Speeches and Remarks

14 October 2004

U.S.-India Collaboration on Improved Access to Energy

Remarks by Ambassador David C. Mulford delivered at the "DRUM Launch Event" India Habitat Center, New Delhi, October 14, 2004

Good morning honored guest and friends. Let me express a particular welcome to Secretary of Power Mr. Shahi and Joint Secretary of Power Arvind Jadhav; Mr. Prasad, the Chairman and Managing Director of the Rural Electrification Corporation; and Mr. McCracken, Program Advisor of the U.S. Department of Agriculture Rural Utilities Service.

I am pleased to be here today at the launch of the Distribution Reform, Upgrades, and Management activity, or DRUM. This Indo-American collaboration can bring light and opportunity to millions of people across the towns and villages of India. One of America's founding fathers, Benjamin Franklin, could have been describing rural electrification when he observed, "Energy and persistence conquer all things." Today, the United States and India are combining electrical energy and persistence to take a significant step forward in infrastructure development.

Relations between India and the United States have never been better. We are confident that under Prime Minister Manmohan Singh's leadership, the relationship will strengthen. Our relationship has its roots in common values and interests. We are the world's two largest democracies, committed to political freedom, tolerance and representative government. We have common strategic interests: to protect vital sea-lanes of the Indian Ocean; to fight terrorism, the spread of weapons of mass destruction, organized crime, and drug and human trafficking; to stop the spread of HIV/AIDS; to open global markets and boost economic opportunities for our citizens, and to create a strategically stable Asia.

Over the last two years, the level of cooperation between our countries across a broad range of issues has been nothing short of extraordinary. We see immense potential for growth and development in the region and we are working hard to build on this transformation and develop a better investment climate. Last month, President Bush and Prime Minister Singh reaffirmed their commitment to the bilateral relationship. The continuous series of high level visits and meetings between our two governments demonstrates the importance we both place on this relationship.

As relations between India and the United States burn even brighter, it is fitting that cooperation to better connect the Indian population to reliable electrical power is also expanding. Today, less than half of Indian households have electricity, and that drops in rural areas to only 1/5 of homes. In the case of water, 70 percent of the cost of delivering water is for power. Without dependable electricity, basic water and sanitation systems are overstressed or nonexistent. This raises health risks and makes domestic life a burden for women and girls (who are most often called on to haul water and care for sick family members).

In agriculture - the sector where most Indians earn their living - farmers are over-pumping water. This happens because subsidized, unreliable, poor quality power is counterproductive for conservation. If you don't know when the power will be on and you don't have to pay much, there is in fact an incentive to leave your pump set "on". Then, whenever the power does come, the water starts flowing. This contributes to over-use, leading to an increasingly severe and worrisome groundwater depletion. India's long-term growth depends on reliable supplies of both water and power, efficiently delivered at affordable cost.

Clearly, sustainable growth for any country depends on reliable infrastructure. That has certainly been the case in my own country. The link between power, overall economic growth and reduced poverty, particularly rural poverty, is clear to Indian policy makers. India has invested huge sums in the heavy infrastructure required to generate and transmit electric power. However, at the other end of the chain-electricity distribution-much more needs to be done. Clearly, the need to improve power distribution is essential for India to move forward.

Instituting commercial practices - such as the effective metering, billing, collection, and accounting needed to ensure the financial viability of power utilities - has not been stressed. State Electricity Boards are heavily dependent on government subsidies, which have reached the point where their impact on state and national fiscal operations could threaten India's overarching development objectives. Power utilities lose almost $7 billion per year, and this figure is growing at 15 to 20 percent per year. Subsidies to shore up the power sector total twice what India spends on health and half of what it spends on education. At these levels, the ability of states to invest in vital social sectors is severely limited.

Although India initiated power sector reforms in 1991, there is a growing recognition that the sector will not progress significantly until financial viability improves at the distribution level. Without financial soundness, state electricity boards cannot cover their costs, maintain their systems and provide for future growth.
The Government of India Ministry of Power has launched an aggressive reform program to improve the commercial viability of distribution.
The Accelerated Power Development and Reform Program began in 2001. It aims to link state-level reforms with the disbursement of government funds to achieve modern and efficient practices. The scale and complexity of the effort signals an opportunity for collaborative assistance to enhance program success.

The U.S. Mission to India is eager to help Indian public and private partners address these issues. We are also interested in expanding access to electricity for both urban and rural consumers. The challenges may seem daunting but India has made progress and further success is certainly possible.

For example, sixty years ago less than ten percent of rural America was electrified. Today, it is difficult to find a community in the U.S. that the grid has not reached. This remarkable achievement was realized by the U.S. Department of Agriculture's Rural Utilities Service. America's Rural Utilities Service, RUS, was created in 1936 by President Franklin D. Roosevelt. Its mandate was to get affordable, good quality power to every rural home in America. It engaged rural cooperatives, nonprofit associations, public bodies, and for-profit utilities to do the job. RUS developed creative financing models, standardized technical standards, and facilitated loans that succeeded in accelerating the pace of progress.

RUS's skills and experience are unique, yet very relevant to the Indian context today. Indeed, in recent remarks at Assocham, the Honorable Union Minister of Power, Sri P.M. Sayeed, invoked President Roosevelt's "New Deal" as a source of inspiration for the new Government's Common Minimum Program.

We are proud of our heritage and the accomplishments of the Rural Utilities Service in improving the lives of rural Americans. Much of what worked in the United States would probably work in India, but transforming an existing system is different from building a system from scratch. We look forward to developing a program of mutual cooperation with the Rural Electrification Corporation. The joint statement that will be signed today between India's Rural Electrification Corporation and the U.S. Rural Utilities Service is symbolic of a partnership-a partnership where both the U.S. and India will invest and where both sides will benefit.

This is not the first time that USAID has engaged in rural electrification in India. During the late 1960's and into the 1970's, USAID worked with the Rural Electrification Corporation to form rural cooperatives and build over a dozen thermal and hydroelectric power plants. USAID used PL 480 resources to invest in grid expansion and provided $175 million for rural electrification.

Those investments were expanded during the 1980's as the REC extended rural electrification under the Minimum Needs Program for particularly underdeveloped areas. Hundreds of rural areas received power for the first time.

The joint statement to be signed between REC and RUS builds on that legacy. This Statement is but one component of USAID's new Distribution Reform, Upgrades, and Management (or "DRUM") activity.
DRUM has three major "beats"; each of them focused on delivering consumer-level services that benefit people in rural and urban areas. The first is a commercially viable and accountable distribution system for rural electrification. The name of the game is improved access to reliable, high quality, and reasonably priced power.

Aside from the RUS element, the second "beat" will establish pilot centers of excellence for electricity distribution that promote efficiency and conservation in the management of water and electricity resources. The Power Finance Corporation is a project partner and will work with PA Consulting, Inc. to finance these "centers of excellence."

The last element of DRUM will focus on training 25,000 utility personnel - from linemen to senior management - in the commercial, technical, safety, and management aspects of electricity distribution. CORE International, Inc., will spearhead this effort.

I want to congratulate the Indian Rural Electrification Corporation and the U.S. Rural Utilities Service for taking this important step in enhancing our bilateral collaboration. I am optimistic that greater achievements in bringing power to the people will dramatically bolster economic growth and ultimately improve the lives of India's citizens.

Thank you.