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Social perception on power needs change: Study
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SME Times News Bureau | 10 Sep, 2019
Contrary to treating electricity as a right, governments in low-income
countries should treat it as a private good, according to an
international report prepared after studying the power situation in
Bihar.
This will help resolve the problem in Bihar, says the study released on Tuesday.
According
to the study, less than 50 per cent consumers of all income levels paid
their electricity bills. It shows bigger consumers are as likely to
fail to pay bills as smaller ones and it's not an issue of an expensive
redistribution programme, but of the entire electricity market.
Also,
the power authority in Bihar collects just 30 per cent of the cost of
supplying power and less than 20 per cent of the official rate.
Thus,
the distribution firms lose Rs 70 for every Rs 100 of power supplied.
They, therefore, limit their losses by limiting the supply -- no
consumer gets 24 hours of electricity, the average consumer gets about
12 hours a day, and some areas only 6 hours a day.
As a result, some consumers value electricity at more than its costs but are unable to purchase it.
"Surprisingly,
we find no relationship between payment rates and the amount of
electricity supplied to a given area," said Burgess, IGC Director and
LSE Professor. "It's a serious indication that the power market is not
functioning effectively," Burgess said.
"It's critical to provide
lifeline style electricity to the poorest. But doing that in a way that
causes power markets to fail harms everyone. No solution will work in
the end, unless the social norm that electricity is a right is replaced
with the norm that it's like any regular product, like food and cell
phones," said Michael Greenstone, the Milton Friedman Distinguished
Service Professor in Economics and director of the Energy Policy
Institute at the University of Chicago (EPIC) and the Tata Centre for
Development at Chicago (TCD).
The paper recommends potential
policy solutions for the social norm change and that include tariff
reform, social incentives, better bill collection, social trust,
technology and privatisation.
It's a widespread belief in
developing countries that electricity is a right to be enjoyed by all.
In practice, this social norm results in customers not paying their
bills, stealing electricity and bribing bill collectors -- behaviours
the government often tolerates.
Thus, power utilities lose money
on every unit of electricity sold, causing large financial losses that
limit their desire and ability to maintain infrastructure, provide
reliable power and invest in expanding access to electricity. And as
customers then receive poor energy supply, they are even less likely to
pay their bills.
The study, conducted by the International Growth
Centre (IGC) of the London School of Economics & Political Science
(LSE), the University of Chicago and Yale with support from the Bihar
government. The research was led by Robin Burgess (LSE), Michael
Greenstone (Chicago), Nicholas Ryan (Yale) and Anant Sudarshan
(Chicago).
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