As with many other DISCOMs in India, Madhya Pradesh Power Management Company Ltd. (MPPMCL), a state-owned DISCOM, is grappling with reducing high distribution losses. A significant component of total losses is collection losses. The challenge is to identify innovative and cost-effective ways of increasing consumers’ compliance to pay their bills in full and on time. Moreover, the state’s DISCOMs have a minimal enforcement capacity, leading to non-compliance. Low cost-recovery leads to rationing, blackouts, voltage fluctuations, and low-quality and unreliable service.

Developing countries struggle to collect public revenue, reducing their ability to provide services. In the Indian electricity sector, state-run utilities incur billions of dollars in losses, exceeding the budgets of other ministries, because they do not collect on payments due to them. Our researchers are currently working with two state utilities under MPPMCL to design behavioral nudges that explore the enforcement options to encourage electricity consumers to pay their bills — such as targeted messages, social comparison messages, targeted letters, in-person notices, and disconnections. The study seeks to explore the welfare effects of such strategic enforcement and how the payment behaviour varies with enforcement. Researchers use the randomized control trial (RCT) methodology to test the effectiveness of these tools across ~30,000 households in two districts namely- Hoshangabad and Narsinghpur in  Madhya Pradesh.