A group of world bank econs have written this interesting paper.
They show rural electrification has many positive externalities (see this paper as well):
The goal of rural electrification programs in developing countries goes beyond providing rural households affordable modern energy at a cheaper price than inferior alternatives over the long run. Rural electrification is expected to improve rural people’s quality of life and spur growth on a range of socioeconomic fronts. Various examples can be given to substantiate such expectations. As a replacement for kerosene-based lighting sources, electric lighting substantially reduces indoor air pollution and carbon emissions. In addition, it allows school-going children to read during evening hours, thus encouraging more hours of study. Furthermore, it benefits income-generation activities through business operations being able to stay open longer and promoting productive uses.
This paper analyses impact of rural electrification from this broader perspective:
To provide further impetus on the welfare gains of electricity, this paper analyzes the impact of electrification on a wider range of household outcomes in rural India and determines who benefits most from rural electrification. With its long history of rural electrification programs, diverse population, and geographic spread, India presents an ideal case for this study, which has benefitted from a large, nationally representative data set. We apply an instrumental variable (IV) method in a fixed-effects (FE) framework to obtain unbiased estimates of the impacts of rural electrification.
To quantify electrification’s benefits, we explore the outcomes potentially affected immediately after electrification, such as time allocated to fuelwood collection or children’s study time and the labor market, to understand how these immediate outcomes may have impacted welfare indicators (e.g., household income, expenditure, and incidence of poverty). More importantly, to determine who benefits most, we estimate a quantile regression model that examines the distributional effects of electrification.
The paper confirms rural electrification has many gains:
The estimation results indicate that electrification has significant positive effects on time allocation for fuel collection, as well as income, expenditure, and poverty incidence. It also has a positive impact on children’s schooling, which can increase future income; thus, electricity not only alleviates poverty in the near term but also holds the potential to do so over the longer run. The policy implication of these findings is that rural electrification should be used as a complement to other educational investments to further improve schooling and educational attainment.
Despite India’s many years of rural electrification programs, access to electricity is still low:
Despite such significant benefits of electrification, the household access rate in rural India is substantially lower (about 60 percent) than that for village electrification (about 90 percent). Possible reasons for households not adopting electricity are high connection costs and lack of service reliability. Rural households in India depend mainly on agriculture-based seasonal income, from which saving enough for the connection cost may be difficult. Therefore, it may be advisable to spread the connection cost over a longer period.
We have observed that the kerosene consumed by households with electricity is not much less than for households without electricity. At the very least, the money households with electricity spend on kerosene equals what they pay for unreliable electricity service, not accounting for the loss of productivity and appliance damage due to power outages, suggesting that access without reliability may be counter-productive. Policy makers must focus on this key issue.
What Shashi Tharoor perhaps meant is there is 90% electrification and not access.
Another issue is who benefits most? It is the richer households:
Quintile regression estimates show that electrification benefits are, not unexpectedly, higher for wealthier households. The greater benefits to richer households accrue through higher consumption and more diversification of electricity service. This too is an issue that policy makers keen on the poverty-alleviation aspects of electrification should address.