DATABASE

Case study

Ahmedabad slum electrification project

completed



Country
India

Year
2001


Issue

Solutions

Link
GNESD Energy Access


Abstract

The project secures legal electricity connection in Gujarati slums. Started in 2001 with a few pilot households, it has created the basis for a full electrification of Gujarati slums with more than 200,000 new connections. Project stakeholders worked jointly to overcome administrative and economic barriers.


Project Description

The project objective is the extension of legal electricity services in Gujarati slums. Starting in 2001 as a small project to connect 700 households in 5 slums of Ahmedabad, by 2008 the impact was measurable in 710 slums electrified with over 200,000 legal connections opened. Two local NGOs, the Ahmedabad Municipality and the Ahmedabad Electricity Company (EAC) were the main project stakeholders. Initially the project was funded by USAID. In 2004 the financial support of the donor was over and AEC carried on the efforts to extend connections in slums. The project focused on the ways to overcome main barriers impeding people to get a legal connection: - High initial cost. The project worked to establish a bank credit system and convinced EAC to dilute the initial cost into 12 installments. EAC was also asked to offer a monthly payment option in addition to the standard bi-monthly bill. Energy efficiency campaigns were run to help customers to reduce their bill. - Lack of legal status of potential customers. People living in slums did not have the legal status to apply for electricity services. Electricity connection was linked to proof of residence and house building permission. Ahmedabad Municipality introduced special connection procedures for urban poor. - Lack of trust between people and the electricity company. Educational and awareness campaigns were run to increase the trust between communities and the electricity company that historically step away from slum areas.


BENEFICIARIES

Over 200,000 households in Gujarati slums


Results

Electricity brought comfort and safety in 200,000 slum households and resulted in overall improved quality of life. This helped increase the productivity level of residents with a positive impact on their health. Electrification enabled a more comfortable environment for children to study and families to live in, it allowed access to various electrical appliances. AEC records a reduced number of incidents from electricity theft and a remarkable reduction of non-technical losses. This persuaded AEC to support slum connection beyond the pilot project. AEC registered an increase of sales of 200% in the project area. To reduce service costs, cheaper meters were developed and an easier procedure for meter reading introduced. Supplying electricity to people ‘below the poverty line’ resulted in new policy challenges. The Electricity Regulatory Commission introduced in 2010 a specific scheme for families below poverty line based on a block tariff with reduced cost for small consumers.


Business Model

The project is a good example of partnership among different stakeholders: electricity company, municipal Government and NGOs. The project improved the policy framework and helped removing administrative, economic and behavioral barriers to make it economically possible to provide electricity services in the slums. The business model consists in introducing specific administrative and tariff options for the most needy to include them in the conventional activities of the electricity company.


Lessons Learnt

The project went beyond its specific results to embrace a wider vision. The original plan was to pay for new connections but during implementation it became clear this was only a component of a more complex picture. For a larger impact it was necessary to work on credit opportunities, connection options and the legal status of slum dwellers. Negotiation with stakeholders and reciprocal understanding became the relevant project target rather than 700 connections. Luck of trust between slum dwellers and the company was an emerging issue and educational campaigns had to be organized. Energy efficiency measures were introduced to reduce costs and make legal connections a practicable option.


Key Feature

What had started as a small scale project has become a successful story to be considered as a best practice for urban connections. The Gujarat example serves as a good definition of the term “scaling-up”. When the USAID grant period ended, the electrification program continued. The role of the NGOs gradually diminished as the electricity company took charge of the program. The scaling up of slum electrification was possible due to the commitment of AEC to extend services, given the favorable changes emerged. AEC and the Municipality modified electricity access requirements and billing procedures at policy and company level and not uniquely for the project purpose. The project offers a methodology to work with the urban poor that may be replicated in other contexts. The barriers identified here are found in many other slums in India and elsewhere. Other cities in India and Africa are studying the Gujarati example as a best practice. Mumbai and New Delhi are working on a similar approach.


Other significant information

One relevant result of the project was the capacity to overcome the reluctance of AEC to extend electricity services in urban slums. Once the company got committed to the challenge it started to be proactive. Normal connection rates used to range between 91 and 136 $ whereas a slum dwellers ability to pay analysis suggested a much lower level. During the pilot phase the donor supported connection costs, paying AEC the difference above 49 $. Later the company changed the meter type installing a lower price, outdoor model, with the additional advantage of reducing meter installation and reading costs. The cost of connection was reduced to 56 $. The success of the strategy persuaded the Government to introduce a discounted connection at 38 $ for the most needy and the company to offer the option of an upfront payment of 12 $ and the remaining cost in 10 monthly installments.


Main Donor

Usaid
(Government)

Implementing Actor

Ahmedabad electricity company (AEC) (Private sector)