chapter  7
Economics of Village Line Extension
WithDouglas F. Barnes
Pages 23

The cost of the electricity delivered to the project must be added to the capital cost of line extension for estimating overall costs. In the United States, for example, the relatively slow growth of rural consumer demand, combined with the high expense of rural grid extension, prompted Franklin Roosevelt in 1936 to sign into law a bill authorizing subsidized loans for rural electrification. Most studies on rural electrification have found that it has positive economic rates of return once productive uses are taken into account. All incremental economic benefits, such as improved agricultural and industrial development, could be added to household revenue to calculate a project's economic rate of return. Comparing these options may seem like mixing apples and oranges, but some type of comparison of the financial and economic benefits is necessary. The 1980s benefit-cost study in India introduced an interesting twist to estimating the financial and economic costs and benefits of rural electrification.