Electricity (Amendment) Bill, 2021

Syllabus: General Studies Paper 3

Context:

Recently, India’s power demand broke a daily threshold of 200 GW, setting a new record that will surely be broken in the years to come. 

• To manage this surge and other equally significant developments in the power distribution sector, there’s a need for a paradigm shift in the energy model.
• A key change in India’s energy model, which will aid and support these developments, is coming up in the shape of the Electricity (Amendment) Bill, 2021.

Key points of the Electricity (Amendment) Bill, 2021

• It proposes to de-licence electricity distribution and let the consumer choose what kind of electric energy to use and whom to buy it from.
• It seeks privatisation of discoms (distribution companies) by way of sub-licensing & franchisees.
• According to the draft, state commissions will determine tariff for retail sale of electricity without any subsidy under Section 65 of the Act and the tariff should reflect the cost of supply of electricity and cross-subsidies to be reduced.
• Electricity Contract Enforcement Authority to adjudicate on contract-related disputes; a common selection committee for the State Electricity Regulatory Commissions.
• The Appellate Authority to ensure release of timely and cost reflective tariff orders; 
• An adherence to the National Electricity Tariff Policy
• A subsidy mechanism (DBT) where it will go directly to the consumers.

Need for the Act:

• The de-licensing of power generation: Since 2003, India’s power generating capacity has grown nearly four-folds to around 385 GW today.
  • The growth of the Indian economy that followed, and its emergence as the sixth-largest economy in the world, was due to India becoming a power surplus country.
• The power reforms remained incomplete. The last mile connect with the consumer, electricity distribution is operating at sub-optimal efficiency through distribution monopolies (discoms).
• No choices for consumers: India’s power distribution sector is currently structured in a way that does not give consumers any choice in terms of who they want to buy electricity from. 
  • It could be a State Electricity Board (SEB) or private player, but the consumers are forced to buy power from one discom. 
  • That is irrespective of whether the customer likes the quality of power, the electricity tariff, or the various choices on renewables, like rooftop solar, that some discoms provide and others do not.
• A monopoly creates inefficiencies and these in the power distribution sector have had serious financial consequences. 
• Financial losses: Today, an estimated ₹94,000 crore is owed by various state-owned discoms to power generating companies (gencos) across the country. 
  • This happens when discoms are not able to properly bill for energy supplied and collect the monies. 
  • If money had been paid to the power generating companies on time, it could not only have led to additional generating capacity, especially renewables, but also funded the bills for the input suppliers to these gencos.

Significance: 

• Green energy: The Indian power sector as a whole is in a critical phase, as major changes will be witnessed across its value change, moving from thermal or fossil-fuel fired generation to renewables. 
  • The country has already achieved 100 GW of renewable energy capacity and is moving closer to the 175 GW target, which hopefully will be achieved by 2022. 
  • We have an even bigger target of building 450 GW of renewable energy capacity by 2030. 
  • Tackling the unfinished task of reforming electricity distribution by opening it up will certainly help us realise these ambitious dreams.
• The consumer- and investment-friendly reforms proposed in the new Bill will not just create choice for consumers but also more efficient power distribution utilities. 
• It will also attract investments from global capital sources interested in implementing future technologies, particularly in areas like clean energy and digital technologies. 
• By ensuring capital into electricity distribution, these reforms can become a direct enabler for a more sustainable energy sector in India.
  • In fact, a beginning has already been made by starting the privatisation process of discoms in Union Territories, where many power sector players participated.

It is now a little more than three decades since India started opening up and liberalising the economy, and in the 75th year of Independence, the electricity distribution reforms will play a key role in helping the government achieve its ambitious goal of powering every home, shop, office, industrial unit and village with quality and reliable electricity supply. And that, in turn, would be crucial in achieving the larger economic goal of making India a $5-trillion economy.

The Hindu Link:

https://www.thehindubusinessline.com/opinion/time-to-unshackle-power-distribution/article37289400.ece

Question- Giving the provisions of Electricity (Amendment) Bill, 2021, explain how can it impact the energy model of the country.