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States have to set house in order to meet rising power demand: Official
On December 16, 2021, the government said it would drop at least four major clauses from the draft bill based on objections from stakeholders, including the farmers, state-owned distribution companies and power utility staff associations.
The Electricity (amendment) Bill, 2021, through which the government intends to bring sweeping reforms in the country’s power sector, is still at a “decision stage”, Union power secretary Alok Kumar has told HT, adding that states have to set their house in order to meet India’s growing power demand.
He also said the government is going to include additional minimum area clauses and cross subsidies in the draft Bill to avoid “cherry picking” by private distribution companies (Discoms) and generation companies (Gencos).
“The power minister has also told the Parliament also that there is a need for reforms. States have been consulted and it is still at a decision stage. The government has to decide on the exact provisions of the law,” Kumar told HT.
The Bill was first released by the Ministry of Power for public comments on April 17, 2020.
On December 16, 2021, the government said it would drop at least four major clauses from the draft bill based on objections from stakeholders, including the farmers, state-owned distribution companies and power utility staff associations.
The Centre dropped the clause of direct benefit transfer (DBT) on power subsidies from the proposed bill besides doing away with the provision for creating a new ‘Electricity Contract Enforcement Authority’ that was supposed to adjudicate on contracts among others.
The DBT clause saw a lot of criticism from the farmers who are given subsidies on electricity by many state governments. But despite these changes to the draft Bill, there remain several other provisions which the government is currently reviewing, which essentially means that it will take longer than expected for the bill to be introduced in Parliament.
Kumar said the government is still reviewing all the suggestions and objections received by various states and adding necessary clauses to provide a level playing field for private as well as government discoms and gencos.
“States have suggested that cherry picking should be avoided. Cherry picking means if you open up a private sector, they will only pick up or put terms for the big consumers. The states have asked not to allow cherry picking as all the loss making areas or the poorer areas will be left to the government companies. But, we are addressing this by adding minimum area clauses and through cross subsidy and other various obligations,” he said.
Explaining the need for the amendment bill, Union power minister RK Singh on December 9 told Parliament that the condition of most state government-owned power discoms was a matter of “grave concern” as the combined revenue losses had climbed up to ₹5,07,416 crore.
“Discoms have not been able to pay the generation companies for the power procured, and the outstanding payments to generation companies are estimated to be in excess of ₹1,56,000 crore. The outstanding dues to renewable generators are around 11 months of revenue,” Singh had said in a written reply to the Lok Sabha.
Kumar, however, said that if seen in per unit terms, the dues are reducing. “In absolute terms, the dues are increasing. But in per unit terms, the dues are coming down. If you see the average cost of supply (ACS)-average revenue realised (ARR) gap, it looks high. But the per unit cost is coming down. Say there is an improvement in the profitability or lesser losses you can see in the per unit cost. But since the energy supplied is also increasing, therefore, in absolute terms we are seeing a marginal increase,” he said.
“Non payment of dues is the central issue in the power sector because if gencos are not paid, they will not be able to buy coal, get it transported, and pay to their banks. Ultimately, they will have to regulate. In our Revamped Distribution Sector Scheme (RDSS), we have put a pre-qualification that the genco dues in terms of outstanding days must come down as per the agreed trajectory. That is the biggest intervention by the power ministry to reduce the ACS-ARR gap. Suppose somebody has 120 days of outstanding, so they have to bring it down to 45 days in about 4-5 years as per the agreed trajectory and we believe that this precondition will help us bring down the genco dues,” Kumar said.
