In many states in India, the current tariffs for electricity are set below supply costs for residential users, with total subsidies in the range of $25 billion in 2019. The costs of subsidies are then recovered by certain commercial users paying costs higher than the cost of supplying them electricity. The system, however, creates perverse incentives for utilities to limit services to subsidized users to balance their subsidy budgets. The researchers want to understand this behavior and the distributional effects of utility incentives to service delivery to the poor. They are proposing a pilot study that looks at the tariffs and utility behavior in a slum in a city that employs rate cross-subsidies. If the pilot is successful, they hope to expand the study to look at additional locations.
Projects / Energy Access
The Perverse Effects of India’s System of Electricity Subsidies
In this project, researchers propose conducting a pilot study to investigate the impacts of India's electricity subsidy system.