Nairobi — The Government has reduced electricity connection charges for rural areas by more than half, aiming to spur growth of small business and boost living standards.

The new charges that Energy minister Kiraitu Murungi said will come into effect immediately, will see rural businesses pay a deposit of Sh5,000 and clear the balance of Sh10,000 in 10 monthly instalments.

Domestic consumers will pay a deposit of Sh15,000 and clear the remaining bit of Sh19,980 in 12 monthly instalments.

This is a significant reduction from the previous rates that required commercial and domestic consumers in the rural areas to pay Sh15,000 and Sh34,980 respectively to get connected to the national electricity grid.

The connection charge reduction is expected to increase the pace at which Kenyans get electricity access in the rural and peri-urban areas and double the penetration rate in this segment of the population.

Mr Murungi reckons that the increased connection on the rural front is part of a broader plan to wire at least half of the country and accelerate the rate of economic growth.

"This programme aims at enhancing economic growth in the rural areas since the beginning of all development is light," he said.

Higher electricity coverage is also seen as a key plank in the government's long term development plan dubbed "Vision 2030." The new connection initiative is expected to help double the country's electricity penetration rate to 20 per cent in the next three years and to 40 per cent by 2020 with rural areas as the focal point.

With only 10 per cent of its population having access to electric power, Kenya stands among countries with the lowest rates in the world -below those of other developing countries such as Ecuador and Jamaica where rates stand at 37 per cent and 46 per cent respectively.

The situation is worse in the countryside where the connection rate stands at below two per cent despite accounting for close to 75 per cent of the country's population.

Access to electricity is expected to have major ramifications on the rural economy that has continued to lag behind the urban side.

"With increased electricity coverage, we expect a boom in the small and micro enterprises that forms a good base for employment generation," Mr Jacob Omolo, a research fellow at the Institute of Policy Analysis and Research (IPAR)- a local think tank, said.

The micro sectors that look poised to get a facelift include the mechanical, services and agro based manufacturing, which is concentrated in urban areas despite although they get their raw materials from rural areas.

Mr Omolo added that the levels of unemployment in the rural areas remain higher than in urban areas, arguing that the few that are employed on average earn 27 per cent less than the minimum wage of Sh5, 395.

This has contributed to widespread poverty among the rural household as more than 50 per cent of the rural dwellers live below the poverty line compared to about 33 per cent of urban dwellers.

The steep decline in urban poor, which dropped from 52 per cent in 2000, has been attributed to the robust growth in the informal sector that added more than three million jobs into the job market, but lack of infrastructure, including electricity, has hampered growth of the sector in rural areas.

Though the government has in the past four years pumped in billions of shillings fixing the agriculture sector, which is the bedrock of rural economy, the battle against poverty has been slowed by the number of rural Kenyans lacking access to food in the villages.

But the acceleration of rural electrification is set to boost production in sectors operating in rural areas as well as add jobs to the rural economy.

The move is likely to stem the growing tide of rural dwellers flocking to urban areas in search of employment, which poses a headache to policy planners who fear the explosion of urban population could threaten the country's social and economic fabric.

The expected surge in the rural economy is also set to boost the country's ranking under the human development index ,where Kenya is ranked at 152 out of 177, a fact attributed to widespread poverty among rural households.

The new drive also comes as a boost to Kenya Power and Lighting Company (KPLC), which has pegged its stay on the recovery path on growing its revenues through increased connections as the firm's costs continue to spiral upwards.

"Our strategy is to boost our sales volumes by connecting more Kenyans to the grid in a convenient manner," Mr Don Priestman the chief executive officer of KPLC said in an earlier interview.

In the six months to December 2006, KPLC increased its customer numbers from 802, 200 to 866, 000, - a 16 per cent growth. This surpassed the target for the period, which had been set at 49, 500 customers.

The company has committed itself to connecting 120, 000 customer per year over the next three years.

The fast tracking of connection of more customers into the power grid comes at a time when the demand for power is putting a strain on the country's generation capacity.