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Expanding Access to Modern Energy in
Rural India
Dr. P. BALACHANDRA
Department of Management StudiesIndian Institute of Science
Bangalore 560 012
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l Motivation is to explore whether climate change
imperatives be transformed as opportunities forexpanding rural energy access in the India Climate change mitigation is a necessity and Indias
participation is inevitable; Is expanding rural energy
access a low hanging fruit? The market mechanisms created by international
protocols have provided revenue opportunities formitigation efforts; Whether these can reduce the cost ofexpanding rural energy access?
l Why rural energy access is a critical issue inIndia?
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l Energy access is a term mostly used in the
context of describing the energy use pattern ofpoor people in the world.
l It means a reliable and affordable access tomodern energy carriers to perform basic end-use
services like household cooking and lighting.These two are used as indicators of energyaccess levels.
l What is the crisis?
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l Only 55% of the rural population had access toelectricity in 2005 and the remaining 45% relied onkerosene for their lighting needs.
l For cooking, only 8.6% of the rural population hadaccess to LPG (cooking gas), 1.3% to kerosene and
large share of 84% to biomass (firewood, agro-waste and cattle dung) in 2005.
l 726 million relying on biomass for cooking and 364million on kerosene for lighting out of a total rural
population of 808 million in 2005.
Source: Estimated based on NSSO (2007); UNPD (2008)
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l 0.73 billion are in India out of a total 2.15 billion worldrural population without access to modern cooking fuelsin 2005 (33.8% share).
l 0.36 billion in India out of a total 1.3 billion world ruralpopulation without access to electricity for lighting in2005 (28.4% share).
l India accounted for 24.1% of rural world population.
l Lack of rural access to cooking in India is 90%compared to 64% in the world.
l Lack of rural access to electricity in India is 45%compared to 38% in the world.
l The issue is even more critical
Source: Estimated based on NSSO (2007); UNPD (2008); IEA (2006)
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Energy poor are also income poor. Rural poverty line in India is Rs. 447MPCE (Planning Commission, 2009)
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The trends are disheartening, especially with cooking energy access (basedon National sample survey organization (NSSO) and Census reports)
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The regional disparities in cookingaccess levels are vast
Top 5 states have access levels in therange of 17-28% and the worst 5 inthe range of 2-5%.
The progress during last 11 years isdiscouraging for failure states. Thisis true even for successful states
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Rural electricity access situation is farbetter compared to cooking access
Electricity access levels were in the rangeof 10-34% in failure states and in thesuccessful states the range was 80-96%.
Except for Uttar Pradesh other states areprogressing well
Even many focused programmes havefailed to achieve desired results in failures
states
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First number within the brackets is the share of households using a particularfuel for cooking and the second number is that share of that fuel in total
energy consumption.
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Distribution of monthly average rural household electricityconsumption in India (2005)
Average household electricityconsumption per month in 2005for electrified households
World 213 kWh USA 956 kWh China 56 kWh India 56 kWh India rural 39 kWh India urban 78
kWh
Estimated based on NSSO, 2007; MOSPI, 2007; MOSPI, 2006; EIA, 2008and UNESCAP, 2009
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Implications of lack of energy access
The outcomes are income poverty, primitive lifestyles, lossof dignity, physical hardship, health hazards, lack ofemployment and polluted environment.
Household energy access for cooking, lighting and othercritical end-uses forms an important linkage in achieving the
Millennium Development Goals (MDGs) and therebysustainable development
It is an aspiration as well as social necessity. India cannot beenergy secure if her people remain without access to modernenergy for lifeline needs.
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Health impacts of lack of energy access
Globally two million deaths occur annually from pneumonia,chronic lung disease, and lung cancer, which are associated withexposure to indoor air pollution and 99% of them occur indeveloping countries (UNDP-WHO, 2009)
Women and children, especially the girl children, suffer most from
indoor air pollution Respirable particles are strongly associated with acute respiratory
infections among children accounting for largest number of childdeaths in India (World Bank, 2004).
Indoor air pollution is causing more than 400,000 deaths everyyear in India (World Bank, 2004)
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Climate change and energy access
GHG emissions from rural energy is typically ignored considering that
it is mostly from renewable biomass. However, this is not true atleast in the Indian context.
The total GHG emissions from rural household energy use in 2005 was191 million tonne (including 141 million tonne from biomasscombustion) compared to total energy related GHG emissions of
1,252 million tonne (WRI, 2010) in India.Rural household emissions are estimated to reach 330 million tonne in
2031-32.
Black Carbon is estimated to contribute 10-20% of global warmingcompared to 40% by CO2 and residential sector contributes18-25%
of the black carbon (Baron et al, 2009, Smith, 2009).Rural households contribute 134,000 tonne of BC annually, which is
about 20% of BC emissions in India.
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Access to modern fuels for cooking - Programmes
Policy towards rural cooking energy was to encourage use of non-commercial energy and discourage shift to commercial fuels with betterconversion technologies like biogas plants and improved cook-stoves(Planning Commission, 1979 and1981). Efforts are guided by subsidydriven programmes with a technology dissemination focus.l National Project on Biogas Development (NPBD) in 1981:
Cumulative number of biogas plants built from 1982 to 2009 is 4.17 million(MNRE, 2010) against a potential of 12 to17 million.
The estimates suggest that about 1.05 million households were using biogasas primary cooking fuel in 2005 and this is about 28.3% of the biogas plantsdisseminated.
l National Programme on Improved Chulhas (NPIC) or improvedcookstoves in 1983: As on 31 March 2003 over 35 million stoves had been built across the nation
In 2002, MNRE deemed NPIC a failure and funding was stopped and theresponsibility of continued ICS dissemination was passed to the states.
In December 2009, the Ministry of New and Renewable Energy (MNRE)re-launched a re-structured National Biomass Cookstove Initiative (NBCI)
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Access to modern fuels for cooking - Programmes
l Subsidies on household fuels for expanding cooking energy access:
Both LPG and kerosene are subsidized heavily. They are not targeted at poorand are universally applicable to all categories of consumers. Indian government contributed Rs. 26.7 billion (US$ 0.6 Billion) in 2008-09
towards subsidies. The total under-recovery due to the sale of these under-priced fuels is to the
tune of Rs. 458 billion (US $10 billion) in 2008-09.
Benefit of subsidized LPG is largely enjoyed by middle and higher incomeurban households and that of kerosene by urban poor. Kerosene ispredominantly used for lighting by rural poor.
A study in 2005 revealed that nearly 39% of the Public distribution system(PDS) kerosene was being illegally diverted (NCAER, 2005).
l Deepam, a scheme for expanding LPG access to poor in the state of
Andhra Pradeshl Rajiv Gandhi Gramin LPG Vitrak (RGGLV) A scheme forexpanding LPG access
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Cooking energy access programmes - Outcomes
l MNRE programmes on biogas and improved cook stoves were
technology centric approach aiming more on dissemination ratherthan expanding access. Success was measured in terms of numbersdeployed rather than how many use.
l With cattle ownership and availability of adequate dung being thecriteria for installation of biogas plants, the poor got excluded fromthe programme. Thus, government subsidy for installing biogas
plants was targeted at rural high income families.
l LPG subsidy is directed at mostly middle class and rich.
l Kerosene subsidy is mostly for lighting and directed at urban poorfor cooking. Nearly 40% of kerosene is diverted.
l Andhra Pradesh accounts for 33% of LPG using poor households inIndia (an outcome of Deepam scheme).
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Only 10.7% of the biogas using rural households belonged to poor and thisis 5.8% for LPG. In 2005, 45% of the rural households were poor (MPCE
< Rs. 455)
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Electricity Access - Policies
l Electricity Act 2003
Universal obligation on the part of government to endeavorelectricity supply to all areas including villages and hamlets National policy for rural electrification Bulk purchase of power and management of rural distribution
through local participation
Stand-alone systems, removal license requirements from the stategovernments in notified rural areas
l National Electricity Policy, 2005 and Rural ElectrificationPolicy, 2006 Access to electricity for all households in next 5 years
Minimum lifeline consumption of 1 kWh/household/day as amerit good by 2012 Rural electricity infrastructure and implementation mechanisms
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Electricity Access - Programmes
l Rural Electrification Corporation (1969): Financing ruralelectrification schemes and promoting electricity co-operatives.
l Kutir Jyoti Scheme (1988-89): Providing single point lightingconnections to below poverty line (BPL) rural households.
l Accelerated Rural Electrification Programme (AREP): Interestsubsidy of 4% on loans for rural electrification.
l Accelerated Electrification of one lakh villages and one crore
households: 40% capital subsidy and remaining loan.l Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) in 2005
Establish village electrification infrastructure within next five years Free electricity connection to all rural households below poverty line All relevant stakeholders are included
Government provides 90% of the capital cost as grant Projects are managed by franchisees (NGOs or entrepreneurs) The awarded cost till now is Rs. 287 billion (US$ 6.4 billion)
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Electricity Access Programmes - Outcomes
l All programmes prior to RGGVY have failed to achieve theobjective of universal access to electricity.
l Through RGGVY India could electrify only 23% of the targetedrural households during last four-years.
l As on 1st January 2010, a total of about 9.4 million households areelectrified.
l Though initial goal was to provide electricity access to allhouseholds and free connections to 23.4 million BPL households by2009, the targets have been revised to free connections to 17.5million BPL households by March 2012.
l The estimates suggest that rural household electrification level is
likely to be about 64% by 2009 compared to 43.5% in 2001.l Focus was mostly on connectivity. Energy problems are yet to be
resolved.
l Unreliable and low quality supply
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Expanding rural energy access: Opportunities
Lack of energy access had serious negative implications foreconomic, social, & environmental wellbeing of human kind
Large number of programmes has been initiated by thegovernment and they have failed to achieve the desired goalsof universal access
These lessons suggest that India needs a radically differentapproach to bridge the rural energy access gap.
The proposal is to use opportunities provided by climatechange mitigation imperative and other inherent capabilities
possessed by India to stimulate expansion of access to modernenergy carriers for rural households.
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Expanding rural energy access:Opportunities
1. Need for climate change mitigation and associated opportunities2. Large potential for renewable energy resources3. Access to near-commercial renewable energy (low carbon) technologies4. Pioneer in small and micro enterprises5. Targeting the current government incentives
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Need for climate change mitigationThe global climate change regime requires Indias
contributions in mitigating GHGsIndia cannot avoid participation citing the need for
development. Non-participation might result in economicconsequences.
Expanding rural energy access is a low hanging fruit
According to IEAs reference energy scenario, Indiasenergy related CO2 emissions are expected to increasefrom 1.3 Gt in 2007 to nearly 3.4 Gt by 2030 (IEA, 2009).
The climate stabilization 450 ppm scenario requires India to
reduce CO2 emissions to 2.2 Gt by 2030 from 3.4 Gt.Rural energy access has a potential of up to 0.2 Gt.
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Climate Change: OpportunitiesMarket mechanisms like Clean Development Mechanism (CDM)
created by international protocols allow mitigated GHG emissions to
be traded in carbon market.CDM in its present form is not exactly suitable for rural energy accessprogramme. It is too restrictive and preference is always for largescale and easy to implement GHG mitigation projects.
Though sustainable development and conforming to national priorities
are listed as critical factors for approval of a CDM project, these arenot strictly adhered to in practice.Projects catering to the needs of poor and maximizing social wellbeing
hardly attract attention of CDM market.Reforms in CDM are being proposed (IEA, 2009)
Sectoral crediting mechanisms - emission reductions at the sector level,relative to a pre-defined sector baseline. Policy CDM - Government policies generating CERs related to renewable
energy, efficiency standards, energy subsidy, etc.
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Renewable energy resources
The past experiences suggest that centralized energy supply
alone cannot achieve universal access. Distributed energysystems relying on renewable energy sources will have toplay significant roles.
Among renewable energy sources, biomass appears to bemost promising for India
Hard or woody biomass for electricity generation Woody biomass being used for cooking/heating is 200 MT Energy forestry in wasteland (40 million hectares) is estimated
to contribute 255 MT (million tonne)Soft biomass for biogas production for cooking
Soft biomass of 300 600 MT Cattle dung of 450 MT
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Renewable energy technologies
Biomass combustion/gasification technology
Bio-methanation or biogas technologyBoth are commercial and India has experience in large-
scale dissemination of these technologies.
Power generation potential is 60,000 MW
Biogas potential is more than 100 billion m3/year(adequate for 275 million households).
(Based on Planning Commission, 2005, MNRE, 2010, Ravindranath, et al,2005, Vijay, 2006)
I di i i MSME t
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India; a pioneer in MSME sector
Medium, small & micro enterprise (MSME) sector
contributes to 8% of countrys GDP, 45% of manufacturedoutput and 40% of its exports (MSME, 2010)As per fourth census of MSMEs; in 2006-07
26 million medium, small and micro industries 29% engaged in manufacturing and the remaining 71% in services
52% of the MSMEs are rural based MSMEs have provided employment to 60 million people This is second only to agriculture Women employees account for 17% of the total employment About 91% of enterprises are of proprietary type indicating the entrepreneurial qualities
of the individuals
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Targeting Subsidies
Kerosene subsidy of Rs. 10 billion and LPG subsidy of Rs.
17 billion in 2009, total of Rs. 27 billion (US$ 0.6 billion)Kerosene and LPG under-recovery of Rs. 458 billion (under
pricing) in 2009 (US$ 10.2 billion)
Electricity subsidies are provided by the state governments
and they were approximately Rs. 415 billion (US$ 9billion) in 2006 (IEA, 2007)
Nearly US$ 20 billion per year is available. Major portionof it can be made available as incentives for expanding
energy access.
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A proposal for achieving universalrural energy access
Process of providing access to modern energy for all rural households Energy accessscenario
Implications of the above on energy resources, investments, cost and benefits, andenvironment
Policy and institutional framework required for enabling such a transition
Implementation mechanism and financial feasibilities
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Scenario of universal rural energyaccess
Proposal targets 100% access to modern energy carriers for cookingand lighting by 2030, in 20 years starting from 2010.
The energy needs are to be met with a judicious mix of supply fromcentralized (electricity grid and LPG) as well as decentralizedrenewable energy-based systems (electricity and biogas)
It is assumed that a contribution of 50-70% would be from distributedand smallscale renewable energy technologies
The rate of transition towards universal energy access is expected to beslow at the beginning and to pickup towards the end.
Expanding rural energy access through decentralized energy systemswould be based on market principles by adopting a public-privatepartnership driven business model approach
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Scenario of universal rural energyaccess
2010 base year status is established by projecting the 2005 data usingpast growth rates in access levels.
As in 2010, the total rural households are 165 million (based on UNPD,2008, Census, 2001). Out of these, 25 million have access to moderncooking fuels and 106 million to electricity.
By 2030, the total rural households predicted to grow to 188 million.The scenarios track providing access to 163 million households for
cooking and 82 million for lighting.
Data from various secondary sources as well as few relevantassumptions were used to estimate the implications of providinguniversal rural household energy access
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C 2030
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Cooking energy access: Implications by 2030
Total annual energy requirement of 10 million tonne ofLPG and 34 billion m3 of biogas
Soft biomass (dry) requirement of 67 million tonne(potential 300-600) and cattle dung (wet) requirement of355 million tonne (potential 450).
Total investment over a period of 20 years is Rs. 870 billion(US$ 19 billion) and annual recurring cost is Rs. 230
billion (US$ 5 billion).
Annual GHG mitigation potential of 190 million tonne
(including 37 million tonne of avoided emission of CH4from cattle dung)
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R l l t i it I li ti b 2030
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Rural electricity access: Implications by 2030
Total annual energy requirement of 23,000 GWh Incremental requirement is about 5,500 GWh (3,300 GWh from grid and 2,200 GWh
from distributed systems) Additional installed capacity of 7,000 MW (4000 MW grid and 3000 MW
distributed). Incremental lifeline energy requirement of 25,000 GWh is possible with this capacity.
Woody biomass requirement of 12 million tonne (potential
> 400).Total investment over a period of 20 years is Rs. 760 billion(US$ 17 billion) and annual recurring cost is Rs. 55
billion (US$ 1.2 billion).Annual GHG mitigation potential of 21 million tonne (with
lifeline consumption)
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U i l R l E A
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Universal Rural Energy AccessFor cooking and lighting
Total annual energy requirement of 1,300 PJ
Total investment over a period of 20 years is Rs. 1,650billion (US$ 37 billion)
Total annual recurring cost is Rs. 236 billion (US$ 5.2billion).
Annual GHG mitigation potential of 213 million tonne
Average GHG abatement cost of Rs. 1,830/tCO2e (US$41/tCO2e)
Lighting access is about US$ 205 per household
Cooking access is about US$ 120 per household
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Inp ts for Polic /Instit tional frame ork
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Inputs for Policy/Institutional framework
Policies are in place to enable such a transition, howeverthey are fragmented.
The need is to integrate these and create a national ruralenergy access policy focusing on household electricityand cooking energy.
Ensuring compatibility of CDM projects to national
development priorities.Establishment ofenergy access authorities, both at thenational and state levels.
Creation ofenergy access funds with plan grants as well asbudgetary support. Transferring energy subsidy amounts
to this is crucial.Transforming RGGVY franchisees in to rural energy
enterprises.
National &StateGovernments
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Similar to RGGVY withexpanded scope
More stakeholders Energy access authorities Energy access funds Business principles Entrepreneurs instead of
franchisees Carbon markets
Implementationframework
Governments
Create
National Rural EnergyAccess Authority
Regulatory
policies
StakeholdersFinancial institutionsEnergyOrganizationsTechnical organizationsDonor agenciesIndustriesNGOsGovernment ministries
Energy access fund
Energy subsidiesBudgetary supportDonor funds
Regional energy
access authorities
Entrepreneurshipdevelopment
programs
Regional energy
access funds
Capacity buildingprograms
Entrepreneurs
Micro-enterprises
Energy services
ESCO/Intermediary
Rural
households
Carbonmarkets
Micro-enterprise for energy services
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Financial feasibility of Enterprises
Bio-methanation for cooking energy accessBiomass Gasifier and CFLs for lighting andlifeline energy access
A bundling intermediary (ESCO; Energyservice company) for accessing carbonmarket
Bio-methanation enterprise
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Bio methanation enterprisel Village with 200 households requiring 200m3 capacity biogas
plant/s.
l Total new investment (biogas plants, distribution system & stoves)is Rs. 1.6 million annual O&M cost of Rs. 0.21 millionl CO2e mitigation per year ranging from 214 415 tonnel A micro-enterprise model with equity contribution of 20% and a
soft-loan at 6% interest rate and a repayment period of 5 years.
l A profit (from carbon trade) sharing arrangement with ESCO with98% for enterprise and 2% for ESCO.l Household repayment of Rs. 20,000 (@ Rs. 100/HH/Month).l At present CER rates of US$ 20/tCO2, the enterprises will be able
to make only marginal profits during the repayment period and this
is expected to improve substantially after 5 years.l Government to provide incentives to increase profitability of the
enterprises from energy access fund.
Biomass gasification enterprise
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Biomass-gasification enterprisel Five villages with 1000 households requiring 65,000 kWh/year for
basic lighting with efficient technologies.l For economies of scale, a 100 kW biomass-gasifier is proposed
with a generation potential of 530,000 kWh per year.l Remaining 465,000 kWh will be used for other end-uses and
productive livelihoods at higher tariff.l Total new investment is Rs. 5.0 million and annual O&M cost of
Rs. 0.35 million and input fuel cost of Rs. 1.6 million and samefinancial arrangements as that bio-methanation enterprise.
l CO2 mitigation potential per year is 581 tonne assuming grid asthe competing option
l Differential tariffs for various end-usesl At present CER rates, the enterprise would be under loss during
the first 5 years and making significant profits afterwards.
Profitability measures
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Profitability measures
Enterprises Biogas-Dung Biogas-Biomass Biomass
Gasifier
Entrepreneurs
IRR 39% 14% 25%
NPV (Rs.) 1,730,000 315,000 3,300,000
ESCO(Intermediary)
IRR 69% 47% 86%
NPV (Rs.) 12,260,000 14,700,000 9,300,000
Enterprises 125 225 75
Conclusion
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Conclusion
l Climate change mitigation linked energy access expansion
programme has multiple benefits; monetary, social/ethical,compliance, etc.
l Resources are more than adequate US$ 24 billion/year versus an investment of US$ 37 billion and expenditure
of US$ 5.2 billion/year
Energy resources Requirement is less than the prevailing biomassconsumption
l Policies and Institutional mechanisms are already availablel Only suggestion is that the energy governance should include the
demand-side dimensionl Mitigation of black carbon emission is a major plusl 600,000 micro-enterprises; 2 million employment and 4,500 ESCOs
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THANKS