March 27, 2017

Why Free Electricity for Bhutan’s Rural Poor?

In Bhutan, it costs more to collect electricity bills than the cost of electricity itself. The government is coming up with a novel idea -- offer electricity to the rural poor for free. The country's prime minister says the move would control urbanization and save fuelwood. Bhutan is one of the highest consumers of fuelwood per capita in the world, despite being a net exporter of electricity.

Posted on 09/29/13
By Nidup Gyeltshen | Via Kuensel Online
The rivers of Bhutan provide much of the GDP of the country, generating electricity for sale to India. Bhutan is a net exporter of electricity thanks to hydropower. In a country where remote communities are still heavily reliant on firewood for heating and cooking, rural electrification is a key development goal. What doesn't help is the fact that Bhutan is heavily mountainous and rural access to roads is still a challenge. (Photo by Michael Foley, Creative Commons License)

The rivers of Bhutan provide much of the GDP of the country, generating electricity for sale to India. Bhutan is a net exporter of electricity thanks to hydropower. In a country where remote communities are still heavily reliant on firewood for heating and cooking, rural electrification is a key development goal. What doesn’t help is the fact that Bhutan is heavily mountainous and rural access to roads is still a challenge. (Photo by Michael Foley, Creative Commons License)

The government, during its monthly meeting with the local media recently, said it is exploring the possibility of providing 100 units of electricity for free to the rural poor.

It is also studying the possibility of providing partial or full subsidy on electrical appliances such as rice cooker, curry cooker and water boilers to the same section of the population.  This means these items would either be provided free of cost or at a subsidised rate.

Prime Minister Tshering Tobgay said that a preliminary study has indicated that the idea was doable, but there was a need to do more studies, and make it more convincing before rolling out such packages.

Providing free electricity to the rural poor to the tune of 100 units of electricity a month has been based on the assumption that a rural household has a rice cooker, a curry cooker, a water boiler and some few light bulbs.

The prime minister pointed out that, as of today, a rural household uses, on an average, 70 units of electricity a month.

The Bhutan Power corporation probably spends more money while collecting the bills from the rural areas than the money received from them, he said.

“So if the collection procedure is more expensive than the money being collected, that alone pays for the subsidy,” lyonchhoen said.

The government today has royalty energy worth around Nu 1.4 billion (one US dollar is equal to 62.46 Nu, the Bhutanese currency).  This comes from the 15 percent of total generation that is given to the government as royalty by Druk Green Power corporation, the country’s generating company.

Considering 100 units of electricity for 73,000 households is given free, the total cost works out to around Nu 500 million.

Earlier, several concerns were raised that, should the government inject the entire subsidy portion to the rural poor, the urban low voltage or household consumers and the medium voltage consumers will be deprived of any subsidy, and hence land up paying a higher electricity tariff.

Economic affairs minister Norbu Wangchuk said the government was still working on several issues. “We need to find if it would be fair and reasonable,” he said, “to offload the subsidy from the urban and medium voltage consumers and load it to the rural consumers.”

“Also, we need to clearly define rural areas,” he added.

Lyonchhoen Tshering Tobgay said subsidizing farmers did not mean taking away subsidy from the urban residents, since urban residents do not receive subsidy.  According to him, only rural and the medium voltage users or small industries receive power subsidy at the moment.

But BPC officials said that, even urban low voltage consumers are entitled for subsidy. “If an urban resident uses less than 100 units of electricity a month, he or she pays only Nu 0.85 a unit,” a BPC official explained. “If the subsidy component is removed, he’d be paying Nu 4.21 a unit.”

Nu 4.21 is the actual cost of electricity supply, therefore all LV consumers consuming 100 units or more than 300 units of electricity will actually be paying Nu 4.21 per unit, should there be no subsidy.

The need to provide free electricity, the prime minister (Tshering Tobgay) said, was to curtail rural-urban migration, by making rural life more attractive and prosperous.

Also Bhutan is one of the highest consumers of fuelwood per capita in the world.

“By providing free electricity, fuel wood consumption would reduce, this would ensure proper sanitation, reduction in drudgery and environmental preservation,” the PM said. “When people are less dependent on firewood, our watersheds will be protected and thus it’ll provide good amount of water to the hydropower sector.”

He also said that the urban areas are already highly subsidized in the form of the best schools, the best hospitals, the best roads and the best entertainment, for which the urban residents do not pay anything. “In the rural areas, people contribute land and labour to build any infrastructure in their locality,” he said. “So it makes sense to provide some free electricity to the poor.”

By  |Thimphu


Filled under: Bhutan, Views Digest

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