PremiumThe existing distribution companies will continue working as they are — however their monopoly will go and they will have to face competition, says a govt letter in the backdrop of Mamata Banerjee’s opposition to Electricity (Amendment) Bill
NEW DELHI : Union power and new and renewable energy minister Raj Kumar Singh on Monday upped the ante for West Bengal chief minister Mamata Banerjee over her opposition to the Electricity (Amendment) Bill, 2021 that entails de-licensing the power distribution business and making the sector more competitive.
In a communication dated 13 September to Banerjee reviewed by Mint, Singh wrote, “One of the proposals in this bill (2021) is to delicense distribution. The existing distribution companies will continue working as they are — however their monopoly will go and they will have to face competition. Presently, the people do not have a choice, they have to bear with a distribution company even if it is inefficient, its service is poor and the tariff is high."
“There must be competition in this sector, so that the people can choose a distribution company which gives more efficient service at a lower price. For example, the private distribution company in Kolkata has one of the highest tariffs in the country and is a monopoly. If the proposed amendments happens that company will face competition. Why you want to protect this private company from competition is not clear," the letter said in the backdrop of Banerjee’s opposition and her earlier letter to Prime Minister Narendra Modi alleging that the states were not consulted properly.
RP-Sanjiv Goenka Group company CESC Ltd supplies electricity to Kolkata and recently placed the highest bid of ₹871 crore to acquire the electricity distribution business for Chandigarh. CESC was also among bidders for power discoms of Dadar and Nagar Haveli, and Daman and Diu for which Torrent Power placed the highest bid.
A RP-Sanjiv Goenka Group spokesperson did not immediately respond to Mint’s request for comment on Singh’s letter.
“She is only playing politics. She doesn’t understand or she has been briefed wrongly," Singh said on 9 August as reported by Mint earlier.
While the proposed Bill has gone to the cabinet secretariat, which has to put it up before the cabinet; it could not be introduced in the monsoon session of Parliament.
“Your statement that no consultations have been held with the States is also incorrect. The draft Bill was circulated to all the States for their comments. After the receipt of comments detailed discussions were held with the States region wise on the draft Bill," Singh said in his letter.
“The State Electricity Regulatory Commission will set the ceiling tariff and the Distribution Companies will have to offer tariff below that ceiling Therefore, there is no question of the tariff going up. In fact, the tariff will come down because of competition," Singh added in his letter.
This comes in the backdrop of the Centre's reforms-based result-linked power distribution sector scheme to be applicable till 2025-26 that aims to reduce India’s AT&C loss to 12-15% from 21.83% in 2019-20, and narrow the deficit between the cost of electricity and the price at which it is supplied to ‘zero’ by 2024-25.
“I have already pointed out the high tariff (one of the highest in the country) of the private company having monopoly over Kolkata. Similarly, the billing efficiency of WBSEDC is only 81.43 percent whereas the national average is 85.36 percent, and the AT&C loss is 20.40 percent — leading to WBSEDCL having one of the highest tariffs in the country. The regulatory assets are ₹15519 Crores — if this burden is added the tariff will be ever higher," Singh said in his letter.
Discoms have traditionally been the weakest link in the electricity value chain, plagued by low collections, rise in power purchase cost, inadequate tariff hikes and subsidy disbursement, and mounting dues from government departments.
"However, as per the proposed amendments, the existing companies will continue functioning as they are — the only difference is that other companies can come and offer electricity to the people at a lower tariff because they are more efficient. The people will benefit. What is the objection to that?" Singh said in his letter.
Jammu and Kashmir (J&K) utilities reported the highest losses among power discoms in India. J&K recorded aggregate technical and commercial (AT&C) losses of 60.5% in the year ended March 2020. The high loss figure of J&K was followed by Nagaland (52.9%), Arunachal Pradesh (45.7%), Bihar (40.4%) and Tripura (37.9%). Also, the ACS and ARR gap is the highest in Nagaland ( ₹5.62 per unit), followed by Arunachal Pradesh ( ₹4.92 per unit), J&K ( ₹1.85 per unit), Meghalaya ( ₹1.80 per unit) and Tamil Nadu ( ₹1.27 per unit).
“Your statement that the draft Bill seeks to curtail the powers of the SERC is again factually incorrect. In fact, the Bill provides for strengthening the SERCs by giving them powers to get their decisions enforced. There is also a proposal to add a Judicial Member — this is as per Supreme Court order," Singh’s letter said.
Prime Minister Narendra Modi earlier said an electricity consumer should be able to choose his supplier like any other retail commodity. With the discoms 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.
“The people have rights - and the right to choose a company which offers better service at lower rates is one of them," Singh wrote.
This comes in the backdrop of the Cabinet Committee on Economic Affairs approving the marquee ₹3.03 trillion power discom reform scheme, wherein the Centre’ share will be ₹97,631 crore. The funds will be released to discoms subject to them meeting reform-related milestones.
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