[Editorial] Electricity (Amendment) Bill, 2022

Background:

  • The Electricity Bill was passed for the 1st time in 2003, under the Prime Ministership of A B Vajpayee.
  • Its purpose:
  1. Consolidation of the various laws on electricity generation, distribution, transmission, trade and use
  2. Consumer interest protection
  3. Enable electricity supply throughout India
  4. Rationalization of tariffs
  5. Bring in transparency in subsidy policies, etc.
  • The 2003 Act resulted in privatization of discoms.
  • It was amended in 2007 to introduce provisions for ‘cross subsidization’ i.e. subsidizing electricity for the poor households while charging higher costs from the industrial consumer segments.
  • There were further attempts to amend the Act in 2014, 2017, 2018, 2020 and 2021. Though the 2014 Bill was cleared by the Standing Committee on Energy, it wasn’t passed by the Parliament as the Center sought to revise it. The other Bills didn’t even make it to the Parliament as the government was dissatisfied with the responses from consultation with stakeholders.
  • Recently, the Union Ministry of Power tabled the Electricity (Amendment) Bill, 2022 in the Lok Sabha.

What are the proposed amendments?

  • The Bill seeks to amend the Sections 42 and 14 of the Act to enable competition in retail distribution of electricity. The customers would have the option of choosing electricity suppliers– like how one chooses internet or telephone service providers.
    • The amended Section 14 provides for the “use of distribution networks by all licensees under provisions of non-discriminatory open access”.
    • The amended Section 42 would facilitate “non-discriminatory open access to the distribution network of a distribution licensee”.
  • One of the most significant among the proposed changes is the Center’s intervention in the power distribution sector- traditionally a domain of the state governments. This can be seen in the Bill’s clauses 5, 11, 12, 13, 15 and 23.
    • For instance, clause 5 amends Section 14 to enable the Central government to prescribe criteria for electricity distributiors.
    • Clause 11 amends Section 42 to facilitate operation of multiple licensees in the same area, to prevent parallel networks and to optimize the network usage.
    • Clause 13 amends Section 60 for management of electricity purchase and cross-subsidy. In case of licenses being issued to multiple distribution licensees in an area, the state government will establish a cross subsidy balancing fund. A government company will manage this fund.
  • The amended Section 62 provides for ‘mandatory’ fixing of minimum and maximum tariff ceilings to prevent predatory pricing by discoms and to protect the consumers. The ceilings are to be fixed by an appropriate commission.
  • The Bill also provides for timely graded tariff revisions to help the state power utilities get enough cash to make timely payments to electricity producers.
  • It proposes amendments to Section 166 to strengthen the payment security mechanism and empower the regulators.

What is the rationale behind these proposals?

  • The amendments will help address the recurrent issue of payment defaults by discoms to power generation companies.
    • According to government data, discoms in Tamil Nadu, Maharashtra and Telangana are yet to pay 57% of the total dues owed to electricity generating companies. Another 26% of the dues are to be paid by UP, Jammu & Kashmir and Madhya Pradesh.
    • States leading the chart on payment defaults to discoms:
      • Telangana at Rs 11,915 crore
      • Maharashtra at Rs 9,131 crore
    • States that haven’t paid the discoms for the subsidies:
      • UP at Rs 18,946 crore
      • Madhya Pradesh at Rs 16,240 crore
  • It seeks to address the issue of low quality electricity supply.

Why is it being opposed?

  • Farmers’ groups fear that the Bill will put a stop to subsidies and that discoms will fall under private companies’ control.
  • Power sector workers fear that privatization of discoms and power generating units would lead to job cuts.
  • The Opposition parties have been raising concerns over the Bill’s implications on federalist principles. This is because electricity is a Concurrent List subject and critics point out the lack of consultation with states.
  • Critics have argued that the provisions will replicate the telecom sector’s situation where monopoly companies destroy the smaller networks and the public sector.

What is the way ahead?

  • Power sector trade unions have been holding strikes against the Bill. The Opposition parties and the regional parties have been raising concerns over the Bill too.
  • Meanwhile, the Bill has been referred to the Energy Standing Committee, headed by senior MP Rajiv Ranjan Singh.
  • The Bill has come at a time when public debate is focusing on the issue of political parties offering freebies– one of the reasons that has led to state discoms making large payment defaults.
  • The Bill should be passed only after consensus building to ensure ground-level support in implementation. Here, the deliberations in the Standing Committee would help.
  • Additionally, experts recommend empowering the power regulator to make decisions on tariff revisions and ensuring that electricity subsidies be delivered to the truly deserving via DBT.

Conclusion:

The Electricity Amendment Bill seeks to address the burgeoning issue of discom payment defaults as well as poor quality of power supply impeding the general population and the industries. Wide-spread consultation and consensus building are key to achieving these objectives.

Practice Question for Mains:

What are the changes proposed in the Electricity (Amendment) Bill 2022? Why is it facing so much opposition? (250 words)

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