The Congress had promised to provide 300 units of free electricity per month per household in certain states such as Punjab, Himachal Pradesh and Karnataka, during the assembly elections. The initiative aims to alleviate the financial burden on millions of families. However, the financial implications of this promise warrant closer examination.
The promise and its reach
As per the 2011 census, Karnataka was 13.4 million households, followed by 5.51 million households in Punjab and 1.48 million in Himachal Pradesh, government data shows. The initiative could see a surge in energy consumption in these 20.39 million households. Reduced electricity costs will likely significantly boost demand in rural and low-income urban areas.
Financial Implications
Providing free electricity has some financial implications for state-owned power producers and distribution companies. With an average electricity cost of Rs 6.29 per kilowatt-hour, 300 units of electricity to more than 20 million households, the government could stand to lose Rs 3,774 crore a in monthly revenue.
Power generation and supply
Moreover, India's power generation capacity would also need to be more robust, since more people would tap into the grid on a more sustained basis. According to ministry of power data, Indian coal plants have an efficiency rate of 34.68 percent, versus 42 percent in Japan.
Given this level of efficiency, generating 1 kWh of electricity requires 0.0153 tonnes of coal. Thus, for the promised 300 units of free electricity, 0.06483 tonnes of coal are needed, considering that 49 percent of the country's power requirements are met through coal-fired power plants.
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