Home / Industry / Infrastructure /  Centre tries to get states onboard for next generation power reforms

NEW DELHI : Facing opposition from some states over the proposed next generation reforms, power and renewable energy minister Raj Kumar Singh on Thursday said that a ‘misinformation campaign’ has been spread.

Addressing a press conference, Singh said that he has been writing to all state chief ministers presenting the true picture and will also meet them individually to get them onboard.

This comes in the backdrop of the draft Electricity Act (Amendment) Bill 2020 becoming another flash point in the Centre-state relationship, with a growing chorus of states including Telangana, Jharkhand, West Bengal and Tamil Nadu opposing some measures.

“This is just politics," Singh said and added, “You can’t become a great power with a broken power system."

The reform measures proposed by the Centre are intended to help improve the financial health of the power sector and implement the direct benefit transfer (DBT) scheme for better targeting of subsidies, promoting retail competition, payment security mechanism and introducing financial discipline. The proposed amendments have also pitched for a cost reflective tariff and setting up an Electricity Contract Enforcement Authority to enforce power purchase agreements (PPAs).

The draft also proposes to do away with multiple selection committee for central and state electricity regulators and one such standing committee for selecting chairpersons and members of Central Electricity Regulatory Commission and State Electricity Regulatory Commissions (SERCs).

He explained that the present system of appointments to the SERCs that is done by a committee headed by a retired judge, with one each representative of the centre and the states, has been sub-optimal as every time a position becomes vacant, the committee has to be reconstituted.

Debunking the states’ concerns that New Delhi is taking away their appointment making powers with respect to their electricity regulators, Singh said that there have been cases when tariffs have not been revised for years in the absence of constitution of such a committee.

“We felt that this needed a change and in the proposed amendment instead of this multiplicity, we have a standing committee headed by a sitting judge of the Supreme Court," Singh said.

The proposed committee will have two representatives each from the states and the centre, with the panel for selection to the SERCs to be recommended by the states.

This comes in the backdrop of the state owned power distribution companies (discoms) being the the weakest link in the electricity value chain. The situation haven’t been helped much by the regulators, many of whom have been political appointees.

Regulators take signal from state governments, Singh said.

Singh said that given the feedback from the states, the union government is also open to the idea of having individual standing selection committees for respective states.

With power being on the concurrent list of the Constitution, many sectoral issues face hurdles due to differences between the Union and state governments.

Talking about implementing DBT in the power sector, Singh said that a state is free to provide any amount of subsidy to any class of consumers till the time it provides upfront subsidy component to its discoms.

Singh said that the consumer will not suffer as the proposal is about transferring the subsidy component in the consumer’s account maintained by the discoms every month.

The Centre also wants the state government departments such as police and other essential services to make timely payments to discoms, whose outstanding dues are to the tune of around 64,000 crore.

Singh said that the reforms are focused on consumer interests and they are the most seminal attempt at power sector reforms since the Electricity Act of 2003. The states have sent their comments to the centre, and once a proposed law is drafted by the ministry of law and justice, it will be introduced in the Parliament.

Singh added that that amended tariff policy has gone for the union cabinet’ consideration after been approved by a Group of Ministers.

As part of its strategy to bring India's battered economy back on track, New Delhi also plans to provide 90,000 crore liquidity injection for the fund-starved discoms that is reform linked. Singh said that the plan has gained enough traction from the states with requests for 93,138 crore in loans reaching the centre.

Singh also said that there is a good case of extension to those coal-fuelled power generation plants who have initiated work to install the flue-gas desulphurisation (FGD) systems, but couldn’t get it completed on account of the lockdown, that has affected discom collections. However, he wasn’t in favour of any extension to those who have flouted the guidelines and haven’t done anything on the same.

Post the emission norms for sulphur oxides (SOx) put in place by the ministry of environment and forests, all thermal power projects need to install FGD systems.

Experts say that taking the states along is the right approach to reforms.

“Outreach and clarifications provided will go a long way in assuaging the sentiments of the states and bringing in transparency around the objectives of the Electricity Act amendments and tariff policy," Sambitosh Mohapatra, partner, power and utilities at PwC India.

“Intent has to be backed by budgetary support linked to reforms, pace of execution and demonstration of tangible benefits for all stakeholders," Mohapatra added.

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