Electricity reforms on government’s agenda
- Cabinet may consider landmark bill to reform the power distribution business
The Union cabinet may shortly consider the landmark Electricity (Amendment) Bill, 2021, to reform the power distribution business and make it more competitive.
Post the cabinet’s approval, the bill is expected to be introduced and voted upon in the monsoon session of Parliament that begins on Monday.
Speaking at a conference organized by lobby group Confederation of Indian Industry (CII), power and new and renewable energy minister Raj Kumar Singh said all stakeholders, including the states, industry and the ministries, have been consulted over the proposed amendments.
“We have consulted the ministry of law. Now, it is final, so we have proposed it to be taken up in the cabinet,” Singh said.
“It also has a provision for delicensing distribution, which again is a major reform. And which I think should happen. We have consulted with all the states and no state has raised any objections. Why should they? Because we are not tampering with their present distribution companies. They will continue functioning as they are. But, because we are de-licensing it, other people will have the opportunity to come and compete. Which is as it should be,” Singh added.
Prime Minister Narendra Modi earlier said electricity consumers should be able to choose their supplier like they do with any other retail commodity. With the distribution companies being the weakest link in the electricity value chain, the Union budget presented earlier this year announced the creation of a framework to allow consumers to choose their electricity suppliers.
Experts said issues related to high levels of cross subsidy, losses and poor infrastructure will also need to be resolved. “Success of de-licensing or retail competition will critically depend on its ability to address the core issues relating to (a) the high level of cross subsidies in retail tariffs; (b) inefficiencies in the form of T&D (transmission and distribution)/ AT&C (aggregate technical and commercial) losses; and (c) poor state of T&D infrastructure,” said Debasish Mishra, partner at Deloitte India.
“Imposition of restrictions to address existing tariff distortions (to avoid cherry picking) and/or imposition of universal supply obligation on new suppliers despite having 100% access would defeat the objective of creating an industry structure which is driven by market forces,” he added.
The bill has been in the making for some time now, and also proposes appointing a member with legal background in every electricity regulatory commission and strengthening the Appellate Tribunal for Electricity (Aptel).
The bill also spells out penalties for any failure by power distribution companies to meet renewable purchase obligations. Discoms are required to buy a fixed amount of renewable energy to reduce the ereliance on fossil fuels.
“The people need choice. If one distribution company is not performing well, if its service is not up to standard, they should have a choice to switch companies -- to a company which gives better service. So, this will happen,” Singh added.
The long-discussed plan has its origins in an earlier proposal for separation of the so-called carriage and content operations of discoms. Carriage refers to the distribution aspect and content to power itself.
In addition, the Electricity (Amendment) Bill also lays down the rights and duties of electricity consumers, as the government plans to ensure round-the-clock supply to consumers across the country.
While India has an installed power generation capacity of 383.373 GW, the demand has usually been lower than 200 GW. However, this changed on 7 July when India’s peak electricity demand breached the 200 GW mark.
“We have a growing economy and demand has crossed 200 GW,” Singh said, adding, “Our demand is substantially more than what was in the peak covid times. The demand will grow and it will grow rapidly.”
India’s electricity demand has been growing, with state-run NTPC Group companies achieving over 100 Billion Units (BU) of generation in the current financial year. In comparison, the group crossed this 100 BU mark on August 7 last year.