcases an outreach to more than 920 million people . However, the rapid pace of rural electrification has not yet led to 24 hours reliable electricity supply through the national grid .  Erratic and unreliable electricity supply in remote areas (on an average six hours per day) hampers the opportunity for people to adopt electricity in their day-to-day lives and engage in economic activities.

In recent years, private and grant supported rural electrification programs have provided access to electricity through renewable sources to complement the efforts of the government. This is done to ensure affordable, reliable, sustainable and modern energy for all by 2030 (as stated in Sustainable Development Goal #7). However, the emphasis of these programs has largely been on providing electricity needs of households in rural areas. This has met a crucial need among households for lighting and other appliances. 

Beyond basic household needs, however, electricity serves as an important driver for rural enterprise and business development, specifically the development of Micro, Small and Medium Enterprises (MSMEs).

Access to reliable electricity is crucial for rural enterprises

The MSME sector contributes to regional development, employment generation, poverty reduction and overall economic growth. In India, this sector employs 110 million people and accounts for 28.77 percent of GDP.  The Government of India has implemented several programs such as the Scheme for Micro & Small Enterprise Cluster Development Programme (MSE-CDP), Financial support to MSMEs for certification, and A Scheme for Promotion of Innovation, Rural Industry & Entrepreneurship (ASPIRE). These programs are mainly aimed at providing financial and technical assistance and enhancing competitiveness of the MSME sector. Given the importance of MSME sector for the Indian economy, access to reliable electricity is as important as the provision of technical and financial support. 

Smart Power, a rural electrification initiative by the Rockefeller Foundation, aims to accelerate welfare in India by ensuring access to reliable electricity to rural customers. Renewable energy based mini-grids, set up under the Smart Power initiative provide electricity to households and micro-and-small enterprises in select villages of Uttar Pradesh, Jharkhand and Bihar. These mini-grids provide good quality and reliable electricity for six hours in a day to 24 hours based on customers’ need and demand, overcoming the uncertainty associated with national grid electricity. 

The assured supply has been able to garner confidence among many enterprise owners to get involved in productive economic activities. Approximately 90 percent have shifted to the mini-grid as their primary source of electricity .  More than half of the customers (especially enterprises) use the mini-grid as their only source of electricity. Moreover, larger rural enterprises such as grain mills, computer & printer centres, public institutions and others have started running their heavy power load appliance on electricity through the mini-grid instead of diesel generators.

Enterprise customers have not just started using a single source as compared to earlier where they hedged their electricity requirements across multiple sources, but our data also indicates that they prefer the mini-grid to all other sources.

In addition, decentralized power generation through mini-grid ensures higher customer responsiveness than other sources of electricity. More than 70 percent of the customers have reported high level of satisfaction for the schedule and hours of electricity supply, grievance redressal mechanisms, and quality of service provided by the mini-grid operators. 

Role of rural electrification for enterprise development

Crucially, access to quality and reliable electricity through the mini grid has aided in expansion of business operations of many entrepreneurs in rural areas.

Ram Prasad (name changed), a resident of Gumla district of Jharkhand, India, owned a tiny printing shop. Frequent voltage fluctuations and disruptions in national grid supply often made him turn customers away for a later time. And ‘later’ could mean a few hours, a few days or in fact, a few weeks. Not only did his earnings take a blow, but customers were also affected, especially during emergency situations. 

The last few years has seen him scaling from a small shop owner to a rural enterprise stalwart. Because of mini-grid electricity, he has expanded his microenterprise into large multi-utility customer service centre, offering printing, lamination, and other services.

“I have become a rural entrepreneur from a small shop owner. Earlier, I provided printing services to the customers. Now, I have also bought lamination machine and registered myself  as a Government of India authorised Unique Identification (AADHAR) enrolment point, adding other necessary devices such as biometric machine and internet modem”

Emerging issues and challenges in rural electrification sector

While cases like Ram Prasad’s business offer glimpses of success, there is much work yet to be done. 

First, high cost of the electricity is a point of concern for many mini-grid customers and especially for the enterprise owners. High per-unit cost of mini-grid electricity increases their operating costs. Although, the cost of operating on mini-grid electricity is cheaper than that of a diesel generator, it is less economical than operating on a government grid electricity. 

Second, there are only a few rural electrification programs aiming for convergence between reliable electricity supply and provision of technical, financial and market support for the rural enterprises. The Smart Power initiative promotes setting-up of new enterprises through its Micro-enterprise Development (MED) activities. The sustained growth of new enterprises is maintained by providing technical assistance and skill development to the entrepreneurs, and developing backward and forward market linkages, in addition to the supply of good quality and reliable electricity. 

Simply put, there needs to be a fresh momentum at the policy level that regularises the high cost of electricity through renewable or decentralised systems. Further, future electrification policies and programs can focus on cross-sectoral, inter-departmental & public-private partnerships to support enterprise development, beyond provision of electricity. These partnerships will ensure holistic support to the rural entrepreneurs, capitalise on the efficiency of the private sector (such as the energy service companies (ESCOs)) and target the scale and outreach of the public sector. Thereby, ensuring financial viability of the rural electrification programs in the long run as well as enhancing larger developmental outcomes from better access to reliable electricity. 

It is crucial to note that access to electricity cannot alone solve the fundamental problem of poverty, but it can certainly provide an important impetus for triggering development in rural areas. Because reliability of electricity supply is a significant parameter for development, it is critical to ensure an assured supply at an affordable cost.

Ramanshu Ganguly - Assistant Vice President-Research, Sambodhi
Ridhi Jain, Economist

[1] Power for All: Electricity Access Challenge in India
[2] Electrification report, GoI and Bloomberg estimates (https://www.bloomberg.com/news/features/2017-01-24/living-in-the-dark-240-million-indians-have-no-electricity
[3] Mini-grids: Electricity for all, Centre for Science and Environment Report
[4] Annual Report 2017-18, Ministry of Micro, Small and Medium Enterprises. Data for 2015-16.
[5] Evidence gathered from Monitoring and Evaluation rounds conducted by Sambodhi for Smart Power program

Wednesday, April 29, 2020

COVID-19 will make Data Science a critical necessity for the development sector


The outbreak of COVID-19 has put the global community of evaluators at an interesting, almost paradoxical, juncture. While the need for data and insights is most critical at this point to respond to the public health crisis, collecting this data is going to be now, and henceforth, more challenging than ever.

The article ‘Rewiring How We Measure Impact in the Post-Covid-19 World’ co-authored by Veronica Olazabal, Michael Bamberger, and Peter York puts several of our concerns as evaluators into perspective. In addition to the challenges that COVID-19 will potentially create for evaluators, the article stresses how Data Science will be instrumental in how the development and impact sector responds to the need for evidence.

With social distancing norms dictating human interactions until the pandemic is effectively controlled, in-person data collection is going to be hindered as the article correctly establishes. Yet, the need for real-time analytics from data is going to be even more critical not just in the public health domain but across parameters in order to rebuild the damage COVID-19 is inflicting on the socio-economic fabric of countries universally. Granular, localized, and verified data will be required by decision-makers – public, private, or philanthropic – in order to carry forward fast and effective impact at scale.

Data Science for development and social impact has been steadily gaining buy-in from governments, philanthropies, and relevant organizations across the board for a while now. Data Science technologies offer several advantages. Diverse datasets and sources can be integrated, and sampling biases can also be removed as big data covers large populations. Data Science also allows us to study patterns in behavior over long periods of time as well as predict future trends, an aspect that private sector organizations have been successfully leveraging.

The current COVID-19 situation will push the sector to treat Data Science not solely as an optimization tool, but as a critical necessity for social justice and impact to be delivered. This holds particularly true in Global South contexts where damage caused by the pandemic can be exponentially catastrophic.

India will also have to channelize Data Science technologies in order to contain the outbreak and to recover from the damage COVID-19 is inflicting. Fortunately, discourse is already underway in both public and private domains on how big data and AI can be utilized. However, translating this on the ground will be challenging for India owing to multiple factors. Not only is the architecture to harness data on the ground weak, the culture for data usage and appreciation is still nascent.

With the contextual and behavioral complexities and diversity of the Indian population, relying on big data sources such as social media, IoT, mobile phone and geospatial data alone will be thoroughly insufficient. A large proportion of this big data is harnessed from the supply-side, i.e., from the point of sale. It may not reflect the actual behavior of users who are on the demand-side. Unless big data can be validated and backed up with socio-economic and demographic variables, it will be of limited use to policymakers and implementors. Further, despite digital penetration in India being relatively high and digital payments and media usage increasing in rural areas, the modes of tapping big data is still relatively small for majority of the population. For remote, marginalized populations, stray digital activity and behavior is incapable of reflecting any valid or true patterns of human, demand-side behavior.

What India needs in current circumstances is a means to validate analytical insights derived from Data Science technologies, and to optimize the already existing data that exists at the grassroots that is yet to be tapped for its complete potential.

Since in-person data collection will be hindered, remote methods such as telephonic and video calling technologies must be explored. Mobile and high-speed internet penetration in India will enable this to a large extent in India. Layering this with big data insights can overcome validity concerns and offer holistic, 360-degree insights on human behavior patterns which could also be used for forecasting activities.

We will also have to inspect our public systems for the data reserves that already exist. Several grassroots and local entities house rich primary, demand-side data that can be transformative. For example, frontline community health workers are well-trained in collecting medical and health data, several of who use technology-enabled devices to track records. Tapping into this to maximize the insights derived can prove immensely valuable.

Navigating contextual constraints with technology and by leveraging existing infrastructures is the answer to how evaluators in India will respond to the need for data in the post-COVID-19 era. Data Science will become indispensable to how the development sector advances, and innovation will help overcome some of the challenges it poses in the Indian context.

Swapnil Shekhar - Director and Co-founder, Sambodhi

Kaamila Patherya Program Manager, Sambodhi