1 Reply Latest reply: Apr 25, 2014 3:59 PM by mwangi RSS

    Subsidies, quality standards, and cost recovery - your experience wanted!

    C4D Explorer

      1.) Are subsidies good for business? Which ones help? Which ones hurt?


      3.) Are official quality standards for equipment helpful for doing business?


      2.) Is cross-subsidization of consumer payment (businesses subsidizing consumers) a feasible way to improve recovering investment costs? Under what conditions can this approach be successful?

       

      Together with my classmates Julia Heckmann, Neda Oreizy, and Sunny Xu, I am working on a year-long study on the role of policy in mitigating risks and providing opportunities to private sector development of energy services in India. This is our second round of questions - the first can be found on this page.


      We look forward to your insights. If you are interested in taking a larger role in our research, please consider responding to our online questionnaire or messaging one of us.


      Thank you in advance for your time and contribution!


      Best regards,

      Kieran Coleman

      Johns Hopkins School of Advanced International Studies

        • Re: Subsidies, quality standards, and cost recovery - your experience wanted!
          C4D Enthusiast

          Kieran, the question of subsidies is challenging. On a general level, they help and they hurt, it just depends whose perspective you are taking. Speaking more specifically, there is broad agreement that if renewable based mini-grids are to take off, then the amounts disbursed as diesel subsidies have to be reduced or phased out. Preferably these subsidies would be directed towards renewables to support their uptake. But even these would have to be over a specified period since subsidies distort markets and at some point market mechanisms should be allowed free rein. In practice, entrenched interests make it difficult to shift subsidies away from diesel to renewables. It would take significant political will to achieve this. In a conversation I had with an India-based policy analyst, she mentioned that while there was a stated commitment to phase-out diesel subsidies in the state of Bihar, this was not occurring as the state government was apprehensive about the knock-on effects that would impact the agriculture and transport sectors.


          In terms of quality standards, conversations I have had with East Africa based practitioners point to their necessity. They mentioned increasing consumer wariness caused by entry of sub-standard goods into the market. When the devices did not perform as expected, consumers naturally became skeptical. Unfortunately this was extended even to quality products which inhibited their uptake. While businesses may make short-term gains from selling cheap, sub-standard goods, in the long-term this undermines the market for renewable based equipment.