By Munibar Barui
Recently, the Union Government has introduced Electricity Amendment Bill, 2021 in the Parliament. This new bill seeks to de-license power distribution and also provides for other amendments in the Electricity Act, 2003. Nevertheless, members from the opposition and state governments have raised objections to certain amendments proposed in the Draft Amendment Bill.
So, the first question arises that: Why do we need to amend the old bill?
In current context, the distribution of electricity across the country by distribution companies (which are mostly state owned) has remained one of the key areas of concern due to their mounting losses. At the end of June 2021, the DISCOMs owed over Rs. 90,000 crores to power producers. Around 36 out of 56 DISCOMs reported aggregate losses of around Rs. 32,900 crores as on March 31, 2020. So, such mounting losses for DISCOMs has not allowed them the window for more investment to upgrade distribution infrastructure. This results in non-installation of power meters at many places resulting in electricity theft. In the end, any infrastructural investment needs to be done at the cost of high market borrowing and this results in DISCOMS getting trapped in the vicious cycle of debt non-repayment, resulting in increasing arrears to be paid i.e., a vicious cycle of debt. Thus, there is a need to amend the old bill and bring in new clauses to circumvent such issues at hand.
What does the new 2021 bill imply for the power distribution companies?
The new Electricity Amendment Bill 2021 seeks to de-license power distribution, allowing private sector players to enter the sector and compete with state-owned power distribution companies (DISCOMs). There will be various provisions of direct Benefit Transfer of subsidies, Reduction of Cross Subsidies, Role for distribution sub-licensees with regulators’ nod And Adoption of a national Renewable Energy Policy. The Bill provides for the constitution of the Electricity Contract Enforcement Authority (ECEA) to adjudicate upon contract-related disputes in the electricity sector. Furthermore, the Bill also proposes that a selection committee will be constituted to select the chairperson and members of the Appellate Tribunal (APTEL), the central and state regulatory commissions (CERC, SERCs) and the ECEA.
Why are the Opposition and State Governments opposing this bill?
There are several grounds on which concerns are raised such as: the private players can pick and choose their area to distribute power thereby providing power only to commercial and industrial consumers leaving aside rural and poor areas. Such cherry picking of remunerative areas by the private players will leave it to the State DISCOMs to serve social sector obligations and rural areas. This will further increase losses for State DISCOMs. The objective of providing choices to the consumers would “end up in profiteering” by new service providers through tariff hikes. Furthermore, such higher penalties for failure to meet Renewable energy Purchase Obligations (RPOs). We have to also understand that the RPO is a form of obligation mandated by State Electricity Regulatory Commission (SERC) to purchase minimum level of renewable energy out of the total consumption by the Obligated Entity i.e., the end-consumer. It should be also noted that the Purchase Obligations cannot be segregated for hydropower as it is based on seasonal monsoons.
Nonetheless, the Union Power Minister R.K. Singh had assured all the states that the minimum area to be covered by private sector competitors would be defined in a manner to include an urban rural mix, a universal service obligation and elements of cross-subsidy in the ceiling tariff. Now what will happen in reality only time can tell as because the government-of-the-day is committed towards the policy of “Antyodaya”, but their bills and amendments put forward iterates something else.