Empowering 'Solar Didis'

A programme offering interest-free loans to women to buy solar panels could help alleviate poverty and empower rural households

India’s coal-mining states would benefit greatly from a distributed solar programme for rural women. Such a “Solar Didi Yojana” could be implemented in states such as Jharkhand and Chhattisgarh to ensure a just transition to a net-zero economy.

This programme would provide 20 to 30 million women interest-free loans to buy 10 kw solar panels connected to the power grid. State distribution companies (discoms) would continue to pay market-based feed-in tariffs for the electricity generated. Solar panels would enable each Solar Didi to earn over Rs 2,000 in monthly income as well as receive 100 units of free electricity. An entire ecosystem, employing millions of people, would be created to manufacture, install, and service these rural panels.

India has several states that are dependent on the coal economy. These states will be impacted deeply by the net-zero transition. Rural households in these states eke out a difficult living and are dependent directly and indirectly on income generated from coal-mining. Many farmers do not have irrigated fields and are dependent on non-farm income to survive. Most marginal communities do not own any farm land and work as rural labourers or practise traditional crafts. Rural women have to supplement their household farming income with various other activities such as rearing goats and cows, selling country liquor, and making handicraft items such as bamboo baskets. Despite ceaseless labour, the median rural household income in states like Jharkhand is Rs 6,000-7,000 per month.

Various government programmes have targeted rural poverty by seeking to increase women’s incomes. Women have been enrolled in cooperatives to produce ethnic clothes or jewellery, or cultivate mushrooms and other exotic vegetables. Unfortunately, market linkages are difficult, and therefore it has been hard to develop cost-effective products that result in consistent sales. As a result, these programmes have struggled to provide steady monthly income. State governments have, therefore, begun direct cash assistance through schemes such as the Ladli Behna Yojana in Madhya Pradesh, which pays out Rs 1,250 per month.

A Solar Didi Yojana would solve these problems. Every rural household that has a ration card would be eligible for the programme. The solar panel would be owned by women and all income would be deposited directly into their bank accounts.

The numbers work. A 10 kw installation costs about Rs 5 lakh and generates about 12,000 kwh (units) of electricity per year. Across India, discoms are generally willing to buy long-term solar electricity supply at Rs 4 per unit (this assumes no capital subsidies). After deducting 100 units per month for self-consumption, annual revenues generated by the panels are about Rs 43,000. Another Rs 5,000 per year can be generated through carbon credits leading to total annual revenues of about Rs 48,000. Panel EMI (assuming a 25-year life and zero interest rates) is Rs 20,000 per year. Maintenance expenses are in the range of Rs 2,000 per year. The remaining Rs 26,000 can be paid out monthly to rural households, resulting in a monthly household income of over Rs 2,000. If 20 million families participate in this programme, it will supply about 10 per cent of India’s electricity requirements.

Free reliable electricity can deliver many positive externalities. First, the household itself can be electrified. Second, cooking can shift to induction stoves, thereby eliminating the need for cooking gas cylinders, saving the household over Rs 500 per month. Third, rural households can switch over to electric two-wheelers, reducing their petrol consumption. Lower fossil fuel usage can help India reduce its massive fossil fuel imports. Finally, electric two-wheelers can provide battery backup to the household enabling 24x7 electricity supply.

Interest-free loans will drive the Solar Didi programme. These loans would be a much more efficient policy intervention than a capital subsidy for solar panels since they dramatically improve the unit economics. The interest payment subsidy declines as the panel principal is paid down. This subsidy could be provided by some combination of development finance institutions, the central government, and state governments.

Zero-interest loans could be made available through central and state renewable development agencies. Discoms are already mandated to establish a feed-in tariff for distributed solar generation and to provide smart meters. Discoms will also save money because rural households will generate their own electricity and therefore discoms will not have to supply them with free units. Local distribution networks will have to be strengthened so that they can absorb the solar electricity being generated in rural areas.

Once interest-free loans become freely available, market forces will be unleashed, and an entire ecosystem would develop around the Solar Didi Yojana. Panel manufacturers would start producing affordable and highly packaged installation modules because they are assured steady, scalable demand. Wiring and meter providers will customise their offerings to enable panels to get plugged into the grid easily. Remote management software will be developed to track electricity generation as well as to provide remote maintenance. Installation companies will rush to install solar units so that they can make money on installation charges. Various storage technologies will be developed to ensure continuous electricity supply for a household. Low-priced electricity will quickly lead to the electrification of two, three, and four-wheelers.

A Solar Didi Yojana provides multiple benefits. India’s poorest households will receive a steady monthly income and free electricity. A vast ecosystem of panel manufacturers, meter equipment companies, software providers, installers, and financing companies will spring up. India would have enough green electricity to power our growth. Packaged solar units could become a large export industry to the global South. And India would move rapidly towards net zero while ensuring a just transition for its most vulnerable citizens.

The writer is chairman of the Standing Committee on Finance in Parliament and a Lok Sabha MP from Hazaribagh. The views are personal