Electricity (Amendment) Bill, 2021

The Union Government has recently come up with the proposal of Electricity (Amendment) Bill 2021. It becomes more important in light of the current coal crisis that the country has been facing. The broad objectives of the Bill are as follows:

  • To ensure consumer centricity – Under the conventional regime, the consumer is someone who has options among the goods and services, and one has the right to choose among them. However, this basic notion has been missing for the electricity consumers in India because they do not have the option to choose among the electricity service providers, also known as DISCOMs (Distribution Companies), and will dismantle the state monopoly.
  • To promote ease of doing business – Under the new system, the government will de-license the power distribution sector and hence act as a facilitator instead of a regulator. This will attract private companies to enter into power sectors.
  • To enhance the sustainability of the power sector – Currently, the Discoms are facing huge losses due to the populist measure of the government to provide electricity at subsidized rates to the consumers. In the new system, there is a provision of a fund for the settlement of subsidized rates in a prompt manner.
  • To promote green power – This Bill also imposes liability of the distribution companies to procure and generate a specific amount of electricity from renewable sources of energy and hence promoting a sustainable environment.
  • Universal Service Obligation Fund – this fund will maintain the payment in the subsidies in a prompt manner by promoting Direct Benefit Transfer of subsidies; Reduction of Cross Subsidies delay in which caused losses to the discoms.
  • Appellate Tribunal for Electricity (APTEL) – It strengthens the authority for quicker resolution of disputes with respect to electricity.
  • Renewable Power Obligation – This Bill will also promote the required push for the adoption of renewable energy. India’s more than 70% energy requirements are fulfilled by the traditional coal-powered thermal power plants, the delay in supply of which caused the power crisis in many states of India.
  • Penalty – It imposes the liability of up to Rs 1 Crore for those discoms who do not procure power through renewable energy resources.
  • The Bill constitutes the Electricity Contract Enforcement Authority (ECEA) to adjudicate upon contract-related disputes in the electricity sector.

Benefits

  • Increase investment by private players
    • Increase Competition in the market
    • Improve service delivery, efficiency, and quality of electricity distribution
    • Adds flexibility and allows choice to consumers
    • Lead to Price Stabilization for electricity rates

India is an energy-dependent country. We are the 2nd largest consumer of electricity after China. Therefore, to ensure standard quality of life, there is the need for affordable energy supplies.

Challenges

The poor infrastructure will be a big challenge for the discoms. In such a diverse country in terms of geography, the inefficient operations also act as a hindrance in the supply of electricity to the country’s remote areas. Also, minimizing the leakages and finding and rectifying the fault in time is an important key in ensuring the uninterpreted supply of electricity. Moreover, the weak state tariff policy adopted by the states is one of the reasons behind such losses for discoms.

Solutions

 This Bill aims at de-licensing and ending the monopoly of the state electricity boards. It will ultimately increase the competition because the market will now be open. For example – in Delhi, after the privatization of discoms, the Aggregate Technical & Commercial (AT&C) losses, which were soaring high at 55% in the year 2002, reduced to 9% in 2020.

Tariffs rates should be reflective of supply costs. Therefore, it is important for the discoms to be given autonomy in the sector. The discoms also acknowledge the fact that if they have to sustain, they cannot abruptly increase the prices.

It is also suggested that electricity which is not yet covered under the ambit of Goods and Services Tax (GST) so as to allow the discoms to claim the input tax credit.

Increased private investment in this sector will also invite innovative tech solutions to simplify the life of an individual, such as smart prepaid meters, etc.

Impetus on renewable energy will now not be neglected. There has been slow progress in this field as India has an estimated 5-6 Gigawatts of energy being produced through installed renewable energy resources against the 2022 target of 175 Gigawatts of energy.

Therefore, this Bill looks promising and should be the torchbearer in the much-needed reforms in India’s power supply and distribution sector. This Bill, if implemented properly, could revolutionize the sector similar to the telecom sector. 

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This post was last updated on October 31st, 2021 at 06:00 pm

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