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The percentage of the population living below the poverty line in India decreased to 22% in 2011-12 from 37% in 2004-05, according to data released by the Planning Commission in July 2013. This blog presents data on recent poverty estimates and goes on to provide a brief history of poverty estimation in the country. National and state-wise poverty estimates The Planning Commission estimates levels of poverty in the country on the basis of consumer expenditure surveys conducted by the National Sample Survey Office (NSSO) of the Ministry of Statistics and Programme Implementation.
The current methodology for poverty estimation is based on the recommendations of an Expert Group to Review the Methodology for Estimation of Poverty (Tendulkar Committee) established in 2005. The Committee calculated poverty levels for the year 2004- 05. Poverty levels for subsequent years were calculated on the basis of the same methodology, after adjusting for the difference in prices due to inflation. Table 1 shows national poverty levels for the last twenty years, using methodology suggested by the Tendulkar Committee. According to these estimates, poverty declined at an average rate of 0.74 percentage points per year between 1993-94 and 2004-05, and at 2.18 percentage points per year between 2004-05 and 2011-12. Table 1: National poverty estimates (% below poverty line) (1993 - 2012)
| Year |
Rural |
Urban |
Total |
| 1993 – 94 |
50.1 |
31.8 |
45.3 |
| 2004 – 05 |
41.8 |
25.7 |
37.2 |
| 2009 – 10 |
33.8 |
20.9 |
29.8 |
| 2011 – 12 |
25.7 |
13.7 |
21.9 |
Source: Press Note on Poverty Estimates, 2011 – 12, Planning Commission; Report of the Expert Group to Review the Methodology for Estimation of Poverty (2009) Planning Commission; PRS. State-wise data is also released by the NSSO. Table 2 shows state-wise poverty estimates for 2004-05 and 2011-12. It shows that while there is a decrease in poverty for almost all states, there are wide inter-state disparities in the percentage of poor below the poverty line and the rate at which poverty levels are declining. Table 2: State-wise poverty estimates (% below poverty line) (2004-05, 2011-12)
| State |
2004-05 |
2011-12 |
Decrease |
| Andhra Pradesh |
29.9 |
9.2 |
20.7 |
| Arunachal Pradesh |
31.1 |
34.7 |
-3.6 |
| Assam |
34.4 |
32 |
2.4 |
| Bihar |
54.4 |
33.7 |
20.7 |
| Chhattisgarh |
49.4 |
39.9 |
9.5 |
| Delhi |
13.1 |
9.9 |
3.2 |
| Goa |
25 |
5.1 |
19.9 |
| Gujarat |
31.8 |
16.6 |
15.2 |
| Haryana |
24.1 |
11.2 |
12.9 |
| Himachal Pradesh |
22.9 |
8.1 |
14.8 |
| Jammu and Kashmir |
13.2 |
10.4 |
2.8 |
| Jharkhand |
45.3 |
37 |
8.3 |
| Karnataka |
33.4 |
20.9 |
12.5 |
| Kerala |
19.7 |
7.1 |
12.6 |
| Madhya Pradesh |
48.6 |
31.7 |
16.9 |
| Maharashtra |
38.1 |
17.4 |
20.7 |
| Manipur |
38 |
36.9 |
1.1 |
| Meghalaya |
16.1 |
11.9 |
4.2 |
| Mizoram |
15.3 |
20.4 |
-5.1 |
| Nagaland |
9 |
18.9 |
-9.9 |
| Odisha |
57.2 |
32.6 |
24.6 |
| Puducherry |
14.1 |
9.7 |
4.4 |
| Punjab |
20.9 |
8.3 |
12.6 |
| Rajasthan |
34.4 |
14.7 |
19.7 |
| Sikkim |
31.1 |
8.2 |
22.9 |
| Tamil Nadu |
28.9 |
11.3 |
17.6 |
| Tripura |
40.6 |
14.1 |
26.5 |
| Uttar Pradesh |
40.9 |
29.4 |
11.5 |
| Uttarakhand |
32.7 |
11.3 |
21.4 |
| West Bengal |
34.3 |
20 |
14.3 |
| All Inda |
37.2 |
21.9 |
15.3 |
Source: Review of Expert Group to Review the Methodology for Estimation of Poverty (2009) Planning Commission, Government of India; Press Note on Poverty Estimates, 2011 – 12 (2013) Planning Commission, Government of India; PRS. Note: A negative sign before the number in column four (decrease) indicates an increase in percentage of population below the poverty line. History of poverty estimation in India Pre independence poverty estimates: One of the earliest estimations of poverty was done by Dadabhai Naoroji in his book, ‘Poverty and the Un-British Rule in India’. He formulated a poverty line ranging from Rs 16 to Rs 35 per capita per year, based on 1867-68 prices. The poverty line proposed by him was based on the cost of a subsistence diet consisting of ‘rice or flour, dhal, mutton, vegetables, ghee, vegetable oil and salt’. Next, in 1938, the National Planning Committee (NPC) estimated a poverty line ranging from Rs 15 to Rs 20 per capita per month. Like the earlier method, the NPC also formulated its poverty line based on ‘a minimum standard of living perspective in which nutritional requirements are implicit’. In 1944, the authors of the ‘Bombay Plan’ (Thakurdas et al 1944) suggested a poverty line of Rs 75 per capita per year. Post independence poverty estimates: In 1962, the Planning Commission constituted a working group to estimate poverty nationally, and it formulated separate poverty lines for rural and urban areas – of Rs 20 and Rs 25 per capita per year respectively. VM Dandekar and N Rath made the first systematic assessment of poverty in India in 1971, based on National Sample Survey (NSS) data from 1960-61. They argued that the poverty line must be derived from the expenditure that was adequate to provide 2250 calories per day in both rural and urban areas. This generated debate on minimum calorie consumption norms while estimating poverty and variations in these norms based on age and sex. Alagh Committee (1979): In 1979, a task force constituted by the Planning Commission for the purpose of poverty estimation, chaired by YK Alagh, constructed a poverty line for rural and urban areas on the basis of nutritional requirements. Table 3 shows the nutritional requirements and related consumption expenditure based on 1973-74 price levels recommended by the task force. Poverty estimates for subsequent years were to be calculated by adjusting the price level for inflation. Table 3: Minimum calorie consumption and per capita consumption expenditure as per the 1979 Planning Commission task force on poverty estimation
| Area | Calories | Minimum consumption expenditure (Rs per capita per month) |
| Rural | 2400 | 49.1 |
| Urban | 2100 | 56.7 |
Source: Report of the Expert Group on Estimation of Proportion and Number of Poor, 1993, Perspective Planning Division, Planning Commission; PRS Lakdawala Committee (1993): In 1993, an expert group constituted to review methodology for poverty estimation, chaired by DT Lakdawala, made the following suggestions: (i) consumption expenditure should be calculated based on calorie consumption as earlier; (ii) state specific poverty lines should be constructed and these should be updated using the Consumer Price Index of Industrial Workers (CPI-IW) in urban areas and Consumer Price Index of Agricultural Labour (CPI-AL) in rural areas; and (iii) discontinuation of ‘scaling’ of poverty estimates based on National Accounts Statistics. This assumes that the basket of goods and services used to calculate CPI-IW and CPI-AL reflect the consumption patterns of the poor. Tendulkar Committee (2009): In 2005, another expert group to review methodology for poverty estimation, chaired by Suresh Tendulkar, was constituted by the Planning Commission to address the following three shortcomings of the previous methods: (i) consumption patterns were linked to the 1973-74 poverty line baskets (PLBs) of goods and services, whereas there were significant changes in the consumption patterns of the poor since that time, which were not reflected in the poverty estimates; (ii) there were issues with the adjustment of prices for inflation, both spatially (across regions) and temporally (across time); and (iii) earlier poverty lines assumed that health and education would be provided by the State and formulated poverty lines accordingly.[1] It recommended four major changes: (i) a shift away from calorie consumption based poverty estimation; (ii) a uniform poverty line basket (PLB) across rural and urban India; (iii) a change in the price adjustment procedure to correct spatial and temporal issues with price adjustment; and (iv) incorporation of private expenditure on health and education while estimating poverty. The Committee recommended using Mixed Reference Period (MRP) based estimates, as opposed to Uniform Reference Period (URP) based estimates that were used in earlier methods for estimating poverty.[2] It based its calculations on the consumption of the following items: cereal, pulses, milk, edible oil, non-vegetarian items, vegetables, fresh fruits, dry fruits, sugar, salt & spices, other food, intoxicants, fuel, clothing, footwear, education, medical (non-institutional and institutional), entertainment, personal & toilet goods, other goods, other services and durables. The Committee computed new poverty lines for rural and urban areas of each state. To do this, it used data on value and quantity consumed of the items mentioned above by the population that was classified as poor by the previous urban poverty line. It concluded that the all India poverty line was Rs 446.68 per capita per month in rural areas and Rs 578.80 per capita per month in urban areas in 2004-05. The following table outlines the manner in which the percentage of population below the poverty line changed after the application of the Tendulkar Committee’s methodology. Table 4: Percentage of population below poverty line calculated by the Lakdawala Committee and the Tendulkar Committee for the year 2004-05
| Committee |
Rural |
Urban |
Total |
| Lakdawala Committee |
28.3 |
25.7 |
27.5 |
| Tendulkar Committee |
41.8 |
27.5 |
37.2 |
Source: Report of the Expert Group on Estimation of Proportion and Number of Poor, 1993, Perspective Planning Division, Planning Commission; Report of the Expert Group to Review the Methodology for Estimation of Poverty, 2009, Planning Commission; PRS The Committee also recommended a new method of updating poverty lines, adjusting for changes in prices and patterns of consumption, using the consumption basket of people close to the poverty line. Thus, the estimates released in 2009-10 and 2011-12 use this method instead of using indices derived from the CPI-AL for rural areas and CPI-IW for urban areas as was done earlier. Table 5 outlines the poverty lines computed using the Tendulkar Committee methodology for the years 2004-05, 2009-10 and 2011-12. Table 5: National poverty lines (in Rs per capita per month) for the years 2004-05, 2009-10 and 2011-12
| Year |
Rural |
Urban |
| 2004-05 |
446.7 |
578.8 |
| 2009-10 |
672.8 |
859.6 |
| 2011-12 |
816.0 |
1000.0 |
Source: Report of the Expert Group to Review the Methodology for Estimation of Poverty (2009) Planning Commission; Poverty Estimates 2009-10 and Poverty Estimates 2011-12, Planning Commission; PRS Rangarajan Committee: In 2012, the Planning Commission constituted a new expert panel on poverty estimation, chaired by C Rangarajan with the following key objectives: (i) to provide an alternate method to estimate poverty levels and examine whether poverty lines should be fixed solely in terms of a consumption basket or if other criteria are also relevant; (ii) to examine divergence between the consumption estimates based on the NSSO methodology and those emerging from the National Accounts aggregates; (iii) to review international poverty estimation methods and indicate whether based on these, a particular method for empirical poverty estimation can be developed in India, and (iv) to recommend how these estimates of poverty can be linked to eligibility and entitlements under the various schemes of the Government of India. The Committee is expected to submit its report by 2014.
[1] While private expenditure on education and health was covered in the base year 1973-74, no account was taken of either the increase in the proportion of these in total expenditure over time or of their proper representation in available price indices.
[2] Under the URP method, respondents are asked to detail consumption over the previous 30 days; whereas under the MRP method five low-frequency items (clothing, footwear, durables, education and institutional health expenditure) are surveyed over the previous 365 days, and all other items over the previous 30 days.
The central government has enforced a nation-wide lockdown between March 25 and May 3 as part of its measures to contain the spread of COVID-19. During the lockdown, several restrictions have been placed on the movement of individuals and economic activities have come to a halt barring the activities related to essential goods and services. The restrictions are being relaxed in less affected areas in a limited manner since April 20. In this blog, we look at how the lockdown has impacted the demand and supply of electricity and what possible repercussions its prolonged effect may have on the power sector.
Power supply saw a decrease of 25% during the lockdown (year-on-year)
As electricity cannot be stored in large amount, the power generation and supply for a given day are planned based on the forecast for demand. The months of January and February in 2020 had seen an increase of 3% and 7% in power supply, respectively as compared to 2019 (year-on-year). In comparison, the power supply saw a decrease of 3% between March 1 and March 24. During the lockdown between March 24 and April 19, the total power supply saw a decrease of about 25% (year-on-year).
Figure 1: % change in power supply position between March 1 and April 19 (Y-o-Y from 2019 to 2020)
Sources: Daily Reports; POSOCO; PRS.
If we look at the consumption pattern by consumer category, in 2018-19, 41% of total electricity consumption was for industrial purposes, followed by 25% for domestic and 18% for agricultural purposes. As the lockdown has severely reduced the industrial and commercial activities in the country, these segments would have seen a considerable decline in demand for electricity. However, note that the domestic demand may have seen an uptick as people are staying indoors.
Figure 2: Power consumption by consumer segment in 2018-19
Sources: Central Electricity Authority; PRS.
Electricity demand may continue to be subdued over the next few months. At this point, it is unclear that when lockdown restrictions are eased, how soon will economic activities return to pre COVID-19 levels. India’s growth projections also highlight a slowdown in the economy in 2020 which will further impact the demand for electricity. On April 16, the International Monetary Fund has slashed its projection for India’s GDP growth in 2020 from 5.8% to 1.9%.
A nominal increase in energy and peak deficit levels
As power sector related operations have been classified as essential services, the plant operations and availability of fuel (primarily coal) have not been significantly constrained. This can be observed with the energy deficit and peak deficit levels during the lockdown period which have remained at a nominal level. Energy deficit indicates the shortfall in energy supply against the demand during the day. The average energy deficit between March 25 and April 19 has been 0.42% while the corresponding figure was 0.33% between March 1 and March 24. Similarly, the average peak deficit between March 25 and April 19 has been 0.56% as compared to 0.41% between March 1 and March 24. Peak deficit indicates the shortfall in supply against demand during highest consumption period in a day.
Figure 3: Energy deficit and peak deficit between March 1, 2020 and April 19, 2020 (in %)
Sources: Daily Reports; POSOCO; PRS.
Coal stock with power plants increases
Coal is the primary source of power generation in the country (~71% in March 2020). During the lockdown period, the coal stock with coal power plants has seen an increase. As of April 19, total coal-stock with the power plants in the country (in days) has risen to 29 days as compared to 24 days on March 24. This indicates that the supply of coal has not been constrained during the lockdown, at least to the extent of meeting the requirements of power plants.
Energy mix changes during the lockdown, power generation from coal impacted
During the lockdown, power generation has been adjusted to compensate for reduced consumption, Most of this reduction in consumption has been adjusted by reduced coal power generation. As can be seen in Table 1, coal power generation reduced from an average of 2,511 MU between March 1 and March 24 to 1,873 MU between March 25 and April 19 (about 25%). As a result, the contribution of coal in total power generation reduced from an average of 72.5% to 65.6% between these two periods.
Table 1: Energy Mix during March 1-April 19, 2020
Sources: Daily Reports; POSOCO; PRS.
This shift may be happening due to various reasons including: (i) renewable energy sources (solar, wind, and small hydro) have MUST RUN status, i.e., the power generated by them has to be given the highest priority by distribution companies, and (ii) running cost of renewable power plants is lower as compared to thermal power plants.
This suggests that if growth in electricity demand were to remain weak, the adverse impact on the coal power plants could be more as compared to other power generation sources. This will also translate into weak demand for coal in the country as almost 87% of the domestic coal production is used by the power sector. Note that the plant load factor (PLF) of the thermal power plants has seen a considerable decline over the years, decreasing from 77.5% in 2009-10 to 56.4% in 2019-20. Low PLF implies that coal plants have been lying idle. Coal power plants require significant fixed costs, and they incur such costs even when the plant is lying idle. The declining capacity utilisation augmented by a weaker demand will undermine the financial viability of these plants further.
Figure 4: Power generation from coal between March 1, 2020 and April 19, 2020 (in MU)
Sources: Daily Reports; POSOCO; PRS.
Finances of the power sector to be severely impacted
Power distribution companies (discoms) buy power from generation companies and supply it to consumers. In India, most of the discoms are state-owned utilities. One of the key concerns in the Indian power sector has been the poor financial health of its discoms. The discoms have had high levels of debt and have been running losses. The debt problem was partly addressed under the UDAY scheme as state governments took over 75% of the debt of state-run discoms (around 2.1 lakh crore in two years 2015-16 and 2016-17). However, discoms have continued to register losses owing to underpricing of electricity tariff for some consumer segments, and other forms of technical and commercial losses. Outstanding dues of discoms towards power generation companies have also been increasing, indicating financial stress in some discoms. At the end of February 2020, the total outstanding dues of discoms to generation companies stood at Rs 92,602 crore.
Due to the lockdown and its further impact in the near term, the financial situation of discoms is likely to be aggravated. This will also impact other entities in the value chain including generation companies and their fuel suppliers. This may lead to reduced availability of working capital for these entities and an increase in the risk of NPAs in the sector. Note that, as of February 2020, the power sector has the largest share in the deployment of domestic bank credit among industries (Rs 5.4 lakh crore, 19.3% of total).
Following are some of the factors which have impacted the financial situation during the lockdown:
Reduced cross-subsidy: In most states, the electricity tariff for domestic and agriculture consumers is lower than the actual cost of supply. Along with the subsidy by the state governments, this gap in revenue is partly compensated by charging industrial and commercial consumers at a higher rate. Hence, industrial and commercial segments cross-subsidise the power consumption by domestic and agricultural consumers.
The lockdown has led to a halt on commercial and industrial activities while people are staying indoors. This has led to a situation where the demand from the consumer segments who cross-subsidise has decreased while the demand from consumer segments who are cross-subsidised has increased. Due to this, the gap between revenue realised by discoms and cost of supply will widen, leading to further losses for discoms. States may choose to bridge this gap by providing a higher subsidy.
Moratorium to consumers: To mitigate the financial hardship of citizens due to COVID-19, some states such as Rajasthan, Uttar Pradesh, and Goa, among others, have provided consumers with a moratorium for payment of electricity bills. At the same time, the discoms are required to continue supplying electricity. This will mean that the return for the supply made in March and April will be delayed, leading to lesser cash in hand for discoms.
Some state governments such as Bihar also announced a reduction in tariff for domestic and agricultural consumers. Although, the reduction in tariff will be compensated to discoms by government subsidy.
Constraints with government finances: The revenue collection of states has been severely impacted as economic activities have come to a halt. Further, the state governments are directing their resources for funding relief measures such as food distribution, direct cash transfers, and healthcare. This may adversely affect or delay the subsidy transfer to discoms.
The UDAY scheme also requires states to progressively fund greater share in losses of discoms from their budgetary resources (10% in 2018-19, 25% in 2019-20, and 50% in 2020-21). As losses of discoms may widen due to the above-mentioned factors, the state government’s financial burden is likely to increase.
Capacity addition may be adversely impacted
As per the National Electricity Plan, India’s total capacity addition target is around 176 GW for 2017-2022. This comprises of 118 GW from renewable sources, 6.8 GW from hydro sources, and 6.4 GW from coal (apart from 47.8 GW of coal-based power projects already in various stages of production as of January 2018).
India has set a goal of installing 175 GW of Renewable Power Capacity by 2022 as part of its climate change commitments (86 GW has been installed as of January 2020). In January 2020, the Parliamentary Standing Committee on Energy observed that India could only install 82% and 55% of its annual renewable energy capacity addition targets in 2017-18 and 2018-19. As of January 2020, 67% of the target has been achieved for 2019-20.
Due to the impact of COVID-19, the capacity addition targets for various sources is likely to be adversely impacted in the short run as:
construction activities were stopped during the lockdown and will take some time to return to normal,
disruption in the global supply chain may lead to difficulties with the availability of key components leading to delay in execution of projects, for instance, for solar power plants, solar PV modules are mainly imported from China, and
reduced revenue for companies due to weak demand will leave companies with less capacity left for capital expenditure.
Key reforms likely to be delayed
Following are some of the important reforms anticipated in 2020-21 which may get delayed due to the developing situation:
The real-time market for electricity: The real-time market for electricity was to be operationalised from April 1, 2020. However, the lockdown has led to delay in completion of testing and trial runs. The revised date for implementation is now June 1, 2020.
UDAY 2.0/ADITYA: A new scheme for the financial turnaround of discoms was likely to come this year. The scheme would have provided for the installation of smart meters and incentives for rationalisation of the tariff, among other things. It remains to be seen what this scheme would be like since the situation with government finances is also going to worsen due to anticipated economic slowdown.
Auction of coal blocks for commercial mining: The Coal Ministry has been considering auction of coal mines for commercial mining this year. 100% FDI has been allowed in the coal mining activity for commercial sale of coal to attract foreign players. However, the global economic slowdown may mean that the auctions may not generate enough interest from foreign as well as domestic players.
For a detailed analysis of the Indian Power Sector, please see here. For details on the number of daily COVID-19 cases in the country and across states, please see here. For details on the major COVID-19 related notifications released by the centre and the states, please see here.
