The Government of India has also set ambitious targets for 100 per cent village electrification by 2008. An allocation of Rs. 1,100 crores has been made for a rural electricity distribution backbone. The said allocation will pay for village electrification of 1.25 lakh unelectrified villages. In reality, this will result in the provision of a sub-station (33 or 11 KV) within each block and at least one distribution transformer within each village.

It is not clear where the additional power will be generated and who will pay for it. It is unlikely that states will pick up the tab. The rural electrification plan will surely drive up the cost of power delivered and the losses of the State Electricity Boards even further. The realisation of the plan appears uncertain as there are no clear incentives announced either for power generation or indeed for attracting investments with private sector participation. The modest estimates for investments needed to meet current targets amount to Rs. 12000 crores in power generation alone.

Rural India needs reliable power and energy supply for economic growth. This process can be assisted by tail end and distributed generation using local resources — biomass, biofuel, wind and water. The experience with reliable and assured power supply in the form of energy services to rural communities in Bihar, West Bengal is very encouraging. Rural poor pay for energy services that provide value and are delivered at their doorstep. The deemed tariff in terms of electricity units delivered ranges from Rs. 8 per Kwh for irrigation service to Rs. 5 per Kwh for entertainment and Rs. 3 per Kwh for lighting. Rural communities begin to demand new services (refrigeration, ICT), local market begins to develop and a biomass economy emerges. Reliable power ushers an economic revival. Value addition takes place as farmers can process local produce such as wheat, rice, groundnut, mustard, sugarcane and bamboo. Only the high value produce is transported. The biomass generated can be further processed. DESI Power has gained experience in briquetting of rice husk, groundnut shells and charcoal. The briquetted fuel is shipped to local industries. The dormant cash economy is stimulated, creating new jobs.

It is essential that new investments are made in the energy infrastructure. The key question is Resource Mobilisation for fulfilling energy needs and realising new economic opportunities for the masses. Financial resources could be made available by redirecting subsidies and by providing new incentives for power generation and energy services. A case in point is the continuing drain of financial resources due to subsidies on LPG and Kerosene (since kerosene is used extensively for home lighting in villages across the country). Phasing out and, indeed, withdrawal of these subsidies can innovatively finance distributed generation and alternative home lighting with state-of-the-art affordable solutions that are currently available; Compact Fluorescent and white LEDs. Financial incentives, such as 100 per cent depreciation, have worked wonders for investments in wind energy generation. Interest subsidies and consumer finance have likewise speeded up the commercial production and use of solar home lighting systems. Clearly, a package of financial benefits tailored to service provision for villages in India is long overdue.