Determinants of Household Electricity Demand in Rural India: A Case Study of the Impacts of Government Subsidies and Surcharges

Abstract

This paper analyses the determinants of household electricity consumption with the focus to find the impact of government subsidies and surcharges on the demand for electricity services in the rural areas. Using surveyed household data of 332 samples, quantile regression has been employed for checking heterogeneity in electricity demand across different quantile of households. We find government subsidy has enhanced the household demand for electricity consumption with the elasticity ranging from 45 to 65%. Skeptically, electricity consumers of higher quantile tend to consume more even in the presence of outstanding bill while it is the opposite for low quantile group. Surprisingly, income and other socioeconomics variables don't necessarily affect the households demand for electricity. This implies demand for electricity is inelastic to income and selected socioeconomic variables in rural regions. However, electricity demand decreases for households with dwelling characteristics categorized as poorer quantile. Based on our empirical findings implications are drawn for policy makers.