Elasticities of electricity demand in India

The paper examines econometric relationship between electricity consumption and variables like, income, price of electricity and diesel (used in for captive power generation to meet the shortages), and reliability of power supply from utilities in five major consumer categories in India. These categories are, residential, commercial, agriculture, small and medium industries, and large industries. Income and price elasticities of electricity consumption are estimated at the national level for these consumers by pooling data across 19 states spread over 9 years (1985/86-1993/94). The results show that electricity consumption in commercial and large industrial sectors are income elastic (>1), while residential, agricultural and small and medium industries are income inelastic (<1). The short-run price elasticities vary from - 1.35 in agriculture, - 0.65 in residential, - 0.45 in large industry, - 0.26 in commercial and insignificant in small and medium industry. Total power shortages from utilities affect most the commercial sector followed by the residential sector. (C) 1999 Elsevier Science Ltd. All rights reserved.