Implication of using Bankruptcy Code against Discoms

Background of power sector:

• Under the Constitution, electricity is a concurrent subject. However, since pre-independence period, the state governments have played a critical role in the electricity sector.
• State Electricity Boards (SEBs) were established under The Electricity (Supply) Act, 1948 for the electricity generation, distribution and transmission.
• The state governments retained control over the distribution part though the sector was opened up to private players in 1991 for electricity generation.
• In 2001, the SEBs had to be bailed out after their arrears towards central power generation PSUs. This led to the enactment of the Electricity Act, 2003 which mandated the unbundling of SEBs into separate companies for generation, transmission and distribution.