Macro Economy

Soft loans to States in the works to provide power connections to the poor

Debabrata Das Richa Mishra New Delhi | Updated on January 20, 2018

Piyush Goyal

Loans would help cover the upfront cost of getting a connection: Goyal

To ensure that the ambitious rural electrification programme does not suffer any set-backs due to financial constraints of the local distribution utilities, the Power Ministry proposes to fund States with a soft loan for providing connections to the economically weaker but Above Poverty Line families.

The loans would help cover the upfront cost of getting an electricity connection which the families can then pay back in monthly instalments. 

Piyush Goyal, Minister of State (Independent Charge) for Power, Coal, New & Renewable Energy, said, “I am trying to work out a soft loan mechanism for continued support, ultimately Discoms have to come on board.”

Admitting that he is not a ‘fan of subsidies’, Goyal told BusinessLine, “Currently, APL families need to pay for their electricity connection. I am trying to work out a mechanism where instead of paying an upfront amount for the electricity connection, we fund it through the REC through a soft loan and then the families can repay it through small instalments over two, three or five years.”

Similar to gas connectivity

Goyal’s plan is similar to Pradhan Mantri Ujjwala Yojana (PMUY) being used for LPG connections by the Ministry of Petroleum & Natural Gas, wherein the administrative cost of providing a connection for BPL families is fully covered by the government. However, the families have to pay for the stove in easy monthly instalments. 

For providing electricity connections to Below Poverty Line families, States already get a grant under the Deen Dayal Upadhyay Gram Jyoti Yojana. Such families are provided a 500 Watt connection through the Central Government grant. But, for APL families, typically the cost of getting an electricity connection can range from anywhere between ₹600-800 a KW. The final charge of the electricity connection depends on the size of electricity connections.

When the Narendra Modi-government had taken charge in 2014, a total of 18,452 villages had no electricity. So far, 7,549 villages have been electrified and 10,903 villages are yet to be electrified. “In the first stage, we at least want to bring electricity to the villages,” said Goyal.

Acknowledging that once Rural Electrification Corporation — which is working on behalf of the Centre to provide funds and infrastructure for the programme — hands over the infrastructure to the State distribution utilities (Discoms), monitoring will be a challenge, Goyal said this is where Gram Vidyut Abhiyantas help. Besides, each development will be put on the GARV app.

Published on May 08, 2016

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