Household electricity consumption inefficiency and it’s determinants in rural areas

Abstract

In this paper we have analysed the electricity consumption inefficiency of households in rural area by using stochastic frontier analysis (SFA) applying single stage one-sided approach on the primary data collected using stratified random sampling. We find the mean efficiency of the households is 77.25 percent where the stochastic demand frontier reveals government subsidy and minimum watt have a significant positive impact on household electricity consumption. Surprisingly, numbers of living room does not increase electricity consumption demand in rural areas.We found the inefficiency factors; a reduction in cut in minutes and cut frequency can reduce the inefficiency of electricity consumption by the households in rural areas. Intuitively, a reduction in cut time duration and number of times electricity is cut in a day on an average can reduce inefficiency of the households by 15 percent and 39 percent respectively. Additionally, households living in pukka floors and having inverter as secondary source of lighting could reduce their inefficiency by 11 and 7 percent respectively. Overall, we found inefficiency in electricity consumption in the rural areas lie more on the supply side constraints compared to the demand side.