Cooperative Models - Lessons from Around the World

From energypedia


Key Messages:

  1. The cooperative model was pioneered in the United States having since been replicated in several developing countries around the world with the US model as the basis for replication.
  2. In the US, Bangladesh and Nepal the model has been successfully used to increase electrification rates, reduce theft and improve fee collection rates.
  3. In the Philippines and India cooperatives have been affected by political interference which has reduced their capability to function effectively.

The United States: A Forerunner in Cooperative Rural Electrification

The model of community based rural electrification originally stems from the US and was established in the 1930’s. By 1935 rural areas in the US faced similar problems compared to rural areas in developing countries today with an electrification rate as low as 12.6%. With utilities similarly unwilling to engage in rural electrification due to its perceived low profitability a new model had to be established. This was the birth hour of rural electric cooperatives in the United States which soon proved to be an extraordinarily successful approach. With strong backing from public authorities, electrification rates soon soared up and within a period of 20 years electrification rates in the rural United States increased by more than 80% to 94.4% in total[1].
Initially, as the basis of the US model, a rural electrification administration was established in 1935 which had the task of providing funds to a variety of borrowers including cooperatives[2]. However, with time cooperatives essentially emerged as the REA’s main borrowers and became the main competitors of private businesses who had at first rejected any involvement in rural electrification[3]. Feeling threatened by this rapid development and spread of cooperatives utilities and private companies soon showed more interest in engaging in rural electrification but only focused on electrifying those areas in the countryside that contained the highest earners leaving the poorer areas to cooperatives. This posed an additional challenge which, however, did not squander the success of cooperatives. Instead cooperatives proved extremely effective in rapidly repaying their loans and achieving financial self-sustenance[1].

Once financial independence from the government was achieved cooperatives additionally formed the Rural Utilities Cooperative Finance Corporation to strengthen their independence further[2].
Initially, however, the REA acted as the financing institution for cooperatives in the US. Having to borrow money itself from the Reconstruction Finance Corporation the REA’s funds were rather small with 50 million in 1936 and 40 million a year during the five subsequent years. Therefore, no significant subsidies could be provided to cooperatives and the REA acted as a middleman providing the same money it had borrowed as loans to the cooperatives. These had to repay them within a timeframe of 25 years which could, however, be extended by a further 5 years in some cases. In order to ensure that these loans could be repaid the first cooperatives focused on villages with a high number of middle-income farmers whereby poorer families living in the area also benefited from their inclusion. Additionally a membership fee of 5 USD was charged in every cooperative and the costs for wiring of houses were carried by the consumers themselves, although spread out over time by adding an additional 10 cents to the monthly electricity bill. Poorer farmers could trade in their labor by aiding in physically constructing the distribution lines and were thereby exempted from having to pay the initial membership fee. The construction was, however, supervised by experts from the REA who also offered their expertise for the initial planning of the distribution network. Moreover, the REA also assisted in the operation and maintenance of the system, supervised the operations of the cooperatives and sponsored road shows to educate people in non-electrified areas about the benefits of the system[1].

The cooperatives themselves are 100% owned and operated by consumers and function according to democratic principles, meaning that membership is open and voluntary and that members have the right to elect representatives which will form the board of the cooperative[4]. These representatives then have the right to appoint a manager of the cooperative which, however, has to be approved by the REA. Furthermore, the day-to-day business of the cooperatives is handled by a permanent staff of 7-20 members[1].

Employing this model has proven greatly beneficial for the US rural electrification effort and had led to almost complete electrification of rural areas, 99%, by 1970 which was almost entirely due to the more than 900 cooperatives operating in the country[5]. Reasons for this success are multifaceted but the most important factor underlying the successful functioning of cooperatives in the US seems to be the great degree of local ownership (Box 1.1.1). Due to this success the US was also involved in the establishment of many other rural electric cooperative systems around the world and many were closely modeled according to the American predecessors, e.g. the Philippines, Bangladesh.

Box 1.1.1 Rural electric cooperatives in the US today: System, Challenges and Successes – an NRECA inside
Trying to explain the success of cooperatives in the United States and achieve a better understanding which factors underlie a functioning cooperative model an NRECA staff member was interviewed, presenting his insights.

1. What are the underlying success factors of the cooperative model in the United States?

“The most important factor is that everyone has an investment stake in the business. Since everyone has invested and is a part-owner of the cooperative everyone also has an incentive to maintain it.”

2. What are the greatest challenges that cooperative in the US have been faced with?

“Initial financing is always and generally a problem. In the US this challenge was overcome because a partnership between the federal government and the cooperatives existed making it possible for them to access sufficient funds and repay them over time.”

3. How did cooperatives achieve financial viability?

“Once initial financing has been provided and a cooperative has been established the board of directors set the electric rates helping them finance their loans over time.”

4. What has the role of the state been in achieving these successes?

“A good relationship with the government and strong institutional support has been the main important factor. The most important part of this relationship is for the state to provide initial financing.”

5. After the initial stages, what role does the state play today?

“A number of cooperatives still borrow money from the state today to update and develop their technical equipment. A department within the agricultural ministry provides loans today which have to be repaid over time.”

6. What are the advantages of engaging cooperatives in rural electrification?

“A good example to explain these advantages is Bangladesh. There the relationship between end users and the cooperative is much stronger than between end users and the utilities. Power thefts can be better avoided. The sense of responsibility towards the own community is much stronger than towards some far away business.”

7. Considering NRECA’s involvement in establishing cooperatives in many developing countries what are the most important preconditions and challenges in these countries?

“At the base a cooperative is a democratic institution. So understanding democratic principles and the economic participation of all members is important. Another core issue is the need to have access to capital. In most developing countries the greatest challenge is that this understanding of democratic participation and understanding of the business model within the government is lacking. There is also a lack of access to financing and technology and people who are technology savvy enough to maintain the equipment”

Bangladesh: An Asian Success Story

One of the first rural electrification programs to be established in Asia was the one in Bangladesh initiated in 1976 and financially supported by USAID[2]. Since then cooperatives had provided access to an additional 20 million customers by 2004 with a yearly average connection rate of 390000 connections. This means that more than 1000 customers were connected to the grid on a daily basis. Still by 2004 only around 15% of the population in rural Bangladesh had access to electricity and it was estimated that this number would not increase to more than 22% by 2010 despite the fact that Bangladesh had set universal electrification as its target for the year 2020[6].

Similarly to the US model a rural electrification agency was first established in Bangladesh called the Rural Electrification Board (REB). The REB became fully functional in 1977 and began to cooperate with rural communities in order to establish rural cooperatives, Palli Bidyut Samities (PBS). Thereby the REB identified the areas to be electrified and assisted in the initial organization of the PBSs by providing trainings for future staff. It also provided assistance in the procurement of funds as well as in liaising with the main utility and other important stakeholders. Today more than 70 PBSs employing over 16.000 people exist in Bangladesh.

As in the US, the cooperatives function according to a democratic principle with members participating in the decision-making process through electing representatives. These representatives are elected to the board of the cooperative. Unlike in the US, however, the managers of the cooperative are appointed by the REB and not by the board of the cooperative. The REB also reserves the right to dissolve the board at any point in time. Board members are not paid and only receive a small financial remuneration for board meetings[7].
With regard to the tasks of the cooperatives, each of them is responsible for their area which is separated from other areas by the REB. Within these areas every cooperative has the freedom to draw up their own electrification plan suited to the needs of their respective area[8].

Financially, the PBSs are not as independent as the US cooperatives receiving long-term low interest loans from the REB. Usually these loans are provided over a 30 year period with a five year grace period regarding the repayment and low interests of 3% over the repayment period itself. The cooperatives do not retain or control the operating margins but immediately transfer any profits to the REB for the repayment of their loans[7]. In order to ease the repayment of loans households have to contribute a membership fee upon joining the cooperative, pay a security deposit and bear the costs for the wiring of their own house in addition to their monthly electricity bills[6].

Apart from providing the loans the REB also supervises the financial management of each PBS by approving the tariffs, which are set individually by each PBS. Thereby it allows for the existence of cross-subsidies[8]. These cross-subsidies are usually based on higher costs being charged to industrial and commercial consumers to lower the costs for agricultural and domestic consumers. The principle of “cross-subsidization” also exists on a larger scale in the form of a revolving fund to which financially better off cooperatives contribute to subsidize those that perform weakly[6]. In order to monitor the effectiveness of these measures and establish which cooperative belongs to what category the REB more generally monitors the financial sustainability and management effectiveness of the PBSs. While this is not supposed to compromise the autonomy of the PBSs it still provides the REB with a means of holding PBSs accountable. Accountability is also achieved using other measures, e.g. annual performance targets. These commit cooperatives to increase their revenues and decrease their system losses by certain rates as well as to increase the number of new connections. PBSs will then be penalized in case of not meeting the targets or rewarded for the opposite[8]. Generally, bonuses can be as high as a 15% salary increase if all the targets are met while penalties amount to a deduction of at most 1% from existing salaries[6].

In the case of Bangladesh cooperatives are increasingly becoming more financially independent due to an increased reduction of operating costs as well as a reduction of subsidies provided by the REB (subsidies are provided by the REB to help attract more consumers and thereby increase the financial viability of cooperatives). Moreover, distribution assets owned and operated by the state-owned utilities are increasingly being transferred to the cooperatives with great success [8] [2].

The cooperative model in Bangladesh has shown great successes increasing the amount of electrified villages, obtaining high collection rates (96%) and reducing distribution losses (16% while the national utility has losses of 30-35%)[8]. More needs to be done, however, in further reducing the large amount of people in rural areas that are still without electricity.

Nepal: Pursuing a successful bottom-up approach

In 2002 the Rural Electrification Agency in Nepal (NEA) first encountered problems realizing that it was not possible for them to mobilize capital for rural electrification as well as control the theft of electricity. Therefore, the community electricity byelaw was passed in 2003 which allowed for rural groups to buy electricity in bulk from the utilities and retail it amongst their own users[8].

Differently from the approaches pursued in Bangladesh and the US, the NEA does not define areas in which electrification would be viable and assists in the establishment of rural cooperatives in these areas. Instead the rural communities first need to establish legal entities on their own which have to be registered at district level and then have to apply for governmental financial assistance. Only after this process has been finalized will it be the task of the Community Rural Electrification Department (CRED), which is part of NEA, to initiate a survey as well as develop a cost estimate for grid extension[9].

The government of Nepal also only covers 80% of the costs regarding grid extension and the communities finance the remaining 20%. This 80% government contribution will only be provided once the 20% community contribution has been transferred. In many cases, however, it is not possible for communities to provide this contribution making the assistance of international donors imperative[10].

Donors also support the NEA in providing trainings which equip community members with the necessary knowledge to operate and maintain as well as financially manage a local cooperative. A problem that has hereby been noted, however, is that in many cases community members participate in trainings provided by the NEA to acquire technical knowledge which they can then use to find better paid jobs in the city[8]. While this is detrimental to the development of a functioning cooperative the side benefit of increased education and improved job opportunities for individuals remains.

Apart from providing trainings the NEA also plays a significant role as the owner of the distribution assets which are consequently leased by the community organization. It also provides technical support by upgrading overloaded transformers and testing meters. This means a great extent of dependence upon the NEA which is further demonstrated by its key role in monitoring the performance of cooperatives. These have to report once a year to the NEA with the cooperative which has achieved the best results throughout the year being rewarded by the NEA[7].

While the NEA therefore also wields a larger degree of power over the functioning of cooperatives than government agencies in the US, the cooperatives have also carved out a path to assert political influence through the foundation of the National Association of Community Electricity Users (NACEUN) which, despite providing support to its members, also focuses on national level policy advocacy (Box 1.1.2).

Institutionally, the cooperatives in Nepal are run in a similar way to those in Bangladesh. Generally, the board of the cooperative is again democratically elected. The board of the cooperative only has a few members, however. Taking one of the largest cooperatives in Nepal, a cooperative in South Lalipur, as an example, the board can be seen to consist of four members only; a chairman, a vice-chairman, a treasury and a secretary who is the only full-time paid employee of the cooperative. In addition, an engineer, two overseers and a variety of technicians as well as one social mobilizer are further employed. The social mobiliser is mainly responsible for the collection of payments as well as consulting the customers on how timely payment can be achieved. While in the majority of cases timely payment is hardly ever achieved, the cooperative still has a much higher fee collection rate than the NEA and has proven significantly more efficient in this regard[8].

Overall, there are more than 200 cooperatives in Nepal and the concept has proven to be similarly successful as in Bangladesh. Cooperatives in Nepal have achieved similar results ranging from speeding up access to electricity and other services due to the proximity of technicians leading to a higher fee collection rate as well as reducing system losses by reducing thefts and improving the productive use of electricity[11] [8].
Productive use which is important for utilities to balance demand during the daytime and in the evening and further increases the income of cooperatives since higher tariffs are charged for commercial applications is supported by the cooperatives through the extension of their portfolio of services to further provide micro-finance loans[8].

Box 1.1.3 NACEUN: Promoting cooperative interest in Nepal

Explaining the success of cooperatives in Nepal similar factors as in the United States seemed to have contributed to making them a successful model for rural electrification. According to a staff member of NACEUN “investments by the community make them feel responsible for cooperatives and their equipment and ensure that they will look after it. As a result national utilities report electricity losses of 30-40% whereas cooperatives only report losses of 10-15%.”

NACEUN and local rural leaders play an important role in making this success happen. “Initially leaders in the community take the initiative to get villages electrified and educate people about the possibilities of establishing a cooperative. Although their motives are mainly political they play an important role in motivating and educating communities since there is no information from the government regarding their opportunities and everything happens through mouth-to-mouth propaganda. Motivation on the community side is also important. If this motivation is there it really does not matter if cooperatives are established through top-down or bottom-up procedures.”

“Once these initial steps have been taken NACEUN plays a very important role in explaining the rules to people and assisting them, e.g. with financial applications. NACEUN also lobbies for the cooperatives. One example of when lobbying was necessary was when poles made of wood were used in some villages which had to be replaced after 10 years due to the material. The NEA then did not want to invest 80% of the initial costs again but lobbying by NACEUN convinced them to do so in the end. Lobbying is also important since virtually no relationship exists between cooperatives and the NEA. The head office of the NEA is in the capital and only few rural offices exist. It takes too much time and money for people to come all the way to Kathmandu if they need to complain about something. So NACEUN lobbies for them. Recently the NEA has tried to improve its service though and wants to open more branch offices in rural areas but there have been many delays in setting up these offices.”

In spite of the support of NACEUN and attempts by the NEA to improve existing conditions cooperatives in Nepal still face many challenges. “The greatest difficulties cooperatives in Nepal face are a lack of public awareness, for instance. People have limited knowledge about what cooperatives do and are therefore very skeptical about them. There are also many legal issues and constant government changes. Different governments have different ideas so there are no consistent policies. On top of that economic and geographical issues exist. People in rural areas are very poor so it is difficult for cooperatives to come up with the initial 20% investment. This also makes sustaining them harder since the industry is not very well established in these areas and household consumption is not high enough. Geographically, Nepal is a very mountainous country and getting connections to communities far away in the mountains is very challenging. Still grid extension has so far been the best option since off-grid solutions are very expensive in Nepal. But recently first projects with off-grid models have also started.”

The Philippines: Learning a Lesson about the Effects of Pervasive Political Interference

The rural cooperative program in the Philippines was Asia’s first and largest cooperative electrification program which was initiated in 1968 with the help of USAID. Similarly to the programs established later on in other Asian countries it was based on the US model and was established with the assistance of NRECA, the association of rural cooperatives in the US[2]. In the early stages of the program the electrification rates of the entire country were considerably low with only 18% of the entire population having access to electricity. In rural areas this figure was even lower at around 8%[1].

In order to drastically increase these figures, an approach similar to the US rural electrification program was developed starting with the passing of the National Electrification Administration Act which set as the national policy objective for the Philippines to achieve universal electrification through the use of electricity cooperatives[1]. To achieve this objective, a rural electrification agency, the National Electrification Administration (NEA), which became responsible for the development of the cooperative program, was established. Unlike in the US, therefore, cooperatives were the sole implementing institution and the NEA only provided funding to the latter rather than to other businesses as well[12].

Today there are 119 cooperatives in the Philippines. Their boards are democratically elected and managers are appointed by the NEA as in the majority of other cases.
Financially, the cooperatives in the Philippines are also dependent on the support of the NEA. Despite providing loans, the NEA also assumes responsibility for ensuring that cooperatives can cover their loans by constantly monitoring and supervising their performance. In the past it has thereby decisively responded to problems, e.g. in rapidly suspending managers that had embezzled cooperative funds [7] [1]. While this is consistent with the tasks of rural electrification agencies in other Asian countries, the tariff setting process in the Philippines differs greatly by neither involving the NEA nor the cooperatives. Tariffs are set by the electrification commission which operates independently of both of them and also sets the service standards[13]. This complete absence of cooperative involvement in setting the tariffs has often been criticized as one of the factors contributing to the relatively poor financial performance of cooperatives in the Philippines. Yet, other factors have also contributed to impeding the successful function of the cooperative model.

Historically cooperatives have had to deal with many problems including a lack of political independence and corruption. A World Bank audit performed in the 1980’s found that the performance of the cooperatives in the Philippines had worsened due to an increasing degree of corruption within the NEA and the cooperatives as well as weakening oversight by the NEA. Many also saw the cooperatives as a stepping stone to higher political offices and were selected to become managers based on this foresight. During this period fee collection rates dropped to 52%[2].
Apart from illustrating the importance of the political independence of cooperatives and the NEA the historical experience of cooperatives in the Philippines has also demonstrated the importance of strong leadership within the cooperatives as well as the importance of the NEA to also fulfill the role of a supervisory body with regard to the cooperatives. Strong leadership has thereby played a prominent role due to 22 out of the 119 cooperatives in the Philippines that still remained functional despite thriving in an environment of political corruption which was largely attributed to the professionalism of their management personnel.

To remedy the worsening situation of cooperatives donors like the World Bank and USAID pushed for reforms of the NEA and the restoration of professionalism within the cooperatives which led to the restoration of the cooperative system as such as well as the renewed improvement of the performance of the cooperatives[2]. To avoid such pitfalls in the future the NEA also decided to increasingly provide trainings to board and staff members of the cooperatives emphasizing the “ethic of the public service” in order to counteract possible corruption within the cooperatives. In cases where this is suitable it integrates religious leaders into the trainings in order to re-enforce its message[1].

Despite these improvements, however, many cooperatives still suffer from poor operational performance and a general lack of capital[14]. With more than half of all cooperatives in the Philippines today experiencing financial difficulties this results in unstable electricity supply in many rural areas [15][14]. Unlike in many other Asian countries cooperatives have also not been able to increase collection efficiency or reduce theft significantly and are lagging behind private companies which have also become engaged in the rural electrification business. Reasons for this are manifold and include, as mentioned, the absence of cooperative involvement in the tariff setting process as well as the general lack of funding available to both the NEA and rural electric cooperatives. An additional factor that also takes its toll on the performance of cooperatives is the general lack of ownership. While the physical assets installed by the NEA are transferred into the ownership of cooperatives once loans have been repaid cooperative members do not fully own their own cooperatives. This is due to a current policy which limits the amount of shares consumer members can hold in their own cooperatives turning cooperatives into a quasi-NEA owned entity and resulting in cooperatives working like public service entities rather than private businesses[15].

The numbers confirm these problems. Cooperatives in the Philippines accomplished the provision of electricity to an additional 4.5 million Filipinos within 35 years since their foundation[1]. While this is not a small number it only represents a tiny fraction of the over 100 million large Filipino population and is not comparable to results achieved in the US or Bangladesh.

India: Diverse Approaches, Diverse Experiences

Differently to the Philippines rural electrification in India is carried out by a multitude of bodies including the state electricity board, privately owned utility companies, state owned utility companies as well as cooperatives. The cooperative model is not a universal model applied in the majority of rural areas in India but has only been adopted by some states. Due to the size of the country state authorities rather than the national government have assumed a prominent role in furthering the rural electrification effort and selecting to which institutions funding should be provided [6]. In most rural areas in which no cooperatives operate the public utilities engage in electrifying rural areas[16].

Apart from only constituting one out of several actors to engage in rural electrification, however, the Indian model shares many commonalities with the Filipino model. The first pilot cooperatives in India were founded in the 1960’s and started operating in 1969. The financial means for the start-up were provided in the form of loans from the Rural Electrification Corporation (REC). Loans were generally given at low interest rates of 3% and long repayment periods of 25 years were agreed. This, however, changed over time and today the REC charges more than double the amount of interest, 7%, and repayment periods have been shortened to 10 years[6].

Many of the cooperatives in India have not been able to pay these loans and have either faced complete bankruptcy or are showing signs of financial trouble. Out of the originally established and licensed 41 cooperatives only 33 are still in operation and many others have also encountered financial difficulties[17]. One reason is that, similar to the Philippines, cooperatives in India are entirely excluded from the setting of tariffs. In most states State Electricity Regulatory Commissions (SERCs) have been set up setting tariffs in accordance with the National Tariff Policy that argues that tariffs should be set based on economic principles[18]. Mostly tariffs are not economically feasible and high enough to ensure that cooperatives remain financially viable[17].

Financial difficulties are not the only problem some of the cooperatives face. Political interference is another factor that has impeded the success of cooperatives in some Indian states. Already the establishment of cooperatives is coined by top-down procedures rather than a bottom-up approach which is essential in ensuring community involvement and ownership, the core of the cooperative model[2]. Political influence is also present during the operation phase of the cooperative, e.g. by not cutting off consumers despite defaulting on payments in return for election favors. This factor contributed significantly to the unsuccessfulness of Cooperative Electric Societies in Madhya Pradesh[19].
Another problem with regard to rural electrification in India was the fact that in order for rural electrification to be successful, the areas in which the latter is implemented already need to be economically developed to a certain degree since there will otherwise be a lack in demand. In India, however, this logic was disregarded and many villages were electrified, yet, no one was connected to the grid in the end due to non-existing demand[20].

Employing a bottom-up rather than a top-down approach could have prevented this failure since the bottom-up approach ensures the existence of demand by relying on the initiative of the community.

Yet, also in India the cooperative model has generated some success stories. The Anakapalle Rural Electric Society in Andha Pradesh is one widely cited example. It was founded in 1974 and took over distribution operations and maintenance from the state electricity board in 1976. Within 30 years after the start of its operations it had achieved 100% electrification in the areas for which it was responsible, was debt free and its operations were profitable [17]. One important reason for this was the great degree of community ownership which was promoted from the beginning onwards by requiring the cooperative to provide 30% of the initial costs for distribution assets[21]. A supportive government framework including provision of sufficient loans by the government to acquire distribution assets and disciplined debt financing also contributed to this success. After the acquisition of existing assets from the state electricity board full ownership remained with the cooperatives[17].

Other successful examples of Indian cooperatives include the Singur Haripal Rural Electric Cooperative Society and cooperatives in the state of Orissa [19][22]).

Institutional set-up Degree of autonomy of cooperatives Ownership of assets Technical Implementation Tariffs Financing Training
United States •Establishment of REA as central lender
• Cooperatives were set up by communities and emerged as main borrower
• Board of the cooperative is democratically elected by consumer
• Politically independent
• Financial independence from government since formation of Rural Utilities Cooperative Finance Cooperation

• REA provides expertise
• Poorer members of the cooperatives undertake the physical construction of the distribution lines under the REA’s experts supervision
• Tariffs set by board of directors of the cooperatives • Loans initially provided by REA
• Loans to be repaid in 25 years
• Almost no subsidies

Bangladesh •Establishment of REB
• Palli Bidyut Samities (PBS) established through cooperation of REB and community
• Board is democratically elected by consumers
• REB appoints managers
• PBSs supposed to act as independent entities and are privately owned
• Financially monitored and held accountable for actions by REB
• Financially dependent on REB
• Distribution assets initially owned by state-owned utilities
• Ownership increasingly being transferred to cooperatives with great success
• Implementation by state-owned utilities • Each PBS individually sets tariffs
• Approval by REB
• 30 years loans at 3% interest by REB
• PBS have to cover O&M costs
• REB monitors financial viability of PBS
• Allow for the use of cross-subsidies
• Initial training for potential future staff provided by REB
Nepal •Establishment of NEA
• Cooperatives founded upon community initiative only
• Board of the cooperative is democratically elected
• Financial dependence on NEA
• No direct political control seems to have been asserted on the cooperatives
• Cooperatives have formed their own association (NACEUN) to advocate their policy interests on the national level
• NEA owns distribution assets • After 20% contribution have been received NEA calls for tenders
• Distribution assets installed by independent contractor
• NEA establishes maximum tariff
• Cooperatives set own tariff within limits of maximum tariff
• Government finances 80% of costs of grid extension
• Community has to finance remaining 20%
• International donors often subsidize 20% share of communities
• NEA provides trainings which are partly funded through donor assistance
Philippines •Establishment of NEA
• NEA developed cooperative programme and funds cooperatives
• Board of cooperatives is democratically elected
• NEA appoints the managers of the cooperative
• In the 1980’s political dependence and corruption within the NEA affected performance of cooperatives
• Reforms led to increasing political independence
• Today cooperatives are only financially dependent
•Cooperatives own all assets
• Lack of ownership of cooperatives
• NEA built initial distribution grid • Tariffs set by Electri-fication Commission
• No involvement of cooperatives
•Cooperatives receive loans from NEA • NEA provides trainings
India • Cooperative model only applied in some Indian states
• REC funds cooperatives
• Cooperatives are founded employing a top-down approach
• High degree of political dependence
• Once loans have been repaid ownership of assets is transferred to cooperatives • Equipment installed by State Electricity Boards (state utilities) • State Electricity Regulatory Commission sets tariff
•Cooperatives are entirely excluded from decision-making process
• REC initially provided 25 years loans at 3% interest rate
• Today 10 year loans at 7% interest rate

Further Information


  1. 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 Barnes, 2005
  2. 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.7 NRECA, 2002
  3. GENI, 2008
  4. NRECA, 2010b
  5. NRECA, 2010a
  6. 6.0 6.1 6.2 6.3 6.4 6.5 USAID SARI, 2004
  7. 7.0 7.1 7.2 7.3 Barnes & Foley, 2004
  8. 8.0 8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8 8.9 Cruickshank & Yadoo, 2010
  9. Bodenbender, 2010
  10. EnDev, 2010
  11. NACEUN, 2011
  12. Foley, 1992b
  13. Grewal et al., 2006
  14. 14.0 14.1 IFC, 2009
  15. 15.0 15.1 ADB, 2009
  16. REC, 2011
  17. 17.0 17.1 17.2 17.3 Kalra et al., 2007
  18. World Bank, 2010b
  19. 19.0 19.1 Ernst & Young, 2007
  20. Foley, 1992a
  21. Karekezi et al., 2006
  22. Harper, 2000