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6 things to know about electrification scheme ‘Saubhagya’
Nearly 4 crore Indian families – roughly one in four households - don’t have power. To light up their lives, the Indian government recently rolled out an ambitious project titled ‘Saubhagya’, which intends to provide electricity to the ‘powerless’ Indian families. The government push will generate business for a lot of listed companies in the LED lights, battery power and electrical equipment business.
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Subsidy
The government will provide free electricity connection to families that fall below the poverty line.
Those above it will have to pay Rs 500. But they can pay the connection fee over ten instalments. The instalment amount will be added to the electricity bill. The subsidy will also be given to purchasing equipment such as transformers, meters, and wires. However, the government will not provide any subsidy on electricity consumption. This is good news from the point of view of government finances that matter to the stock market investors. -
Deadline
The Modi-led government intends to provide electricity to all households by December 2018. States that meet the deadline would be given an additional 15% grant by the central government as an incentive.
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Difference between electrifying villages and households
In 2015, the government had launched the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) to electrify 18,000 villages across India. The scheme has covered 78% of the total targeted villages till date. Its success notwithstanding, the project has an inherent flaw. Electrification of villages only requires providing power to 10% of households and in public areas such as health centres, schools, panchayat office, dispensaries, and community centres. The remaining 90% of residents were not covered under this project. But the ‘Saubhagya’ project intends to rectify that. It aims to provide power to all households without power.
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Solar backup
The government aims to hand out solar power packs and battery banks to families that live in remote and inaccessible areas. The administration also plans to provide prepaid and smart meters. This will urge discoms to supply electricity to these households.
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Import reduction
There is a large reliance on kerosene-- a by-product of crude oil -- in the Indian hinterland. Indians use kerosene lamps to light their homes after sunset. But, access to electricity will make such lamps redundant. This will, consequently, reduce India’s oil import bill.
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Budget
The project has an outlay of Rs 16,320 crore. Of which, Rs 14,025 crore has been allocated to electrify rural households. About 60% of the budget will be provided by the central government, 30% will be funded by bank loans and the remaining 10% will be borne by state governments. Overall, the scheme is likely to boost the demand for electricity. This will come as a respite to many producers of power reeling with overcapacity.
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Rs 24,000 crore
The rural electrification scheme is expected to generate a demand for 80 billion additional units of power, according to a back-of-the-envelope calculation on Moneycontrol.com, a financial website. Even if you assume a price of Rs 3 per unit as revenue for power distribution companies, the potential revenue could be Rs 24,000 crore.
