Govt to weigh one of India’s greatest reforms this Parliament session

The bill also lays down the rights and duties of consumers
The bill also lays down the rights and duties of consumers

Summary

  • Cabinet may consider landmark bill to reform power distribution biz
  • The plan has its origins in an earlier plan to separate the so-called carriage and content operations of discoms

The Union cabinet may shortly consider the Electricity (Amendment) Bill, 2021, that aims to de-license power supply, allowing multiple distributors in the same area and giving consumers the option to switch power suppliers.

Post the cabinet’s approval, the bill is expected to be introduced in the monsoon session of Parliament that begins on Monday. According to the Lok Sabha bulletin, the bill is in the tentative list of government’s legislative and financial business that is expected to be taken up during the sixth session of the 17th Lok Sabha.

Speaking at a conference organized by lobby group Confederation of Indian Industry (CII), power minister Raj Kumar Singh on Thursday said all stakeholders, including states, industry and the ministries, have been consulted over the proposed amendments.

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“Now, it is final, so we have proposed it to be taken up in the cabinet," Singh said. “It also has a provision for de-licensing distribution, which again is a major reform. And which I think should happen. We have consulted 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. “The 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, a partner at consultant 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 also proposes appointing a member with a legal background in every electricity regulatory commission and strengthening the Appellate Tribunal for Electricity (Aptel). The draft law 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 their reliance 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 that 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 383.373GW, the demand has usually been lower than 200GW. However, this changed on 7 July when India’s peak electricity demand breached the 200GW mark.

“We have a growing economy, and demand has crossed 200GW," 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."

“And this (electricity demand) gives us the space to carry out energy transition which otherwise would have been difficult. Because of the growing demand, this space is available to us," Singh said.

Simultaneously, India is working on a plan to privatize discoms in the eight Union territories. This comes in the backdrop of the cabinet committee on economic affairs last month approving the marquee 3.03 trillion power discom reform scheme, wherein the Centre’s share will be 97,631 crore.

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