Willingness to Pay for Electricity Supply Improvements in Rural India

Abstract

This study undertakes a survey using a random sample of 2083 households in rural Madhya Pradesh, India, to estimate benefits of improved electricity supply to rural households. The survey estimated that the Willingness to Pay (WTP) for a household for improved service is 340 per month, on average. Results of this study support similar investments in other states of India with similar electricity services and socio-economic characteristics. Simulations using the estimated WTP function show possibility of progressive tariff increase as household income increases. Block and flat tariff show similar impacts on revenue generation but block tariffs have the ability to induce energy conservation at household level. This study casts doubts about the need for subsidies for below poverty line and scheduled caste households.