Thursday, July 19, 2012

Who benefits most from rural electrification?

Khandker et al. (2012) study the impact of rural electrification in India and find that rural electrification leads to higher time allocation to studying, increase in supply of labor and household expenditure, and reduction in poverty level, but most of the benefits are enjoyed by wealthier rural households (due to higher consumption and more diversification of electricity service).

Below is an abstract of their working paper:


They find that “the money households with electricity spend on kerosene equals what they pay for unreliable electricity service, not accounting for the loss of productivity and appliance damage due to power outages, suggesting that access without reliability may be counter-productive.”

Nepalese policymakers need to read this statement twice. Erecting electricity poles and connecting new houses with wires devoid of regular power supply is not going to be helpful. The focus should be on generating more hydropower. In Nepal’s case the shortage of electricity is leading to drastic increase in demand for diesel and LPG.