Why oppose amendments to the Electricity Act 2003?


The Central Government believed to have prepared draft amendments to be made to the Electricity Act 2003 to implement all its Clauses in letter and spirit. But few state governments have been opposing the amendments seeking some changes as per their ongoing vote-churning subsidy schemes.

Ministry of Power has declared that they are suggesting Amendments to the 2003 Act due to Changing Market Dynamics, increasing renewable energy capacity and to provide Quality Power Supply to all. Let us look into the dynamics of this most important move by the Central government.

It may be recalled the Electricity Act 2003 was passed during the late Vajpayee’s regime in order to bring reforms in the Electricity Boards across the country based on their nature of activities like generation, transmission and distribution besides to encourage alternative renewable energy with liberal guidelines.

During recent years Market Dynamics have changed in Electricity field in many states. Some states have been opposing the Power Purchase Agreements which they have signed earlier due to availability of alternative at a lesser rate. Some states like Telangana are giving free current or current at lower prices to farmers and industries.

But the central government is thinking in parallel to cooking Gas subsidy regularisation scheme in which they saved around Rs.13,000 crore by crediting subsidies to consumer accounts directly by the Petroleum Department.

The main amendments proposed are:

  1. State Electricity Regulator will be replaced by Central Electricity Regulator (CER). CER will monitor entire power tariff charges for all states under “One Nation one Tariff”. Though Retired Supreme Court judge will be the CSR. Reaction: States have some objection for this.

2. Prepaid electric metres will be allowed. Even farmers also have to install metres for knowing the consumed units. Some state governments like Telangana are objecting for this having 25 lakh farmers enjoying free current supply. It is a burden for farmers.

3. If any category of the consumer is charged less than Average Cost of Supply (APS) in any state the difference of amount will be credited to consumer bank account directly. It is like a Gas subsidy. Here it seems there are a lot of pilferages or slip outs to avoid payment of bills by consumers.

4. Suppose a factory is getting Electricity at say Rs.2 per unit, if the factory has, say 40 quarters for employees then there is scope for brining all these connections under one meter to avoid bill payments for residential quarters.

But many states argue a practical problem of how a poor person consuming less than 200 units at Rs.3 per unit, can pay APS of saying Rs.5.50 per unit. It is beyond their financial capacity. This needs to be solved.

In fact, none of the State Governments has provided funds to fill this gap in the budget. Most of the Discoms have proved to be white elephants as they continued to seek financial aid from the banks to compensate for huge losses.

5. But if this amendment is implemented state governments have to pay the difference in charges to the consumer directly. So in future Discoms will not run in losses.

6. The Discoms would henceforth, (after the amendment) confine themselves to distribution and Collection of current bills. However, the Discoms would only be entrusted to monitor the collection and maintenance & power supply will be entrusted to private contractors with some stringent norms.

7. In case of a cut in Power Supply other than Force Majeure conditions and technical faults, the penalty will be levied on the distribution company and it is credited to consumer accounts.

8. No license is required for Renewable Energy generation or supply. This is proposed to increase renewable energy to 25% of the total demand. The States have been opposing this as they have been doing this on their own till day.

9. Violation of Power Purchase Agreement by any state to be penalized. Some states including AP have cancelled PPA as a low-cost alternative is available. The matter is in the Court now.

10. Current tariff to be reduced drastically after the cumulative depreciation provided equals the project cost. This is a revolutionary condition. Practically it is true. But not happen in any other industries.

11. Time-bound reduction of subsidies throughout the country. It shall be not more than 20% of wheeling charges. For this also many State governments are not accepting.

12. If the current bill is not paid then supply will be removed in due course. The subsidy also will be removed. But now there are several cases regarding current bills in various Courts. Though not paid in time subsidies are continuing for many people.

13. States have to purchase renewable energy at a price as fixed by Central Regulatory.

14. Entire PPAs entering, monitoring, current purchase and sales will be in the hands of Central Regulatory. Single tariff for the entire nation will be fixed.