This article talks about rural electrification, a significant topic of rural banking (CAIIB 2023 elective paper). Here we’ll study the socioeconomic benefits of electrification, job creation, challenges, viability and government schemes to promote it.

Bringing electricity must be an essential task for GOI since rural and remote areas are suffering from enormous market failures. 

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When a village can be said to be electrified?

Into effect from 2004-5, the new definition of the electrified village is as given below:

  1. If electricity is being used in an inhabited area within its revenue boundary of the village whatsoever may be the purpose. 
  2. Basic infrastructure such as distribution transformer, distribution lines and dalit basti hamlet has to be provided. 
  3. Some places such as Health Centers, Dispensaries, Schools, Community centres, and Panchayat offices must enjoy electrification facilities.
  4. At least 10% of the total household in the village must be electrified.


What are the challenges hampering rural electrification?

  1. According to the research conducted it has been found that the cost of electrifying the villages has been high even though quite a many policies and measures were introduced.
  2. Energy requirements and demand are both volatile in such areas, and fluctuations among these factors make it hard to draft optimum planning.
  3. Some other issues associated with geography and location like soil, water and storage etc make it unsuitable for renewable energy generation.

For the mitigation of such issues, a networked rural electrification model has also been proposed. Selected villages are linked via an optimal network, which further connects to some centralised generation facilities located at the spots with better renewable energy resources available.

 Resultantly, each community receives some of its supply from tiny local facilities and some from centralised facilities, which increases the efficiency with which energy resources are used as well as the flexibility and dependability of the system as a whole. 

This model’s viability is reliant on how much it costs to construct the ideal network.

The researchers have developed an efficient approach for analysing all potential connections under complex geographical structures and consequently practically optimise network architecture based on the multiplier-accelerated A* algorithm.

Benefits associated with the policy

  1. Businesses would want to invest in the areas that are electrified and this way additional revenues could be generated.
  2. Access to streamlined modern techniques such as crop irrigation, crop processing etc would be eased off promoting greater efficiency and productivity.

Recent government schemes

  1. In Dec 2014, GOI launched DDUGJY (Deen Dayal Upadhyaya Gram Jyoti Yojana) to build up development in the rural area by introducing electrification of all un-electrified villages (as per Census 2011).


The scheme’s main elements are feeder separation, sub-transmission and distribution network strengthening, metering at all levels (input points, feeders, and distribution transformers), a microgrid and off-grid distribution network, and rural electrification—projects that have already been approved under the RGGVY that need to be finished.

Budgetary support

An investment of Rs 43,033 crores including budgetary support of Rs. 33,453 crores from GOI over the implementation period.

All Discoms (including private discoms and state power departments are eligible for financial assistance under the scheme.

Considering specific network requirements, discoms will prioritise the strengthening of rural infrastructure work and will formulate detailed project reports (DPRs) of the projects for coverage under this scheme.

The nodal agency for this scheme is REC (rural electrification corporation).

It will have to report monthly on the scheme implementation indicating both the financial and physical progress to the ministry of power and central electricity authority.

Under the chairmanship of the Secretary (Power) monitoring Committee will approve the projects and also monitor the implementation of the scheme.

Execution period

Within 24 months from the date of issue of the Letter of Awards by the utility, Projects under this Scheme will be completed.

  1. Construction of HT and LT lines, metering at distribution transformers, feeders, and consumers, as well as feeder segregation, are all examples of strengthening and expanding the sub-transmission and distribution infrastructure in rural areas.
  2. The country’s Pradhan Mantri Sahaj Bijli Har Ghar Yojana – Saubhagya, which aims to electrify disadvantaged rural and urban homes, was introduced in October 2017. 
  3. SAUBHAGYA was established to achieve universal household electrification by connecting all rural and urban poor families that are not already connected to the power grid.
  4. As of 31 March 2019, all households were reported to be electrified by the States under the auspices of SAUBHAGYA, except 18,734 households in Chhattisgarh areas afflicted by Left Wing Extremists (LWE). 
  5. Following this, seven States—Assam, Chhattisgarh, Jharkhand, Karnataka, Manipur, Rajasthan, and Uttar Pradesh—reported 19.09 lakh un-electrified households in their State—identified before 31.03.2019—needed electrification. These households had previously expressed reluctance to receive electricity connections but had since changed their minds.
  6. These households’ electrification was authorised by SAUBHAGYA. As of the 31st of March 2021, each of these seven States reported electrifying 100% of houses. Since SAUBHAGYA’s inception, 2.817 crore households have been electrified, as of 31.03.2021. 
  7. The number of unlit houses rose to 11. lacks after that, according to several States. A second approval for the electrification of these homes was given, bringing the total number of powered homes to 2.86 crores.

Rajiv Gandhi Grameen Vidyutikaran Yojana

Launched in April 2005 by merging all ongoing schemes this scheme was implemented for the electrification of villages where grid connectivity is either not feasible or not cost-effective.

Under Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), the Government is implementing Decentralised Distributed Generation (DDG). 

It mainly aims to electrify all villages and habitations as per the new definition, provide access to electricity to all rural households and Provide electricity Connection to Below Poverty Line (BPL) families free of charge.

Following are some government-initiated policies that promote rural electrification:

National electricity policy 2005

  1. GOI notified the National electricity in compliance with Section 3 of the Electricity act, 2003.
  2. This policy mainly focuses on the setup guidelines to expedite the development of the power sector to provide electricity supply to all the areas and safeguard the consumers’ interest and stakeholders as well while keeping in view the availability of the sources, technology and energy.
  3. Without the optimum technology potential to exploit the resources and energy available, it’s not possible to realise the objective. Also, the interest of the stakeholders has much influence on the project. 
  4. Taking into account the consideration of the State government, CERC (Central Electricity Regulatory Commission), CEA (Central electricity authority) and other stakeholders as well, the national electricity policy was yielded and progressed.

The following are some key objectives of this policy:

  1. Electricity access: Available to all households in the upcoming 5 years.
  2. Power availability: Electricity and culminating shortages have to be dealt with and overcome and meet the electricity demand by 2012.
  3. Cost-effective, reliable and quality power: Quality and cost-based standards must be set out. By 2012 target per capita availability of electricity to be increased to over 1000 units.
  4. Minimal consumption lifeline: By the year 2012 it must be 1 unit/household/day as a merit good.
  5. Regaining financial stability and the electricity sector’s commercial viability.
  6. The interests of consumers are protected.

Power supply to rural India program

These rural banking free notes will discuss the power supply to rural India program which will cover the schemes and measures taken to realise this project.

A growing customer base, changes in lifestyle, and consumption habits all contribute to the daily rise in energy demand in rural regions, necessitating ongoing strengthening and expansion of the distribution network. We’ll be studying the aforementioned in this article.


2015 welcomed the commencement of the “Deendayal Upadhyaya Gram Jyoti Yojana” programme by the Indian government to electrify rural areas of the country.

The DDUGJY now incorporates the former Rajiv Gandhi Grameen Vidyut Karan Yojana (RGGVY) programme, which was designed to electrify villages and provide infrastructure for energy distribution in rural regions.

Nodal agency

REC (Rural Electrification Corporation) has implemented the DDUGJY.

Substitutes of power and issues associated with it

In rural areas, 80 to 90% of the total energy used for lighting and heating comes from non-commercial sources such as firewood, cow dung, and agricultural waste.

The lack of energy to meet needs for production and subsistence is one of the main obstacles to raising the quality of life in rural areas.

Developments under Deendayal Upadhyaya Gram Jyoti Yojana


  1.     To electrify 1,21,225 unconnected villages, the Ministry of Electricity has approved 921 projects.
  2.     Complete energization of the 5,92,979 communities that are currently only partially electrified
  3.     Provide 397,45,00 free energy connections to remote BPL households.

B. Fund allocation

  1. A grant of up to 60% of the project cost (85% in the case of special states)and
  2. An additional payment of up to 15% (5% in the case of special category states) is paid upon accomplishment of predetermined milestones.
  3. The REC states that subsidies of Rs. 53,326 crores have been made available to the States for the program’s execution.

C. Special category states

The special category States include all of the North Eastern States, including Sikkim, Jammu & Kashmir, Himachal Pradesh, and Uttarakhand.

India’s move to energize every village in the country with electricity has been acknowledged by International Energy Agency (IA), in 2018.

Components through which DDUGJY will facilitate 24 × 7 Power for all

Separation of feeders for non-agricultural and agricultural purposes, which enables the adequate and continuous power supply to non-agricultural customers and continuous, high-quality delivery to agricultural consumers.

  1. a) Distribution network: Micro-grid and Off-grid
  2. b) Metering of Distribution: Transformers/Feeders/Consumers
  3. c) Sub-transmission and distribution infrastructure: Strengthening and expansion and rural electrification element (including the erstwhile RE projects).


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