Politics of Power
V K Gupta
In the midst of a pandemic, when the economy of the whole nation is paralyzed and administration is in doldrums, the Union Power Ministry has released a draft of Electricity Amendment Bill 2020 to amend the Electricity Act 2003.
The Power Ministry wants the states and all other stakeholders to provide their comments and suggestions on the Amendment Bill by June 5. The urgency to bring changes in vital infrastructure in the midst of COVID 19 makes the motive of the central government suspicious.
Electricity is a basic infrastructure that serves every sector of the economy in the country. The constitution of India has placed electricity under the concurrent list.
Electricity law was first changed in 2003. Under that law, the State Electricity Boards were dismantled into generation, transmission, and distribution.
The private sector was encouraged to set up power plants not just in thermal but in renewable energy also. Today almost the entire solar energy and large parts of thermal are either in the private or central sector thereby diminishing the role of the States. The Act of 2003 also created regulatory commissions that took away from the states the power to set tariffs and regulate the sector.
For various reasons, despite UDAY and other schemes, state DISCOMS are in a financial crisis, made worse by the lockdown caused by the COVID 19.
The Government now intends to drop the “carriage and content” proposal, which was a major bone of contention of the previous amendment Bill of 2014. So after doing away with the “carriage and content” proposal ,the Electricity Amendment Bill 2020 attempts to centralize the powers and privatize the Discoms by way of the introduction of distribution sub-licensee and franchisee in a particular area within its area of supply without the requirement of separate licenses under Section 14 of the Electricity Act from the relevant State Commission. The original distribution licensee will remain the licensee.
The operational part of the Bill is to privatize Discoms through franchisees and multiple licenses without any clarity. In a number of the states where franchisee systems were introduced, they simply minted money and went away leaving the Discoms in the red. In a number of cases, the regulatory commissions were compelled to cancel the franchise for their utter failures.
The amendment bill provides a mechanism wherein no electricity shall be scheduled or dispatched under such contracts without the security of the payment mechanism agreed upon between two parties. The payment mechanism is just to secure the payments of the private independent power producers (IPPS) at the cost of state discoms.
The draft bill seeks to set up an Electricity Contract Enforcement Authority (ECEA), which will be headed by a retired judge, having the power of a civil court to settle disputes related to the power purchase agreement between Discoms and power generation companies. The decision of the ECEA can be challenged at the Appellate Tribunal For Electricity (APTEL) and, subsequently, at the Supreme Court.
When there are regulatory commissions and an appellant authority, why there be a need for another semi-judicial authority? Currently, State Electricity Regulatory Commissions and Central Electricity Regulatory Commission settle state-level and inter-state PPA disputes, respectively.The formation of ECEA should be revoked and Electricity regulatory commission and APTEL needs to be strengthened. The proposed bill subsumes powers of states to appoint state electricity regulatory commissioners and its members. As of now, the State Government has powers to appoint the regulatory commission chief and others.
The draft Electricity Bill 2020 requires the reduction of subsidies and cross-subsidies levied in the manner provided through tariff order. The State Governments are offering subsidies to various categories of consumers like agriculture and domestic consumers of the BPL category or SC/ST categories.
The bill suggests the subsidy be paid directly to the consumers in cash on the pattern of LPG subsidy. This proposal should be tried in a pilot project and if results are encouraging only then it should be included in the amendment bill.
But there are practical difficulties in implementing this proposal. The domestic consumers who have been getting some relief in tariff may not get the proposed cash relief as tenants pay electricity bills, but the subsidy amount will go into the account of property owners in whose name meter stands.
In the agriculture sector where free power or subsidized power is being provided on the basis of a load of pump sets to millions of consumers in every state without any provision of the meter on the basis of fixed charges. This is practically not feasible to provide meters on every pump set across the country and then give cash subsidy every month after the consumer has paid the bill.
Some agriculture and power experts have opined earlier that the State Government may decide agriculture subsidy on the per acre basis and release the payments in by annual installments. The farmers will have to pay to the power utility monthly or by-monthly bill and can claim reimbursement later. The State Governments which are not able to pay cash subsidy to Discom in time, how they can be expected to pay to farmers and domestic consumers in time. The best way is to retain section 65 which provides for subsidy and regulators should force states to implement its order.
The ability of the State Governments to bargain with the center is limited because of the precarious financial condition of the State generation and distribution companies.
On the contrary, the Central PSUs – REC, PFC, NTPC, Power grid are flushed with funds. This financial muscle would be used by the Central Government to arm-twist the State Governments.
The Central Government is out to destroy the state power sector despite the fact that during the COVID-19 crisis, only the State sector companies stood by the Government, while the private sector is nowhere visible in this bad time in the country. The Central Government is trying to usurp the state’s powers.
It is unwise to bring legislation that would virtually finish the state sector and make the entire power supply sector dependent on private companies. In the proposed amendment there’s no political move at course correction based on experiences gained in more than one decade, for revamping the Electricity Act 2003.
(The author is Spokesperson All India Power Engineers Federation)