scorecardresearch

Power politics

The electricity Bill should not become a victim of politicking as it has many sensible provisions

Thus a big gap in the implementation of the 2003 law is sought to be removed, as in practice, open access was limited to industrial units and cross-subsidies given by states depended on using industrial consumers to subsidise households and farmers.
Thus a big gap in the implementation of the 2003 law is sought to be removed, as in practice, open access was limited to industrial units and cross-subsidies given by states depended on using industrial consumers to subsidise households and farmers.

The Electricity (Amendment) Bill 2022, which has been referred to the parliamentary standing committee immediately after being tabled in the Lok Sabha, has kicked up a political storm—a familiar occurrence in recent years because of the broader perception of the Union government’s bid to encroach into the states’ turf. Since electricity is in the concurrent list, the fears have come to the fore once again. One can certainly fault the Centre for once again rushing a Bill to Parliament before doing adequate background work of trying to allay the concerns of states, specially the Opposition-ruled ones. In fact, the central government representatives have been presumptuous by saying that nearly all states were on board with the government’s intention to open up the power distribution sector to competition through the Bill. This is far from reality as the fierce opposition to the Bill has shown. But the nature of the objections raised by some of the states gives an impression that logic is a big casualty when politicking becomes the primary motivating force. Beyond the arbitrary charge of the Bill being “dangerous” and will “benefit a few power distribution companies”, most states have nothing specific to object to the provisions of the Bill.

Also Read| Expect domestic recovery to remain uneven

The 2003 version of the Act brought about major changes in the power sector, including delicensing of generation, open access in distribution, and independent regulators. But certain provisions needed to be amended to plug loopholes in the system. For example, the Bill proposes to enable competition in retail distribution of power by offering customers the option to choose electricity suppliers, just like they can choose telephone or internet service providers. The amendments are designed to facilitate the use of distribution networks by all licensees and the network of a distribution licensee under provisions of non-discriminatory open access. Thus a big gap in the implementation of the 2003 law is sought to be removed, as in practice, open access was limited to industrial units and cross-subsidies given by states depended on using industrial consumers to subsidise households and farmers.

Besides, the Bill also has a provision for graded and timely tariff revisions that will help provide state power utilities enough cash to be able to make timely payments to power producers. This weakens the states’ arguments, as enough time is being given to adapt to the new system. The provision for “mandatory” fixing of minimum as well as maximum tariff ceilings by the “appropriate commission” to avoid predatory pricing by power distribution companies and to protect consumers is once again a move whose time had come.

The point is that power distribution continues to be the weakest link in the supply chain of the power sector. Most distribution utilities are making major losses as a consequence of expensive long-term power purchase agreements, poor infrastructure, and inefficient operations, among others. These losses, in turn, prevent them from making the investments required to improve the quality of the power supply and to prepare for the wider penetration of renewable energy. The distribution utilities’ inability to pay power generators endangers their and the lenders’ financial health, causing a negative domino effect on the economy. In India, this transition is all the more challenging because of the poor operational and financial condition of the distribution sector. Instead of empty rhetoric, the Centre and states should agree to abide by the recommendations of the parliamentary panel.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.