The Peninsula Foundation

Category: Economy & Development

  • UAE’s industrialization drive and the potential for Sovereign Wealth Funds to unlock value

    UAE’s industrialization drive and the potential for Sovereign Wealth Funds to unlock value

    The United Arab Emirates has renewed its commitment to the fourth industrial revolution recently with an ambitious target of increasing the industrial sector’s contribution from AED133 billion to AED300 billion (US$ 81.7 billion) by 2031. The main objectives of this ten-year strategy are to leapfrog towards knowledge-intensive industries, apply technology-intensive solutions to retrofit current industries, and push manufacturing in industries like aerospace, pharmaceuticals, medical equipment, etc. However, these objectives are not novel. While the early development plans of the emirates’ primarily focused on diversifying the economy from hydrocarbon revenues, the ultimate objective was to expand towards knowledge-intensive industries. In line with this, economic development plans as early as 1991 record the rulers’ interests in building a manufacturing-oriented economy, but the success is yet to materialize. Even in the case of the most diversified emirate – Dubai, the main drivers of the economy as of 2020 were entrepot activities like trade (26.5%), transportation and storage (12.5%), and financial services (9.7%), while manufacturing contributed to 8.8%. These statistics can be further appreciated by recollecting that from the early 1990s, development plans for Dubai were made under the assumption that the annual real growth rate in its manufacturing sector would meet 7%.[1]  As of 2020, the growth rate in manufacturing is only 0.3%. While manufacturing-oriented industrialization was to play a key role in the economy, there have been considerable challenges in realizing it. This article first briefly recalls the historical development efforts of the emirate, then discusses reasons which could have hindered the country’s trajectory towards knowledge-intensive manufacturing, and highlights a potential development instrument the country can utilize to realize its objectives in the present day.

    Federal Structure and overcoming the Inequalities

    Being a federation every emirate was offered autonomy which retained the control of resources of the respective emirates’ within respective ruling families. This resulted in vast inequalities amidst emirates with Abu Dhabi and Dubai becoming relatively well off compared to others. The remaining emirates were dependent on the budget provisions from oil-rich Abu Dhabi to maintain the social contract over their respective emirates. This internal dynamic resulted in different approaches being taken for economic development in the country. To briefly summarize some of them – Dubai invested in infrastructure to improve its entrepot facilities and industrialize in sectors associated with hydrocarbon resources, Abu Dhabi began focusing on renewable energy and clean technology from the early 2000s,  Ras al-Khaimah benefitted from its low-cost production environment (up to 25-50% lower than in other emirates) to become the country’s manufacturing base, and Fujairah developed a storage and bunkering expertise due to its geographical location beyond the chokepoint of the Strait of Hormuz.[2] The developmental push from the emirates created a boom mainly in industries associated with hydro-carbon, real-estate, logistics, and finance. Although official data on sector-wise contribution to GDP remain unpublished, World Bank data confirms that as of 2019 about 16% of the UAE’s GDP is accredited to hydrocarbon sources. It also confirms that as of 2019, manufacturing value-added as a percentage of GDP stood at 8.7%.

    In the context of UAE, the viability of proceeding with labour-intensive industries as a starting point was low as the country has a small Emirati population. Second, while most late developing countries have resorted to wage suppression to make production costs competitive, the UAE is restricted from doing so owing to the social contract it shares with its citizens

    Despite the autonomy every emirate has enjoyed, the overarching approach the country has used for economic development is to invite foreign firms to the country by providing business-friendly infrastructure and environment.[3]For the emirate of Dubai, which was most successful in diversification, Singapore’s development model was an inspiration for implementing policies promoting business-friendly infrastructure and environment.[4] Among potential factors that explain the challenge in the uptake of knowledge-intensive manufacturing in the UAE, this article focuses on two – First, the inherent characteristic of firm relocation, and second, the existence of a twin labour market in the country with high wage levels. Helleiner argued that it is easier to scale to knowledge-intensive industries when labour-intensive production processes exist locally, this way, production activities can upgrade vertically. The logic was that direct relocation of knowledge-intensive functions of industries would imply high costs to the firm. His thesis was based on the development of the Asian tigers whose development process benefitted from the vertical up-gradation of industrial activity. In the context of UAE, the viability of proceeding with labour-intensive industries as a starting point was low as the country has a small Emirati population. Second, while most late developing countries have resorted to wage suppression to make production costs competitive, the UAE is restricted from doing so owing to the social contract it shares with its citizens. UAE nationals are instead offered much better employment packages in the public sector which deters their participation in the private sector.[5] As a result, the private sector across all skill levels is significantly dependent on expatriate labour. In addition to this, foreign talents are paid twice as much as their home countries across all skill levels. Tong and Al Awad demonstrate that this is true not only for low-skilled and semi-skilled jobs but also for high-skilled jobs by comparing the average wages of high-skilled expatriates from the US and the UK. They compare their wage levels at home and in Dubai, control for purchasing power parities, and find that the salaries are twice as that in their home countries. Competition for knowledge-intensive industries has predominantly arisen from the global North and as income levels in the UAE are twice as much as that in developed countries, there is an inherent risk on the price competitiveness of products on a global scale.

    Development model, SWF, and Top-down Approach

    A difference in the UAE’s late development model relative to others in the category is that while the latter was challenged in capital accumulation, it was easily accrued for the UAE. The difficulty for the UAE lies in using accumulated capital to break the dependency. Thus, the way forward for the UAE lies in a radical rethinking of its development model. Where vertical integration by first relocating labour-intensive industries demonstrates a bottom-up approach to development, the UAE is better positioned to approach development in a top-down model of vertical integration having accumulated capital. Although public sector investment and involvement in the economy is high, there exists scope to increase the synergies between industry-leading companies and local producers through the public sector. In this case, a policy instrument with the potential to push economic development is the state’s Sovereign Wealth Funds (SWFs).

    The channelling of SWFs as a development policy instrument provides an opportunity for greater collaboration between international industry leaders and local businesses. Investing in the economic diversification of the country has been an important objective for the state’s SWFs. Some noticeable instances where the SWFs have built linkages between international companies and local businesses have been in the aerospace sector.[6] For instance, Mubadala entered into strategic partnerships with Airbus and Boeing in 2008 and 2009 respectively and launched Strata Manufacturing as a wholly-owned subsidiary of Mubadala in 2009. Soon after Strata Manufacturing was launched, the company concluded agreements with both Airbus and Boeing to manufacture aircraft parts at its aerostructures manufacturing facility in Al-Ain. This further continued when Strata Manufacturing received a ten-year contract from Boeing for the manufacture of Boeing 777’s empennage ribs and vertical fin rib for Boeing’s 787 Dreamliner. This development model is novel because it demonstrates how embedded autonomy, a key feature in the East Asian development model, can be replicated while collaborating with established international companies for economic development at home. Sovereign Wealth Funds as an institutional investor demonstrate how the state can be at the forefront of national development efforts from a transnational level.

    This top-down model of economic development through SWFs is a novel use of the investment vehicle as a policy instrument. It allows the state to direct development from a transnational level, which is an important operational condition for developmental states in an era of globalization

    An important lesson from late developers in East Asia and Southeast Asia is that state-directed capitalism is important for economic development. This top-down model of economic development through SWFs is a novel use of the investment vehicle as a policy instrument. It allows the state to direct development from a transnational level, which is an important operational condition for developmental states in an era of globalization. Although the UAE has demonstrated the use of this instrument in some cases, there is great potential to further drive economic development towards the fourth industrial revolution through SWFs. There will likely be more linkages built between local businesses and international companies through SWFs as the UAE moves forward to a knowledge-intensive economy. As the article highlighted above, there will be challenges moving forward in ensuring price competitiveness at a global level when operating in a labour market with price distortions. To this end, the challenge remains in finding innovative financing mechanisms by state investors in the short run and for policymakers to introduce suitable policies for correcting the price distortions in the long run. This ongoing effort in the UAE requires a closer examination from researchers, development practitioners, and policymakers as it is a unique development model and has the potential to deliver promising developmental lessons.

     

    Notes

    [1] Euromoney; London”, Periodical, (1997), World Economic Analysis, United Arab Emirates Document no.:198889294, ProQuest One Business.

    [2] Ulrichsen, Kristian Coates, The United Arab Emirates: Power, Politics And Policy-Making, p.87-129, Routledge, 2017.

    [3] Davidson, Christopher. The United Arab Emirates: A Study In Survival. 1st ed. Lynne Rienner Publishers, 2005.

    [4] Sampler, Jeffrey, and Saeb Eigner. Sand To Silicon. Dubai, UAE: Motivate Publ., 2008.

     

    [5] Davidson, Christopher. The United Arab Emirates: A Study In Survival. 1st ed. Lynne Rienner Publishers, 2005.

     

    [6] Ulrichsen, Kristian Coates, The United Arab Emirates: Power, Politics And Policy-Making, p.103-108, Routledge, 2017.

     

    Feature Image Credit: Asharq AL-awsat

  • Drought or Floods? : Tamil Nadu Needs An Integrated Water Management Policy

    Drought or Floods? : Tamil Nadu Needs An Integrated Water Management Policy

    Tamil Nadu not only requires a more sustainable and scientific approach to water management but an integrated development model that no longer separates the human environment, basic needs, ecological justice and public accountability   

    Every time we are faced with drought or floods, we all complain about the absence of a more sustainable water management policy in the state.  Politicians and the political parties blame each other and present competing narratives of their achievements when people are caught in deep crises of survival either due to bad drought or worse floods.  The bureaucrats, police, public charity and the brave hearts work round the clock while the government monitors the rescue, relief and resettlement of the victims though patterns and intensity of engagements differ between the floods and drought situation.

    We then return to our normal selves when the floods recede and the victims of extreme drought disappear from our sight.  What happened to the excessive water during the floods and the thirsty/hungry people in drought situations who seemed to have gone out of sight? It is important to argue for a more sustainable water management policy and at the same time explore the challenges in developing and executing such a policy. We do not have an open and democratic media/socio-political environment to discuss and debate between the ministers, bureaucrats, experts, non-state actors and creative members of the civil society beyond the blame game. A curious gap is that there are no solutions emerging while causes are either understated or overemphasized by different experts and groups depending on their professional background and personal worldview.

     

    The government appears to be in a catch-22 situation over urbanization, industrialization, population growth, migrations, and the urban slums.  The impact of rural poverty, state of agriculture, unemployment, migrations as well as the level of the rural-urban divide has not been studied adequately even in a developed state like Tamil Nadu.  But there is no escape from the truth that the government is the major violator and path setter for more violations of environmental principles and laws of nature by the greedy builders and corporate interests.

    It may be relevant to recall here the Chennai floods in 2015 and the worse water shortage in less than four years time in 2019.  Besides rapid industrialization and massive urbanization issues, Chennai is also faced with the challenges of climate change which is altering the weather patterns resulting in deadly floods and prolonged droughts.  Given the nature of challenges, there is a need to move beyond developing an appropriate water management policy and strengthening climate change resilience towards addressing core concerns of our democracy such as the absence of public accountability and rights without responsibilities.

     

    Chennai’s water bodies have shrunk at an alarming rate without much public attention. Every lake that has disappeared in Chennai had been part of our ecological system. Pallikaranai marshland has unfortunately been forced to yield land to hospitals, government buildings and educational institutions including (paradoxically) the Indian Institute of Technology – Madras (IIT-M) and National Institute of Ocean Technology.

    Chennai’s water bodies have shrunk at an alarming rate without much public attention. Every lake that has disappeared in Chennai had been part of our ecological system. Pallikaranai marshland has unfortunately been forced to yield land to hospitals, government buildings and educational institutions including (paradoxically) the Indian Institute of Technology – Madras (IIT-M) and National Institute of Ocean Technology. Today, Ennore creek faces a much bigger threat than ever before.  It is time we discuss more openly about our public policy, political culture, and abuse of social power, corruption in public life and the lack of environmental ethics. In intrinsic terms, this reveals about a political society without a conscience for environmental justice which forms the basis of social justice, distributional justice and good governance.

    The percentage culture and corruption prevalent among the politicians cutting across the party and political loyalties and the nexus between the politicians, bureaucrats and the business interests are one of the most unfortunate but successful stories of decentralization of public administration in Tamil Nadu.  If these arguments appear unreasonable, then how do we explain the rise and role of sand mafias, stone quarry contractors, timber lobbies, water industry and corporate bodies engaged in mineral extraction and exploitation?  These are not unspecified and general observations because of the fact that these individuals and the corporates control the lakes, rivers, forests, seashores, land access and ultimately the policy process within the government. Although slum dwellers, settlers along the river banks and seashores as well as forest people appear as main violators of the laws of State, yet the truth is vastly different.  The Palar River in the north, Cauvery River flowing through the west to east and the Tamiraparani River in the south of Tamil Nadu bear testimonies to this brutal reality of sand quarrying and criminal nexus between politicians, bureaucrats, industrialists and the sand mafia in Tamil Nadu.

    We need to question our materialistic approach to progress in the name of growth and development.  It is not adequate to boast about our progress in social justice and the inclusive model of development without environmental justice and responsibility to our future generations.  Tamil Nadu not only requires a more sustainable and scientific approach to water management but an integrated development model that no longer separates the human environment, basic needs, ecological justice and public accountability.

  • Distress Migration: A case study of KBK districts in Odisha

    Distress Migration: A case study of KBK districts in Odisha

    The former districts of Koraput, Balangir and Kalahandi, also known as KBK districts, were reorganised into 8 districts of Koraput, Malkangiri, Nabarangpur, Rayagada, Balangir, Subarnapur, Kalahandi and Nuapada in 1992. These districts form the South-West part of Odisha comprising the great Deccan Plateau and the Eastern Ghats. These highland districts highly rich in mineral resources, flora and fauna remain as one of the most backward regions in Odisha

    Among the different forms of migration, distressed migrants remain the most impoverished and unrecognised. These migrants form the lowest strata of the society; disadvantaged by caste, poverty and structural inequalities. In Odisha, the underdeveloped region of KBK is one among the main sources of distressed migrants. They move to cities in search of employment and better wages, while in cities they are even more disadvantaged due to social, economic and linguistic barriers. Administrative and political apathy over their issues has only enhanced their distress.

    This paper attempts to address three questions:

    1. What are the characteristics of distressed migrants in KBK district, Odisha?
    2. What are the existing policies of the state to curb this form of migration?
    3. What form of government intervention is required to address this distress?

    The analysis is carried out through a review of published articles, government reports, e-books and newspaper reports.

    Defining distress migration

    Migration is a multifaceted concept driven by diverse factors. Migration can be internal or international, voluntary or involuntary, temporary or permanent. Depending on the pattern and choice of migration, each migratory trend could be characterised into different forms. Distress migration is one such form of migration.

    Involuntary migration is often associated with displacement out of conflict, environmental distress, climatic change etc. That is any sudden threat or event forces people to migrate. However, involuntary migration may also arise out of socio-economic factors such as poverty, food insecurity, lack of employment opportunities, unequal distribution of resources etc. This component of involuntary migration is addressed by the concept of distress migration (Avis, 2017).

    To understand distressed rural-urban migration in India, the broad definition used by Mander and Sahgal (2010) in their analysis of rural-urban migration in Delhi can be employed. They have discussed distress migration as:

    “Such movement from one’s usual place of residence which is undertaken in conditions where the individual and/or the family perceive that there are no options open to them to survive with dignity, except to migrate. Such distress is usually associated with extreme paucity of alternate economic options, and natural calamities such as floods and drought. But there may also be acute forms of social distress which also spur migration, such as fear of violence and discrimination which is embedded in patriarchy, caste discrimination, and ethnic and religious communal violence” ( Mander and Sahgal, 2010)

    In brief, the definition states that distress migration is caused by an array of issues. Environmental disasters, economic deprivation, gender or social oppression, lack of alternate employment opportunities and inability to survive with dignity are mentioned as the main drivers of distress migration (Avis, 2017).

    Thus, distress migration is a form of temporary migration driven by environmental and socio-economic factors and not based on an informed or voluntary choice.

    Profile of KBK districts

    The former districts of Koraput, Balangir and Kalahandi, also known as the KBK districts, were reorganised into 8 districts of Koraput, Malkangiri, Nabarangpur, Rayagada, Balangir, Subarnapur, Kalahandi and Nuapada in 1992. These districts form the South-West part of Odisha comprising the great Deccan Plateau and the Eastern Ghats. These highland districts highly rich in mineral resources, flora and fauna remain as one of the most backward regions in Odisha. The region is termed backward on account of rural backwardness, high poverty rates, low literacy rates, underdeveloped agriculture and poor development of infrastructure and transportation (Directorate of Economics and Statistics, 2021).

    The districts are home to primitive tribal communities such as Gonds, Koyas, Kotias etc. dependent on forest produce and subsistence agriculture for a living. KBK region registered a workforce participation rate of 48.06 % in the 2011 census. There was a significant occupation change noticed from the 2011 census.  The region witnessed a fall in cultivators from 33% in 2001 to 26.7% in 2011. However, the fall in cultivators was compensated with an increase in agricultural labourers from 44.24 % in 2001 to 48.87% in 2011. Employment in household industries also witnessed a downfall between the period of 2001 to 2011 (Sethy, 2020).

    The rise in agricultural labourers has a negative impact on the communities. As agriculture is underdeveloped owing to the arid nature of the region, crop failure, extreme calamities, low net irrigated area and falling government expenditure, these workers are pushed into abject poverty. In search of alternate employment options, these workers migrate to other areas of employment in rural or urban pockets. Such a form of seasonal migration during the lean period in agriculture is a predominant phenomenon in these districts. Their dependence on non-timber forest produce is hindered by the rapid deterioration and deforestation of forests for development projects and mining.

    Characteristics of distressed migrants in KBK region

    1. Who Are These Distressed Migrants?

    In the KBK region, distress migration has been a popular coping strategy during lean periods of agriculture. And this strategy is majorly adapted by disadvantaged and marginalised sections of the region. They are disadvantaged by caste, chronic poverty, landlessness, low levels of literacy and skills, increased dependence on forest and agriculture and debt-ridden (Meher, 2017; Mishra D.K., 2011; Tripathy, 2015, 2021).

    1. Why Do They Migrate

    Distressed migration in the region is induced by many interlinked factors. One such factor is that the region is highly under-developed in terms of social and economic infrastructure. Such under-development puts the communities at a disadvantage with low levels of literacy and skills. Their dependence on agriculture and forest produce for livelihood rises. However, agriculture is under-developed and forests are subjected to high levels of deforestation. With low levels of income, crop failure and non-availability of alternate employment opportunities, the communities are subjected to absolute levels of poverty, food and employment insecurities (Kujur, 2019).

    Landlessness is also identified as one significant push factor. As the region is highly dominated by tribal communities, they are more attached to and dependent on the forest cover. Globalisation and industrialisation resulted in deforestation and encroachment of farmlands for industrial and mining purposes. Eventually, a major proportion of land remains with a smaller group of wealthy people (Mishra D.K., 2011).   Relocation and involuntary displacement also result in the loss of their livelihood that is dependent on the local environment (Jaysawal & Saha, 2016).

    With falling income, people approach local moneylenders to meet their basic sustenance needs. With low incomes from agriculture and forest produce, families approach these informal creditors to meet emergency needs like marriage, birth and death rituals or medical treatment as well as to meet basic consumption needs with the expectation of cash flow from labour contractors during the lean season. Moneylenders exploit them by charging higher interest rates. Thus, the non-availability of formal credit facilities pushes them into a debt trap and further to adopt migration (KARMI, 2014; Mishra D.K., 2016).

    The region is also subject to extreme calamities and drought. Small and marginal farmers, poor in income and land, choose to migrate as they are unable to cope with the regular droughts and climate change. A study on historical analysis of the effect of climate on migration in Western Odisha mentions that the migratory trend saw a rise after the mega drought in 1965. Up until then, large-scale migration from the region was not a phenomenon (Panda, 2017).

     

    1. Channel of Migration

    Sardars provide an advance amount and in exchange, the debtor or any family member agrees to work for them for a stipulated period, usually six months. Hence, there exists a form of debt bondage. Large-scale family migration through this system is seen in the KBK region. The major stream of such bonded labour migration is witnessed towards brick kilns in Andhra Pradesh

    In the region, seasonal migration occurs through the channels of agents, locally known as Sardars, on a contractual basis. This form of migration is known as Dadan labour migration. The poor migrant labourers are known as Dadan and they are recruited by Sardars, who are usually local people who are familiar with residents in the region (KARMI, 2014). During the period of Nukhai, they go around the villages and contact prospective labourers. These Sardars are the intermediary between the employer and the migrant labourer. Sardars provide an advance amount and in exchange, the debtor or any family member agrees to work for them for a stipulated period, usually six months. Hence, there exists a form of debt bondage. Large-scale family migration through this system is seen in the KBK region. The major stream of such bonded labour migration is witnessed towards brick kilns in Andhra Pradesh. They are also a major source of labour in the areas of construction, handlooms and other forms of informal sector work across South India (Daniels, 2014). The problems they face in the destination are manifold. They are subjected to poor working conditions, poor housing and sanitation facilities and limited access to education and health facilities. They are recognised as cheap labour with limited bargaining power owing to their social, cultural and linguistic exclusion in the destination state. Upon entering the contract their freedom to move and freedom to express is denied (Acharya, 2020).

    1. Pull Factors to Migrate

    The hope of availability of better job opportunities and wages is the main pull factor. However, upon the analysis of the nature of migration, push factors have a higher weightage in inducing such distress migration. Migration to brick kilns and other informal sectors from the KBK region can be termed as distress migration as in this case, distress is caused mainly by socioeconomic factors. It is not an informed or voluntary choice. Debt migration remains the only coping strategy that they could adopt.

    Government intervention to curb such distress

    1. Policies Addressing Debt-Bondage Migration:

    The first attempt of the state government to address Dadan migration or debt migration is the enactment of the Dadan Labour (Control and Regulation) Act (ORLA) in 1975. The act had provisions for the registration of labourers and agents, ensuring compliance of minimum wages and favourable working conditions and appointing inspection officers and dispute redressal committees (Daniels, 2014).  However, the act remained on paper and no evidence of enactment was published until it was repealed in 1979 upon the enactment of the Interstate Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979 (Nanda, 2017).

    The ISMW act has been criticised to be inadequate and failing to regulate and facilitate safe migration. According to the act, only those interstate migrant workmen who are recruited by licensed agents come under the ambit of the act. However, most agents involved in Dadan migration are not licensed and hence, these workers cannot avail of any of the provisions of the act (Singh, 2020). Though registration of labour contractors is mandatory in the origin state, there is no information about the names of these contractors and hence, further monitoring of the migration process is avoided (NCABL, 2016). Lack of adequate enforcement, under-staffing and poor infrastructure are identified as the reasons for poor implementation of the act in the state (Daniels, 2014).

    A positive attempt against distress migration was the Memorandum of Undertaking (MoU) initiated between the labour department of Odisha and Andhra Pradesh to ensure labour welfare measures of migrant workers in Brick Kilns. After the MoU, the state of undivided Andhra Pradesh took up various progressive measures in education, health, housing and PDS for migrant workers in Brick Kilns. ILO necessitated the need for states to enter into inter-state MoUs to effectively address the bonded labour migration. However, no further MoU was signed with other states like Tamil Nadu, Chhattisgarh etc. which are also among the major host states for migrants from the region (NCABL, 2016).

    The Bonded Labour System (Abolition) Act enacted in 1976 governs the provisions for identification, rescue and rehabilitation of bonded labourers across the country. The act has its loopholes in implementation. There is no information on whether vigilance committees have been set up in every district or whether the surveys have been periodically conducted or to what extent the act has been functioning in the state (Post News Network, 2019). The centrally sponsored scheme for Rehabilitation of Bonded Labour also has its setbacks. There have been reported cases of delay and denial of financial aid by district officials ( Mishra .S., 2016). In 2016, with restructuring and revamping of the Rehabilitation scheme, rescued workers could only avail the full amount of financial aid with the prosecution of the accused employers. With no database on the employer, the rates of prosecution have been low and the rescued bonded labour do not receive their funds (NACBL, 2016)

    1.  Ensuring Accessibility of Health Facilities in Destination

    The Rashtriya Swasthya Bima Yojana or RSBY launched by the central government in 2008 provides health insurance to BPL families. The scheme incorporates provisions to split smart cards so those migrant workers could avail health insurance in destination states. After signing of the MoU between Andhra Pradesh and Odisha, the two states took steps to spreading awareness among the migrant workers about how to use the smart cards (Inter-State Migrant Workman Act (ISMW), Labour Directorate, n.d.)

    1. Ensuring Education of Migrant Workers Children

    The state of Odisha has established seasonal hostels to ensure the education of children of migrant workers.  The children are enrolled in seasonal hostels during October-June, that is until their parents return home (Odisha Primary Education Programme Authority, n.d.).  The state has ensured the education of migrant children at their destination state by sending Odiya textbooks and Odiya teachers to residential schools in Andhra Pradesh (Inter-State Migrant Workman Act (ISMW), Labour Directorate, n.d.).

    1. Alternate Employment Opportunities: MGNREGA

    Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was introduced in 2006 to provide guaranteed employment to rural poor with the objective of uplifting them from poverty and restricting distress migration.  A study analysing the performance of MGNREGA through secondary sources of data suggests that based on physical criteria of 100 Days of Wage Employment, Person-days generated, ST and Women person-days and financial performance in terms of total expenditure, total wages, average cost and average wage rate per day person, the performance of MGNREGA in KBK districts is better compared to Non- KBK districts.  But the region is lagging in rural employability criteria based on average days of employment provided per household and job cards issued (Sahoo et al., 2018).  Labour in the region is not interested to work under MGNREGA due to its dismal implementation in the state. Workers complain about the delay in receiving payments and instances of the creation of non-existent workers’ names among MGNREGA’s beneficiaries (KARMI, 2014).  Uncertain and low wages make these labourers favour migration to Brick Kilns in hope of better wages (Deep, 2018).

    1. Development Policies in KBK Region

    The KBK region has a high incidence of poverty owing to regional disparities in development and social exclusion based on caste. The main initiatives implemented by the state government for the upliftment of the KBK region are the Special Area Development Programme, Revised Long Term Action Plan (RLTAP), Biju KBK Plan, Backward Regions Grants Fund, Gopabandhu Gramin Yojana (GGY), Special Central Assistance (SCA) for tribal sub-plan (TSP) areas, Western Odisha Development Council (WODC) and Grants under Article 275(1) of the Constitution. Development projects to reduce poverty and regional disparities are obstructed by economic, social and institutional factors (Mishra, 2020).

     

    The state of Odisha has done positive interventions in the education of migrant children and health facilities of the migrant population. However, the distress migration is still prevalent owing to the social and economic exclusion and debt bondage situations in the region. Land grabbing in the name of development left the tribal communities poor and in distress. Structural inequalities induced by caste discrimination are enhanced with such landlessness.

     

     

     

    Policy Recommendations

    The state of Odisha has done positive interventions in the education of migrant children and health facilities of the migrant population. However, the distress migration is still prevalent owing to the social and economic exclusion and debt bondage situations in the region. Several initiatives and schemes have been enacted to address distress migration; however, their failure in reducing distress can be linked to dismal governance, poor implementation and misappropriation of schemes.

    The state must ensure migration to be safe and a viable coping strategy. From this study it is suggested the state of Odisha follow a multipronged approach to address the distress.

    Origin state (Odisha) interventions

    •         Short Term Interventions:
    1. The system of debt bondage should be completely abolished by the proper implementation of legislation. Different loopholes in implementation such as the delay in the release of funds, prosecution of accused and identification and registration of middlemen should be addressed. Apart from the financial aid, the state should intervene in providing a comprehensive livelihood plan for the rescued labourers. Abolishing the bonded labour system is essential to reduce distress and make migration safe.
    2. Informal sources of credit should be eliminated and formal credit and microfinance facilities should be made available. Such facilities would reduce the exploitation and prevent the creation of absurd debt. Formal credit provides opportunities for small and marginal farmers to indulge in productive investments. This enables them to cope with extreme climatic changes.
    3. Land grabbing in the name of development left the tribal communities poor and in distress. Structural inequalities induced by caste discrimination are enhanced with such landlessness. The provision of land ownership enables the communities to enjoy land-based benefits which further supports them to sustain their livelihood. Ownership of land also provides the indigenous community with a sense of social and economic significance.
    •         Long term interventions
    1. The state should engage in enhancing the skills of the people in the region. Vocational skill training and development schemes can be introduced. This could expand the opportunities available for employment and distribute labour across all the economic sectors.
    2. Rural development should be given higher priority. The state of Odisha has already initiated many schemes for the development of the KBK region. However, the state should study the economic and social factors that stagnate the process of development in the region. Chronic poverty, poor infrastructural and rural connectivity and dismal education and health facilities are some of the important areas that require attention.

    Host state intervention

    1.   The host state needs to create a database of migrants entering their state. A statistically significant database on migrants solves a huge array of issues faced by the migrant in the destination state. A comprehensive database helps in identifying and recognising migrants. It also allows for understanding the different characteristics of migrants and the sectors in which they are employed. This would be beneficial for monitoring and ensuring safe and favourable working conditions. A database also helps in ensuring the availability and accessibility of social security and entitlements in host states.

     

    1.   Migrant labour is as important to the destination state as it is to the origin state. Both origin and host state should cooperate towards making migration a viable livelihood strategy.

    Another important area where both the origin and host state should intervene together is creating awareness among workers about the existing provisions and rights available to them. Access to the same should be made easy.

    Conclusion

    The highly backward districts of the KBK region remain a major source of distressed migrants. Years of state initiative in reducing distress have had negligible impact. The area remains underdeveloped and migration is the only viable choice of employment. Migration can only be a viable coping strategy for seasonal migrants when the channel of migration is made legal and safe. The major drawback in any initiative attempted to resolve distress is the poor implementation. Administrative apathy, corruption and misappropriation of schemes have stagnated the progress of every initiative.

     

    References

    1. Acharya, A. K. (2020). Caste-based migration and exposure to abuse and exploitation: Dadan labour migration in India. Contemporary Social Science, 1-13.
    2. Avis, W. R. (2017). Scoping study on defining and measuring distress migration.
    3. Bhatta Mishra, R. (2020). Distress migration and employment in indigenous Odisha, India: Evidence from migrant-sending households. World Development, 136, 105047.
    4. Daniels, U. (2014). Analytical review of the market, state and civil society response to seasonal migration from Odisha. Studies, stories and a canvas seasonal labour migration and migrant workers from Odisha, 106-115.
    5. Deep, S. S. Seasonal Migration and Exclusion: Educational Experiences of children in Brick Kilns. Ideas, Peoples and Inclusive Education in India. National Coalition for Education, India. 2018.
    6. Directorate of Economics and Statistics (2021). Odisha Economic Survey 2020-21. Planning and Convergence Department. Government of Odisha. http://www.desOdisha.nic.in/pdf/Odisha%20Economic%20Survey%202020-21-1.pdf
    7. Giri, J. (2009). Migration in Koraput: “In Search of a Less Grim Set of Possibilities” A Study in Four Blocks of tribal-dominated Koraput District, Odisha. Society for Promoting Rural Education and Development, Odisha, 1.
    8. Inter-State Migrant Workman Act (ISMW) | Labour Directorate. (n.d.). Labour Directorate, Government of Odisha. Retrieved August 10, 2021, from https://labdirodisha.gov.in/?q=node/63%27%3B.
    9. Jaysawal, N., & Saha, S. (2018). Impact of displacement on livelihood: a case study of Odisha. Community Development Journal, 53(1), 136-154.j
    10. Jena, M. (2018, July 21). Distress migration: land ownership can put a break. The Pioneer. https://www.dailypioneer.com/2018/state-editions/distress-migration-land-ownership-can-put-a-break.html
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    19. Mishra, S. (2020). Regional Disparities in Odisha–A Study of the Undivided “Kbk” Districts. Research Journal of Humanities and Social Sciences, 11(4), 261-266.
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    Feature Image: Tata Trusts

  • 2021-22 Q1 GDP Data Overestimates: Economic Shocks Question Methodology

    2021-22 Q1 GDP Data Overestimates: Economic Shocks Question Methodology

    2021-22 Q1 GDP Data Overestimates: Economic Shocks Question Methodology: The demonetisation shock impacted the unorganised sector far more adversely than it did the organised sector

    There are methodological errors in estimating annual and quarterly GDP data, especially when there is a shock to the economy, by using projections from the previous year, dividing the annual estimates into the four quarters and using production targets as if they have been achieved, explains Professor Arun Kumar

     

    The Reserve Bank of India (RBI) has maintained its growth projection for 2021-22 at 9.5% while the World Bank has retained it at 8.3%. These are based on the union government’s growth estimate of 20.1% for first quarter of 2021-22—an unprecedented growth rate based on the low base in the same quarter of 2020-21, which witnessed a massive decline of 24.1%.

    A sharp rise in growth after a steep fall in the preceding year is not a new phenomenon for the economy. Prior to 1999, only annual, not quarterly, data was available. Official data shows that the economy has risen sharply several times since independence: 1953-54 (6.2%), 1958-59 (7.3%), 1967-68 (7.7%), 1975-76 (9.2%) 1980-81 (6.8%), 1988-89 (9.4%) and 2010-11 (9.8%). The data after 2011-12 base revision was controversial. For instance, the new series shows a high growth rate of 8.3% for 2016-17 though it is well known that demonetisation devastated the economy

    Methodological Issues

    If the new series, using 2011-12 as the base year, shows a high growth rate for 2016-17, the methodology is not right. This has been extensively discussed since 2015, when the series was announced. A major change has been the use of the data provided by the union ministry of corporate affairs, called the MCA-21 database, since 2015. But it has been pointed out that many of the companies in this database are shell firms and the government shut down several of them in 2018. Further, many companies were found to be missing.

    Another problem pointed out, starting the year of demonetisation, is that the measurement of the contribution of the unorganised sector—which constitutes 45% of the GDP—is not based on independent data.

    The data for the non-agriculture sector is collected during surveys every five years. In between these years, the organised sector is largely used as a proxy and projections are made from the past. Both these features of estimation pose a problem when there is a shock to the economy.

    The demonetisation shock impacted the unorganised sector far more adversely than it did the organised sector. Hence, after demonetisation, the organised sector data should not have been used as a proxy to measure the contribution of the unorganised sector. Further, due to the shock, projections from the past will not be a valid procedure. This problem was accentuated by the implementation of the Goods and Services Tax (GST), which again impacted the unorganised sector more adversely

    Demand started to shift from the unorganised sector to the organized, making the situation even more adverse. For instance, e-commerce has severely impacted the neighbourhood stores and taxi aggregators have displaced the local taxi stands.

    Due to the shocks, the earlier procedure of calculating GDP becomes invalid and should have been changed. Since this has not been done, in effect, the GDP data is measuring the organised sector and agriculture.

    Thus, 31% of the economy is not being measured, and by all accounts, this part is declining, not growing. Therefore, GDP growth is far lower than what has been officially projected since 2016-17.

    The pandemic and the lockdown have administered the biggest shock to the economy. But the organised sector was hit far less than the unorganised sector. The split between the two sectors has been far greater than due to demonetisation or GST. Therefore, there is an urgent need to revise the method of calculating GDP—also, projections from the past do not make sense.

    Quarterly Data Issues

     The problem is even greater when projecting quarterly GDP growth. The data used is sketchier than the annual data. Not only most of the data for the unorganised sector is unavailable (except for agriculture), even the organised sector data is partial. For instance, the data for businesses is based on companies that declare their results in that quarter. Only a few hundred companies out of the thousands might be declaring such data.

    Worse, the estimation is based on a) projections for the same quarter in the preceding year same quarter, b) in many cases, the projection is not just for the quarter but for the year as a whole and then it is divided into four to get the data for one quarter and c) cases where targets, not actual production data. are used to estimate the contribution to GDP.

    Worse, the estimation is based on a) projections for the same quarter in the preceding year same quarter, b) in many cases, the projection is not just for the quarter but for the year as a whole and then it is divided into four to get the data for one quarter and c) cases where targets, not actual production data. are used to estimate the contribution to GDP.

    Fishing and aquaculture, mining and quarrying, and quasi-corporate and the unorganised sector are a few sectors which belong to the first group. Some sectors belonging to the second category are other crops, major livestock products, other livestock products and forestry and logging. Livestock belongs to the third category, where annual targets/projections are used.

    This procedure is clearly inadequate but maybe acceptable in a normal year. But when there is a shock to the economy, does it make sense? If there is a projection from the previous year, it is likely to give an upward bias since the economy was performing better in the preceding year. Further, projections have to be based on some indicators and the data on these indicators were only partially available due to the lockdown.

    Finally, how can the annual projection be made and then divided into four to obtain the quarterly estimate when the economy is highly variable from quarter to quarter. In 2020, each quarter was very different from the previous one.

    Next, if the data for 2020-21 is erroneous, when there was a massive slump in the economy, the shock continues into 2021-22. How can projections be made from the 2020-21 to 2021-22? Thus, there would be large errors in the quarterly data for the current year. This will then be fed into the data for 2022-23. Therefore, the shock to the economy will play itself out for several years.

    Impact on other Macro Variables

    Quarterly data are also published for other macro variables like consumption, and investment by public and private sectors. The government-related data is available in the Budget documents, but the private sector data poses a huge challenge. These estimates are, again, based on projections from the previous year, and in some cases, annual estimates are divided between quarters. Production data is also used to project consumption and investment by the private sector. So, if the former is incorrect, as pointed out above, then the estimates for the latter will also be erroneous.

    The RBI’s survey of the organised sector showed that capacity utilisation was down to 63% in January 2021, but the official quarterly data was showing a growth of 1.3% rather than a decline of 10%. Thus, the quarterly data was not representative of even the organised sector.

    Similarly, consumer sentiment was down to 55.5 compared to 105 a year back, implying that even the organised sector consumption had not recovered to the pre-pandemic levels. Both these variables were further dented in the second wave of COVID-19 in Q1 of 2021-22. The implication is that the data on these variables is also not reliable.

    If the production data is an overestimate due to the use of projections from the last year, the consumption and investment data would also be over projections. The further implication is that if the data for 2020-21 is not right, the quarterly data for 2021-22, projected from the previous year, will also be erroneous and overestimate.

    Analysis of Macro Variables for Q1 of 2021-22

    For the moment, let us analyse the Q1 data leaving aside the errors pointed out above. When the economy was in decline in the preceding year, comparing rates of growth makes less sense than comparing the level of GDP.

    On a low base of 2020-21 (-24.4%), the rate of growth for 2021-22 looks impressive (+20.1%). But it is 9.2% less than the pre-pandemic Q1 of 2019-20—i.e., the economy has not recovered to the pre-pandemic level.

    Further, if the economy was growing at the pre-pandemic rate, the economy would have expanded another 7.5% in two years. Thus, compared to the possible level of GDP in 2021-22, it is down by about 16%.

    Except for agriculture and the utilities sectors, data shows that none of the other sectors have recovered to the levels in 2019-20. Private final consumption expenditure is down by 11.9% and gross fixed capital formation by 17.1%. Government consumption expenditure and exports have increased compared to their levels in 2019-20. The former does give a boost to the economy by increasing demand but the latter does not since imports remain much higher than exports.

    Therefore, out of the four sources of demand, only government expenditure has increased—but this is not enough to compensate for the decline in the other three and that is why the economy is still down compared to 2019-20.

    It may be argued that over time, data undergoes revision as more data becomes available. But the situation now is unusual due to the pandemic. This necessitated a major revision in the methodology itself due to lack of data and consequent non-comparability across quarters and years.

     The views expressed are those of the author.

    This article was published earlier in NEWSCLICK.

    Image Credit: The Federal

     

  • Climate Change: A Review of the Rural Electrification Policies and Barriers to adopting Renewable Energy in Rural India

    Climate Change: A Review of the Rural Electrification Policies and Barriers to adopting Renewable Energy in Rural India

    Energy is crucial for a country’s growth and sustainable development. But over one-third of the world’s population, mostly consisting of people in rural areas of developing countries, do not have access to clean, affordable energy.

    The climate crisis is a battle that countries have been fighting for decades now. The policies and strategies developed by different countries have helped in small ways in achieving their energy and climate goals. One strategy among all countries is the development and improvement in the use of renewables. Various studies, across different fields, have shown us the need for countries to shift to this alternative set of energy sources that will sustain life in the long run. The use of renewable energy in both urban and rural areas should be monitored and developed to achieve the sustainable development goals that countries have vowed to achieve.

    Energy is crucial for a country’s growth and sustainable development. But over one-third of the world’s population, mostly consisting of people in rural areas of developing countries, do not have access to clean, affordable energy. This is an important factor contributing to the low standards of living in rural areas of developing countries.

    In India, more than two-thirds of the population live in rural areas whose primary source of income is agricultural activities. But a large proportion of the rural population does not have consistent access to energy. To this population, new alternative sources of energy remain unaffordable and inaccessible due to poverty and lack of adequate infrastructure, respectively. Hence, we find that the rural populations continue to use traditional sources of energy such as coal, fuelwood, agricultural waste, animal dung, etc. Not only do these cause pollution and quick erosion of natural resources, but they impact negatively on people’s health. The need for transitioning to the use of renewable energy, especially in the country’s rural areas is of prime importance. But, to achieve this, the government must bring out policies that will guide this transition. Moreover, it is important that the government positively supports companies – both private and public – that generate the required technology and research that transforms the available renewable energy sources into energy that the public can consume.

    Rural Electrification in India

    The Electricity Act of 2003 enabled the building of electricity infrastructure across the rural and remote regions of the country and thus, easy access to electricity for most of the people. The Indian Government launched the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) in 2005, to extend electricity to all unelectrified villages. The programme focused largely on developing electrification infrastructure across villages in India and providing free connections to all rural households living below the poverty line. Further, state governments received a 90% grant from the central government which aided in extending electrification infrastructure to over one lakh villages during the period 2005–2013. Moreover, the central government worked towards increasing implementation efficiencies by engaging central PSUs in some states.

    In 2015, the NDA Government launched the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) under which, the villages that remained un-electrified under the RGGVY, were electrified. The scheme has also been significant in supporting distribution networks in rural areas, largely concerning metering distribution transformers, feeders, and consumers in rural areas (Gill, Gupta, and Palit 2019).

    The central government further introduced standalone mini-grids programs, under the DDUGJY in 2016. Guided by the National mini-grid policy, State governments also contributed through various mini-grid policies to promote decentralised renewable energy solutions. Further, the Unnat Jyothi Affordable LEDs for All was introduced to encourage the efficient use of energy and under this scheme, LED bulbs were distributed to all households with a metered connection at subsidised rates. The Ujwal DISCOM Assurance Yojana was also introduced under the DDUGJY to allow a financial turnaround and operational improvement of Discoms. According to the UDAY scheme, discoms were expected to improve operational efficiency and bring AT&C losses down to 15%.

    While the schemes were successfully implemented then, the rate of rural household electrification was still slow. Evaluations of the schemes found various limitations, such as high upfront connection costs, poor quality of supply, poor maintenance services, to name a few. Additionally, some states had also started initiating their electricity-access programmes to accelerate the electrification process, such as the West Bengal Rural Electrification Programme, the Har Ghar Bijli scheme in Bihar, the Bijuli Bati mobile-based app to enable last-mile connectivity and household connections in Odisha (Gill, Gupta, and Palit 2019). To address this issue, the central government then launched the Pradhan Mantri Sahaj Bijli Har Ghar Yojana (PM Saubhagya) in September 2017, with the ambitious target of providing electricity connections to all un-electrified rural households by March 2019. Under this scheme, the government has electrified all of 597,464 census villages in the country (Bhaskar 2019).

     Barriers to adopting Renewable Energy in Rural Areas

    This section focuses on the issues that restrict the efficient adaptation of renewable energy in rural areas. As the government continues to promote renewable energy in rural communities, it should keep in mind these following limitations and develop mechanisms to overcome them as and when they arise. While employing renewables to supply electricity, the problem of grid integration arises. Most electricity grids and the technology used, are designed and placed around fossil fuels. However, when they transition now to more non-conventional forms of energy such as wind and solar, the designs and placements of power generation systems have to change rapidly. Thus, heavy emphasis should be placed on improving the research and infrastructure required to make this transition as smooth as possible. That is, the government should research the most optimal locations for wind turbines and solar panels, as not all lands in rural areas can be employed for this purpose. Otherwise, it may negatively impact the quality of agricultural lands. Upon conducting the required research, the infrastructure to connect all areas to the electricity grids must be developed and well-financed by the government to satisfy the energy demands of the rural population. For instance, in Germany, while the wind power potential is in the northern regions, major demand for it is in the southern region. Thus, the country’s energy transition process emphasizes upgrading the electricity grid infrastructure that would make it possible for power to flow from north to south (UNCTAD 2019). Further, the planning should also focus on balancing the energy mix in the power grid. The transition to renewables will not be a quick one, which implies that for the short term the power grid will be a mix of different sources of energy. Thus, the plans should design the grids in such a way that the proportion of each energy source balances one another so that there is no leakage or wastage in the system, especially given the fact that energy storage technology is still underdeveloped in the country.

    For many years now, there has been an emphasis on the potential of decentralised electricity comprising off-grid or mini-grid systems to help with rural electrification. The government introduced a national mini-grid policy in 2016 to promote decentralised renewable energy. With the increase in the use of solar energy, solar-powered mini-grid systems were found to be more economical and accessible to rural households (Comello et al. 2016). These systems could substantially improve the people’s standard of living and eliminate the use of harmful fuels such as kerosene oil for simple household appliances such as lamps and cooking stoves. However, an IEA report found evidence that this potential is limited, and would not be beneficial for large, productive, income-generating activities. Thus, mini-grids are often considered a temporary solution, until grid connectivity is achieved (IEA 2017).

    Whether a grid system or an off-grid system is implemented, high connection charges will automatically limit the rural population’s ability to connect to the grid.

    A major challenge that the government must keep in mind is affordability. Whether a grid system or an off-grid system is implemented, high connection charges will automatically limit the rural population’s ability to connect to the grid. On the one hand, better access to electricity will increase productivity and lead to the growth and development in the region but on the other hand, most of the rural communities live below the poverty line and will not be able to afford the connection, even if they have access to it. While decentralised energy sounds economical and sounds like an obvious solution, it is also limited in capacity.

    Another factor that the government must keep in mind for the adaptation of renewable energy in rural areas is the situation of state and private distribution companies (discoms) in India that play a pivotal role in the rural electrification process. While the government set the goals and adopted a strategy to electrify all rural households under the Saubhagya scheme, it was the discoms’ responsibility to implement these strategies and achieve the goals. A TERI report found that the discoms had difficulty carrying out the electrification process because the strategy adopted by the government had not considered the difference in demographics in the rural areas (Gill, Gupta, and Palit 2019). That is, each area differs in population size, density, and topography and the discoms found it hard to implement a similar strategy to all places alike. Moreover, the financial status of many state-run discoms has been stressed over the past year due to increasing losses and lack of adequate support from the respective State governments. Over the past year, dues to power generators have increased to Rs 1.27 trillion (Economic Times 2021). The annual 2021 budget’s outlay of over Rs 3 trillion, to be spent over five years, to improve the viability of state-run discoms, is a step in the right direction. The TERI report also found that discoms face institutional burdens in the electrification process (Gill, Gupta, and Palit 2019). The companies are most often strapped for time and must deal with huge amounts of paperwork. Simultaneously, they have to be physically present to install the necessary infrastructure and manage the labour employed in different states. In the end, it remains to be seen how the discoms will manage to monitor and review the electricity infrastructure in the rural areas, especially given the huge amounts of debt that they are trapped in.

    The government must also work towards increasing and incentivising private sector participation. While the private companies were interested in taking up tenders for the production of electricity through renewable energy sources in the past, the recent withdrawal of benefits such as accelerated depreciation has been a cause for concern. Companies like Suzlon Energy Ltd. face lower returns on their investment, thus deterring them from investing in future projects. Removal of benefits also discourages smaller companies that are looking to invest in this sector as it increases not only the cost but uncertainty about the government’s policies. Companies will refrain from investing if they do not anticipate a high return in the future. For grid connection systems to be successful and efficient in the long term, the government must ensure a strong governance structure, and a stable and enabling policy environment that constantly encourages fresh private sector participation. Concerning the rural electrification process, the government must encourage private sector participation because it would complement the public sector companies thus sharing the burden of production, installations, and technology as well as the process of maintenance and regular checks once the grid connection is complete.

    A shift to renewable energy in rural areas will no doubt have a positive impact on the health and well-being of the population. It will also improve the standard of living and in most cases, the productivity of the people. But the change has to be a gradual process. Even if renewable energy and electricity are affordable and accessible to the people, alternative cooking fuels and technology will take time to be accepted in practice as they may not have the same performance quality as traditional stoves and appliances that the people are used to. To overcome this hurdle, the government must ensure that the policies formed will guide the adjustment to renewables for many years to come. Moreover, the government must spread knowledge and awareness about the benefits of shifting to appliances that are sourced through renewable sources of energy. Besides, some rural households collect firewood for not just individual consumption but also to sell it (IEA 2017). This is a source of income for these households hence, the government should tread carefully when they implement programs that seek to reduce the collection and use of firewood. For years now, the government has promoted and subsidised the use of LPG within rural communities, as an alternative for other harmful sources of energy. While it has helped improve people’s health to some extent, it would be beneficial for the government to gradually nudge the decrease in the use of LPG and increase the use of renewable alternatives. Apart from the definite benefits to the environment, such a change would serve to reduce the rural-urban energy gap in India.

    The shift to renewable energy sources holds huge amounts of risks and uncertainty. But, despite this, there is a need to make long-term, accurate forecasts of energy demand and develop drafts of policies beforehand that would guide the process of supplying energy to satisfy the demand. Energy supply projects necessitate this because they have long gestation and implementation periods. With the climate crisis advancing rapidly, it would serve the government well to be prepared.

    International Collaboration

     International cooperation can play a crucial role in expanding the distribution of renewables. It can help countries benefit from shared infrastructure, technology, and lessons. The challenge thus lies in designing policies that will facilitate this technology and infrastructure transfer, especially in countries where the renewable energy sector is emerging. International organizations such as the Commission on Science and Technology for Development can play an important role in supporting such collaborations. Policies should also facilitate mechanisms that will help improve the current capabilities in developing countries.

    For instance, the Indo-German Energy Programme – Access to Energy in Rural Areas was signed to create a favourable environment for rural renewable energy enterprises so that they can provide easily accessible energy services to the rural population.

    The bilateral collaboration brought in local and international professional expertise to support private sector development, to identify and improve viable sources of finance, and to help design government schemes to achieve sustainable energy security and provide clean cooking energy solutions to the rural population. The GIZ – the German Corporation for International Cooperation – worked closely with India’s Ministry of New and Renewable Energy (MNRE) to successfully implement the program. The program succeeded in training more than 10,000 professionals to qualify as energy auditors. It has also helped increase private sector investment and develop a calculation to determine the CO2 emissions for the Indian electricity supply grid.

    Way Forward

     Research and innovation are essential to improve renewable options for producing clean cooking fuel. There is also a need for location-based research to produce appropriate workable technologies. Long-term policies and outcomes are important to consider. So, conducting significant research will not only help understand the present conditions but will also help policymakers make informed decisions in the future. It is also important to educate and communicate to the rural population about the relative advantages of using modern energy sources over traditional sources. For instance, consumers may be unaware of the health impacts of using traditional sources of energy for cooking. Moreover, they may distrust conventional alternatives due to their unfamiliarity with them. Thus, the responsibility falls on the government to properly inform them of the need for the shift to renewables and curb the spread of misinformation.

    Further, alternative solutions will only succeed if they are established in cooperation with the local users. “The women in rural areas play an important role when it comes to energy transition” (IEA 2017). Several initiatives such as the Global Alliance for Clean Cookstoves, SEforALL, and ECOWAS address the joint issues of gender empowerment, energy poverty, health, and climate (IEA 2017). Training and capacity building are key to the shift to renewable sources of power. And in rural energy applications, this can be improved by taking into account the gender issues that plague society. There is a high possibility that rural engineers, once trained, might migrate to urban areas in search of more lucrative work. In response to this, the Barefoot College International Solar Training Programme takes a different approach to capacity-building in rural areas and trains the grandmothers in villages who are more certain to stay and help develop the community.

    a shift to clean energy in rural areas that houses the section of the population that lives below the poverty line will be more successful if it is seen as a strategy to broaden community development.

    Thus, a shift to clean energy in rural areas that houses the section of the population that lives below the poverty line will be more successful if it is seen as a strategy to broaden community development. This includes higher employment, better infrastructure, roads, and telecommunications.  This process requires careful design of policies and the establishment of a supportive environment that includes not just innovative business models but also maintenance systems that will sustain the development in the long run.

    Conclusion

     To summarize, rural electrification and the transition to renewable energy in rural areas have been a part of the government’s agenda for many years now, irrespective of the ruling party at the centre. Necessary policies have been introduced to guide the process. While it is great that the government recently achieved universal electrification, it remains to be seen whether the quality of power provided to these villages meets the needs of the population. Further, in this process, state-owned discoms have taken a serious financial hit and it is a tough road to recovery from here. Adding on, the COVID pandemic has slowed down the development and recovery of these discoms. The government should first increase budget outlays in the following years and create a system to monitor the use of these finances. Second, it could turn to privatisation. Privatising discoms on a larger scale would reduce the financial and risk burden on the government and ensure efficient functioning of the companies. Additionally, it is important that while policies are being designed, the deciding parties have a complete understanding of the socio-economic situation of the communities within which they will make changes. To do this, experts who have studied the layout of these rural areas extensively should be involved in the process, along with leaders from the respective districts who are bound to be more aware of the situation and the problems in their areas. More importantly, the government should keep the process of the transition to alternative energy sources transparent and keep an open line of communication with the rural population to earn their trust before they make significant changes. Finally, India is one of the largest consumers of different renewable sources of energy. While it is important to make changes to the policies in this sector, it is also imperative that the government tries to maintain stability in policies that support the companies which help satisfy the growing energy demand in the country.

     

    References

    1. Bhaskar, Utpal. 2019. “All villages electrified, but last-mile supply a challenge.” mint, December 29, 2019. https://www.livemint.com/industry/energy/all-villages-electrified-but-last-mile-supply-a-challenge-11577642738875.html.
    2. Comello, Stephen D., Stefan J. Reichelstein, Anshuman Sahoo, and Tobias S. Schmidt. 2016. “Enabling Mini-grid Development in Rural India.” Stanford University. https://law.stanford.edu/wp-content/uploads/2016/04/IndiaMinigrid_Working_Paper2.pdf
    3. Economic Times. 2021. “Discom debt at Rs 6 trillion; negative outlook on power distribution: ICRA.” The Economic Times. https://economictimes.indiatimes.com/industry/energy/power/discom-debt-at-rs-6-trillion-negative-outlook-on-power-distribution-icra/articleshow/81431574.cms?from=mdr.
    4. Gill, Bigsna, Astha Gupta, and Debajit Palit. 2019. “Rural Electrification: Impact on Distribution Companies in India.” The Energy and Resources Institute. https://www.teriin.org/sites/default/files/2019-02/DUF%20Report.pdf.
    5. IEA. 2017. “Energy Access Outlook: From Poverty to Prosperity.” International Energy Agency. https://www.iea.org/reports/energy-access-outlook-2017.
    6. UNCTAD. 2019. “The Role of Science, Technology and Innovation in Promoting Renewable Energy by 2030.” United Nations Conference on Trade and Development. https://unctad.org/system/files/official-document/dtlstict2019d2_en.pdf.

    Feature Image: The Better India 

    Image 1: www.alliancemagazine.org

    Image 2: indiaclimatedialogue.net

  • The Economics of Clean Energy: Transitioning to Renewables in a Post-COVID Era

    The Economics of Clean Energy: Transitioning to Renewables in a Post-COVID Era

    “the climate emergency is a race we are losing, but it is a race we can win” – Antonio Guterres, UN Secretary General

    Even without a global health pandemic, our world is still facing a crisis of staggering proportions.  In the 21st century the threat of climate change has outweighed almost all the other threats put together. Such is the pressing nature of the issue that it has even prompted re-branding of nomenclature from ‘climate change’ to ‘climate crisis’ – because that is what it is, a crisis. But as the UN secretary general António Guterres points out, “the climate emergency is a race we are losing, but it is a race we can win”.

    In this light, it is high time a discourse on transition to clean energy systems takes centre stage. With climate change progressing at an alarming rate, the need for clean energy has only been compounded.  At a time of great disruption for the world owing to an unprecedented health crisis with severe economic and social ramifications, a transition to renewables could be the way forward. As governments around the world lead COVID-19 recovery efforts, the verdict is clear that we cannot go back to our old systems – a transition to clean energy must be on the forefront of national agendas.  While the road to recovery is long and might take years, it is also the perfect opportunity for governments to accelerate clean energy adoption by putting this transition at the heart of post-COVID-19 social and economic recovery plans.

    While COVID-19 has certainly slowed down this transition by disrupting and delaying several renewable energy expansion and installation projects, the outlook on clean energy still looks very promising. In Q1 2020, global use of renewable energy in all sectors increased by about 1.5% relative to Q1 2019, while the overall share of renewables in global electricity generation jumped to nearly 28% from 26% in Q1 2019. While this does not reflect the impact of COVID-19 on capacity expansion, as the increase in use is largely due to expansion efforts in the preceding years, it is still a positive sign.

    Solar PV has had the most remarkable fall during this period, with the levelized cost of electricity (LCOE) falling almost 82% over the last decade. Closely following are CSP and On-shore Wind, both of which have fallen 47% and 38% respectively

    Even without factoring in the current global scenario, the rationale for transition has never been more compelling. Over the past decade, the cost of renewables has fallen to record lows (as shown in Figure 1), making it more attractive than ever before to invest in clean energy. Solar PV has had the most remarkable fall during this period, with the levelized cost of electricity (LCOE) falling almost 82% over the last decade. Closely following are CSP and On-shore Wind, both of which have fallen 47% and 38% respectively. Batteries, which have been appraised as one of the key enabling technologies in accelerating the shift to clean energy, have also recorded significantly lower costs in the past couple of years. Battery technologies such as Lithium-ion and Vanadium-flow have long been considered the missing link in ensuring continuity of supply for Wind and Solar generated power, which often depend on the vagaries of the weather. The LCOE for Lithium-Ion batteries has fallen by 35% since 2018, owing to advancements in technology. The only increases in cost have been recorded by Geothermal and Hydropower.

    With the cost of renewables falling, fossil fuel options are looking more and more expensive. According to IRENA (International Renewable Energy Agency), by 2020 Solar PV and onshore wind will be less expensive than the cheapest fossil fuel alternative. In the past, one of the key reasons why fossil fuels such as oil and gas were considered attractive options was because they were highly subsidized and incentivized. The true cost of these non-renewable sources minus the subsidies may well be much higher. The conventional cost of fossil fuels also does not factor in the environmental costs associated with carbon emissions. The extraction and use of these resources are often accompanied by several negative externalities associated with environmental degradation, pollution and global warming. This failure to account for the emissions and their impact has been termed by many as one of the greatest market failures the world has seen.

    Thus, falling costs of renewables coupled with the growing pressure on fossil fuels has presented the world with a unique opportunity to accelerate the adoption of clean energy. As governments pump more money into economies as part of COVID recovery efforts, the same level of investments can now yield greater returns owing to falling costs. Globally, investments in renewable capacity and technology have been on the rise and have shown remarkable growth, especially for Solar and Wind. Investments in Solar PV (Utility) in particular have shown astounding growth, increasing over 200% since 2010 to reach $69.4 billion in 2019. Total investments across renewables stands at $253.6 billion, having grown 21% in the last decade.

    While renewable capacity and investments have been growing, so has the demand for electricity. This growth in demand has somewhat offset the impact of transition to renewables. While mainstream adoption of clean energy is still progressing in the right direction, policy makers are worried that the pace of transition is not fast enough to offset growing demands. Unless renewable technology can scale up quickly and bridge the demand-supply gap, this excess demand will inevitably have to be met by fossil fuels.

    The IRENA estimates that investments in clean energy could boost global GDP by close to $98 trillion by 2050

    Despite several roadblocks still existing for large-scale adoption of clean energy to be made feasible, governments and institutions are putting climate action at the forefront now more than ever before. Post COVID-19, as economic recovery consolidates, we cannot afford to put clean energy on the back burner. Across the world, clean energy technologies such as electric vehicles, solar and wind energy are becoming increasingly mainstream. According to a UN report, global investment in renewables is set to triple in the next 10 years. If governments continue to sustain this momentum, the benefits are manifold. The IRENA estimates that investments in clean energy could boost global GDP by close to $98 trillion by 2050. Thus, the rationale is clear and more compelling than ever for a shift to clean energy. The robustness and resilience of economies to future global shocks will be determined by how quickly and effectively they transition to renewables and reduce dependence on fossil fuels.

     

    References

    [1] The Climate Crisis – A Race We Can Win. (2020). United Nations.

    https://www.un.org/en/un75/climate-crisis-race-we-can-win

    [2] Renewables 2019 – Global Status Report. Ren 21. Retrieved from: https://www.ren21.net/wp-content/uploads/2019/05/gsr_2019_full_report_en.pdf

    [3] Global Energy Review 2020. (2020, April). IEA.

    https://www.iea.org/reports/global-energy-review-2020/renewables

    [4] Renewable Power Generation Costs Report 2019. (2020, June). IRENA. https://www.irena.org/publications/2020/Jun/Renewable-Power-Costs-in-2019

    [5] Henze, V. (2019, March 26). Battery Power’s Latest Plunge in Costs Threatens Coal, Gas. Bloomberg NEF. 

    Battery Power’s Latest Plunge in Costs Threatens Coal, Gas | BloombergNEF (bnef.com)

    [6] Sinha, S. (2020, September 23). How renewable energy can drive a post-COVID recovery. World Economic Forum.

    https://www.weforum.org/agenda/2020/09/renewable-energy-drive-post-covid-recovery/

     

    Image Credit: AZoCleantech.com

  • Rural Development and Gender Equality: A reality check in Tamilnadu

    Rural Development and Gender Equality: A reality check in Tamilnadu

    Category : Agriculture/Rural Development/Gender Equality

    Title : Rural development and gender equality: A reality check in Tamilnadu

    Author : Manjari Balu 06.01.2020

    Tamilnadu continues to be one of the fastest growing states in India, despite some major declines due to political instability, rampant corruption, and populist measures at the cost of development. Despite significant progress in literacy, women’s education, and some aspects of social security, there are still major shortfalls with respect to rural employment, skill development, and gender wage inequality. Tamilnadu has to develop a policy framework to achieve employability through quality secondary education for women, shifting focus from only enrolment of girls in primary education. Manjari Balu analyses this issue in Tamilnadu.


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