The Central Government of India recently put forth the Electricity (Amendment) Bill 2020, intending to revise numerous provisions of the Electricity Act 2003. This initiative aims to rectify a variety of critical issues, thereby enhancing commercial and investment-related activities in the national electrical sector. The bill also hopes to counter operational and financial inefficiencies, political interference, insufficient infrastructure, and lack of customer involvement currently seen in the system.
Rationale Behind the Amendment
The primary objective of the amendment is to address structural problems that have been neglected and are affecting the Indian power sector. There are operational and financial inefficiencies in power generation, transmission, and distribution utilities, with an inadequate quality of power supply. The bill also proposes to tackle issues arising from political interference, inadequate public infrastructure, lack of private investments, and lack of consumer participation. Furthermore, it aims to bring transparency and accountability into the system, safeguarding the consumers’ interests while promoting a robust growth in the power sector.
Key Objectives
The Bill strives to ensure consumer satisfaction, promote ease of doing business, enhance the power sector’s sustainability, and support green power.
Key Amendments
Several significant amendments are proposed in the bill. A National Selection Committee is to be formed, replacing separate Selection Committees for appointing Chairperson and members of State Electricity Regulatory Commissions. Direct Benefit Transfer will be introduced to benefit both State Governments and Distribution Companies by ensuring that subsidies reach entitled individuals.
A National Renewable Energy Policy is proposed as a part of India’s commitment to the Paris Climate Agreement. This policy would focus on developing and promoting electricity generation from renewable sources, with special attention on hydro power.
A noteworthy aspect of the amendment is its emphasis on ensuring cost-reflective tariff and payment security. The bill seeks to empower Load Dispatch Centres to establish adequate payment security mechanisms before dispatching electricity, as per contracts. This measure could help alleviate late payments of dues that are currently at unsustainable levels.
Ease of Doing Business
The bill proposes the establishment of an Electricity Contract Enforcement Authority (ECEA) to ensure the enforcement of contracts related to the purchase or sale or transmission of power between different entities.
Miscellaneous Changes
Other revisions in the bill include strengthening of the Appellate Tribunal (APTEL), provision of higher penalties to ensure the Electricity Act’s compliance, facilitating cross-border trade in electricity and the recognition of franchisees and sub-licensees to potentially open the sector to private players.
Points of Contention
Certain elements of the bill have drawn criticism. The inclusion of cost-reflective tariff raises concerns for states like Telangana, which provide free electricity to the farming sector. The formation of ECEA is viewed by some as a move towards excessive centralization of power.
The Way Forward
Although the bill gives the Central Government more power to determine tariff and regulations in the power sector, it is important to note that electricity is a concurrent subject. It is therefore crucial to ensure that States do not lose their powers through this amendment.