Indian Government To Sell $6 LED Lamp For $0.16 To Boost Demand-Side Energy Efficiency
The Indian ministry of power has initiated measures to make the promise of Prime Minister Modi to provide electricity supply and lamps to all households in the country by the end of the decade. The latest measure is aimed at households and energy efficiency. 
The government plans to offer subsidised LED lamps to households in an attempt to reduce power demand and improve energy efficiency on the demand side. An Energy Efficiency Services company will procure such lamps in bulk and sell them at subsidised rates to consumers. The program will start from the southern state of Andhra Pradesh.
The government of Andhra Pradesh has signed an agreement with an Energy Efficiency Services Limited (EESL), a joint venture company between four public sector companies. The state government had organised a tender bidding for companies to provide LED lamps at the lowest cost. The lowest price quoted for a single lamp was ₹204 ($3.3) while the market price is close to ₹400 ($6.5). The EESL will procure these lamps and sell them at ₹10 ($0.16). Each eligible household will be offered two LED lamps.
The savings realised by the electricity suppliers in the form of low power demand will be paid back to Energy Efficiency Services Limited.
EESL has already procured 2 million LED lamps for distribution in various districts of Andhra Pradesh. The Demand Side Efficient Lighting Programme (DELP) launched by the state government aims to cover 3.7 million households, providing two LED lamps each.
In addition to this scheme, the central government will also work on a similar program aimed solely at households living in poverty. The EESL model has been in implementation in some other jurisdictions of India. About 750,000 LED lamps have been distributed in the union territory of Pudhuchery while ESSL has also retrofitted several streetlights with LED lamps.
LED lamps use about a tenth of the electricity consumed by incandescent lamps, still widely used across the country. India still suffers from significant demand-supply mismatch in the electricity sector. This latest initiative by the Indian government would hopefully reap benefits to the ailing power sector.
Image Credit: Miass | CC BY-SA 3.0
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What they’ve just done is killed the normal market for LED lamps. No Indian peasant will buy one now at full price, they will just wait for the heavily subsidised one. On past performance, the programme will run out of money or political support soon. The solution to poverty, including energy poverty, is Milton Friedman’s: give them some money.
Not many people in the world can afford a $6 light bulb.
It’s the electricity that matters far more than the bulb.
To an indian, $6 is more like $60, in terms of relative buying power and need.
If you give them 120 rupees, they will spend it on food or immediate consumption. Electricity isn’t an issue because most people steal electricity.
A market is ineffective when there is no rule of law or contract
If a region has a peak energy supply and distribution problem, replacing a hundred megawatts+ of peak power consuming devices for only $23million would seem like a very good investment indeed. These will be used in the lights families use the most often, and for poor families with is also a welcome savings (some may only have 2 lights, or even 1). “Peasants” typically don’t have the free cash flow to make long term investments in a light bulb that costs more but can last 10+ years. They also may be restricting lighting use to minimal because of costs, or having their electric bill subsidized. I personally like this approach from a charity, infrastructure, long term cost reduction, and environmental standpoint. The “normal market” for LED lamps doesn’t exist yet in places of poverty without subsidy. That will change, but we’re not there yet. It is just now coming along in 1st world regions. And even here, the local power company subsidizes LED purchases at Home Depot…..