Better off households in Jharkhand receive more than twice the share of government electricity subsidies than poor households, as revealed in a survey of over 900 households released on Thursday by the International Institute for Sustainable Development (IISD) and the Initiative for Sustainable Energy Policy (ISEP).
In both the rural and urban areas, the richest two-fifths of households received at least 60 per cent of electricity subsidies, while the poorest two-fifths received only 25 per cent.
The statewide survey could represent a larger trend in India, where residential electricity subsidies are skewed toward non-poor households.
"Energy access is vital for development, and subsidies are provided so that electricity is affordable. But our research shows that it's the poorest who are receiving the smallest benefits," says study co-author Shruti Sharma of IISD.
"This doesn't make sense -- there is an opportunity to improve equity here."
In FY2019, India's subsidies for electricity consumption amounted to at least Rs 110,391 crore (USD 15.6 billion).
According to the report, 'How to Target Residential Electricity Subsidies in India: Step 2. Evaluating Policy Options in the State of Jharkhand', electricity subsidies in Jharkhand vary between Re 1 and Rs 4.25 per kWh, depending on the type of household and amount of energy used -- but every kWh consumed receives some amount of government support.
Since wealthier households can afford to consume more, they capture a larger share of the benefits.
"According to this model, those consuming more than 800 kWh per month can receive up to four times more government support than those who use below 50 kWh," says Shruti Sharma.
Researchers note that the unfair distribution of energy subsidies is a pervasive problem internationally, and, since many other Indian state governments have tariff and subsidy structures similar to Jharkhand, this issue is likely widespread.
The experts highlight that the lack of good data on targeting electricity subsidies is a major knowledge gap across the country.
To make support for energy access more fair for poor households, researchers say the government must fill that gap.
To improve the system, they recommend that state electricity departments in India should rationalize subsidies for rich households and target government support to poor households.
This approach could even allow support for the poorest to be increased, the study indicates.
The report provides specific recommendations for governments based on the Jharkhand study.
In the short term, the researchers recommend a highly cautious approach, given the impact of the Covid-19 crisis on citizens: removing the subsidy only for households consuming more than 300 kWh of electricity per month.
Once the economy begins to recover, the report says, governments should progressively reduce subsidies for blocks between 50 kWh and 200 kWh per month and exclude households that do not hold poverty ration cards.
With these reforms, the Jharkhand electricity distribution company (DISCOM) could free up Rs 306 crore (USD 44 million).
Savings could be redirected to improve electricity supply, support poor households consuming less than 50kWh per month, or assist with recovery from Covid-19.
( 518 Words)