Poverty
alleviation and improvement in quality of life of the
rural poor have been the stated goals of all the countries
in the South Asian (SA) region, as in other parts of
the world. In terms of sheer numbers, the SA region
has over half a billion people below the poverty line,
majority of who live in rural are a s. Further, due
to very little opportunity of gainful employment in
rural areas, around 75 percent of the population does
not have electricity access in rural areas. The governments,
bilateral, multilateral and other donor agencies have
pumped in millions and millions of dollars as
grants and soft loans with the aim of increasing rural
electricity access. But it never did achieve the desired
results. What could help in creating a market for successful
rural energy supply entities? This paper attempts to
critically examine the issues involved and suggests
possible initiatives to achieve desired results.
2. RURAL SCENARIO
The rural population in South Asian countries is very
poor as mentioned ab ove . They are thinly dispersed
and even the electricity requirements for irrigation
and rural industries are wide spre a d . This leads
to low energy density and high cost of energy supply.
Further, the income level of rural population is very
low compared to urban population, which creates a need
for subsidy. However, subsidization also has its own
attendant problem. No state even with the help of grants
from multilateral/bilateral/other private donors can
provide subsidies to all of the rural population for
long periods of time. In other words, the state can
either provide some people
subsidies all the time, or all the people, only a little
(but unbeneficial) subsidy for all the time, but it
can never provide subsidies to everyone for long periods
of time. Another long term major problem with subsidization
is the rising awareness among rural masses. The subsidy
may become a bone of contention and like water, it may
even become the source of violent demonstration and
conflict. Thus the present trend of focusing all donor
programs towards rural poverty alleviation is an attempt
in the right direction to avoid future conflicts among
the masses. In fact, the ultimate objective must be
to improve the quality of life of the rural population,
through increased income generation propelled by sustainable
rural energy services.
3. SUSTAINABLE ELECTRICITY/ENERGY SERVICES IN
RURAL AREAS
There has never been a substantial market for electricity/
energy in rural are a s. Women and children collect
wood-fuel from forests to meet the cooking requirements,
and subsidized kerosene is used for lighting. The rural
poor cannot afford even a little amount of kerosene.
Many programs have been initiated to increase electricity
access through government owned/run agencies. Electricity
supply services were heavily subsidized, but still there
were no takers. Even if electricity had been free, the
rural poor could not even afford the lighting fixtures
and bulbs. Electricity supply agencies became drained
over a period of time, because subsidies to these agencies
never increased, but in fact reduced over time due to
the pressure for subsidies from other uncovered rural
areas. On the other hand, the cost of providing electricity/energy
increased, which led to deterioration of electricity/energy
services over a period of time.
4. RURAL ENERGY SUPPLY
AND INCOME GENERATION OPPORTUNITY
Rural energy supply and income generating activities
sustain each other. Rural industries and agriculture
activities are more remunerative if electricity access
is there for these activities. The more economic activity,
the bigger income rura l people will have, and this
will lead to an increased demand of energy for domestic
use by the rural populace.
5. CREATING MARKET FOR RURAL ENERGY SUPPLY
How can one create a market for any commodity or service?
What are the conditions, which help in not only creating
new markets but also expanding the existing markets?
The main factor in creating a market in low economic
zones is the availability of money to spend on commodity
and service. The rural areas are basically poor with
the majority of population having no or very little
money to spend for energy services. The increase in
income level leads to the creation of a market, which
is a well-known phenomenon for marketing experts. Unless
there is sufficient income, rural poor consumers cannot
and would not be willing to buy avoidable commodities
or services, which are not required for sustenance.
In fact, only if the rural populace has sufficient income,
then and only then would they contribute to creating
a market. Thus, the only assured way of creating a market
is to create opportunities for increasing the income
generation of rural populace. That is exactly what Henry
Ford did. He increased the salary of his employees marginally
but sufficiently to induce its employees to dip into
their savings and buy his cars. A novel method was adopted
to expand the market for the cars.
One of the best examples in the South Asian region is
fro m Bangladesh. The Grameen Bank (GB) was already
providing loans to rural poor for their economic activities,
thereby increasing their income. Grameen Bank realized
that there is a need for integrating its effort with
the increase in energy supply to its clientele. They
established a sister org anization – a renewable
energy company named Grameen Shakti (GS), which primarily
provided SHSs to the existing clientele of Grameen Bank.
GS set up various centers and financed the SHSs. There
are four methods of financing and it levies a service
charge of 8 to 10% depending upon the scheme. In fact,
Grameen Bank and Grameen Shakti have pooled in their
resources to cut down the overhead costs. There are
also examples from Nepal. The Hima l a yan Light Foundation
is promoting programs, which are packaged with an income
generating project and energy supply based on solar
photovoltaic. However, another unique example wa s detailed
by an ex-member of parliament now functioning as the
Chairman of a newly founded rural electric company registered
with Nepal Electricity Authority in conformity with
the recently enacted “Community Electricity Distribution
Bye- Laws, 2003”. This rural electric cooperative
has distributed cattle (one or two goats and six to
ten chickens) to its poor members. This was done to
facilitate the start of generating income within eight
to ten months. The rural electri c cooperative was expecting
that it will be fully operational by that time and that
these poor rural consumers would then be a ble to afford
to buy electricity. Besides the above described novel
methods, there is a need to bring in the finance, which
would help in not only funding activities to generate
income but also fund electric services. Micro financing
has now been recognized as an important tool to fund
such programs. Grameen bank and the World Bank/Global
Environmental Fund funded the “Energy Services
Delivery” (ESD) program now extended as the Renewable
Energy for Rural Economic Development Project (REREDP)
is a good example of micro financing. Now the big players
in financing have realized the potential of micro financing.
However, they enga g e l o c a l financing institutions
in administering the funds, which helps them in keep
the overhead costs lower. There would always be a need
for an initial subsidy to promote rural energy supply.
As mentioned ab ove , the subsidy must be for initial
capital investment and should never be provided
for operation and maintenance.
6. CONCLUSION
Presently, most of the rural development programs are
focused to alleviate the poverty. Micro financing of
rural energy supply and income generating activities
along with provision for capital subsidies must be done
as a single package. This simple mantra would go a long
way in creating a sufficient ma rket for sustaining
rural energy supply.
