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Elasticities of electricity demand in urban Indian households

Introduction

Over the past few decades’ significant changes have

taken place in the electricity sector in India. Total

electricity consumption in India grew from 44TWh in

1971 to 314TWh in 1999 at an annual rate of growth of

7.4% for this period (

the Indian household sector has also been growing at a

very rapid rate over the last decades. According to the

Tata Energy Data Directory and Yearbook, the consumption

of electricity per household went up from 7 to

53kWh between 1970–1971 and 1994–1995 (

1999

in the domestic sector has also risen from about 11% in

the early eighties to nearly 18% by the early 1990s

(

growth, industrialisation, urbanisation, modernisation

and income growth, electricity consumption is expected

to increase substantially in the coming decades as well.

This implies enormous new financial investments will be

needed to meet demand in this sector.

Currently, the electricity sector is characterised by

chronic power shortages and poor power quality.
With Table 1 below).

demand exceeding supply, severe peak and energy

shortages continue to plague the sector. While the

government opened up the power generation sector to

private investments in 1991, the state electricity boards

(SEBS) continue to be the main agencies responsible for

the generation and supply of electricity in India today.

The elementary problem being faced by the power sector

is the poor financial conditions of these State Electricity

Boards. This has resulted in inadequate investment in

additional generation capacity, which is likely to further

exacerbate the existing gap between supply and demand.

Clearly, there is a large role and potential for demand

side management (DSM) programmes in India. The

government of India, through new energy conservation

legislation is seeking to implement a host of such

programmes within the country. One of the key elements

of the DSM programmes is the introduction of rational

cost-of-service based tariffs for power within the

country. The price of power is currently set by the State

in India and a high degree of cross-subsidization

between sectors continues to exist, with average

electricity tariffs being generally below the costs of

power generation and distribution (see

This has tended to encourage inefficient use of electricity

in the subsidised domestic sectors. A revision of

electricity tariff rates is thus urgently needed.CSO, 2000). Electricity demand inTERI,). The share of electricity consumption from utilitiesCMIE, 1996). Given, current trends in population

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