Center move to present Electricity Amendment Bill, 2022have stocked opposition parties protest and trade unions on the grounds that it violated the constitutional principles of federalisation, which was a step towards privatization of the power sector and would make electricity costly. in an interview with HinduSecretary, Ministry of Power, Alok Kumar addressed the concerns over the provisions of the Bill, its intent and the reforms envisaged by it.
The bill was introduced in the Lok Sabha and referred to a standing committee after strong opposition. Did the Center anticipate this level of opposition?
When reforms are introduced, there are always different views. This bill was prepared after the 2021 budget and we have consulted with all the states, industry bodies, regulators. Most of the states had supported the provisions. During the discussion, there were also objections on some aspects from the states.
What concerns did the states raise?
A major concern was that ‘cherry picking’ (or when a new player with an electricity distribution license might choose areas with the maximum paying customers, and avoid areas where such electricity duty collections have historically occurred). is negligible). this is wrong. All players with new licenses will be bound by Universal Service Obligation (which mandates providing electricity at affordable rates to rural and remote residents).
Secondly, we have proposed that the central government determine the area to be served by the licensee – at present it is a minimum of one district or a municipal area – and we have proceeded to increase this further until the state government has a smaller area. But doesn’t decide. , For example, a sufficiently large area, such as a municipal corporation, would ensure a wider mix of consumers. To safeguard against such cherry-picking we have built-in provisions like cross-subsidy and wheeling charges in the maximum dutiable value (Wheeling fee is money paid by a new one to an existing licensee for the use of electricity distribution network ).
So, to clarify, will farmers who currently get free electricity or those who get subsidized electricity continue to receive them?
Absolutely. There is no mention of ‘free’ electricity in the Electricity Act. Section 65 states that state governments can subsidize any class of consumers and there is no change in this clause. The State Government will have the discretion to continue with free or subsidized electricity. Reducing cross-subsidy has always been mentioned in the Tariff Policy (Electricity Act) and is to be reduced as per the recommendation of the State Commission. Those provisions continue. It is a complete myth that the new bill proposes to do away with subsidized or free electricity.
A major problem in the power distribution sector is the poor financial condition of the power distribution companies (the states collectively owe them more than ₹1 trillion). Can the entry of private companies in the electricity bill solve this?
The financial health of a discom depends on three factors: proper fixation of tariffs, subsidies paid by the government to discoms and their operational efficiency. This bill helps discoms strengthen their ability to set tariffs, we have a number of provisions outside this bill to see that these subsidies are paid and, finally, the operational capacity of many discoms over time. with the improvement. The first two of these factors are relatively more important.
Under the amended bill, an existing licensee can collect wheeling charges from new licensees, secondly, there are many unfulfilled demands from the bill which will improve duty collection efficiency and help fund cross-subsidies . There are many industries that have captive power plants because access to electricity is unreliable and if they can be serviced by more players, that money will flow into the collective pool. The Bill will create competitive pressure on the existing licensees. You have to provide better consumer services – and we have seen this in the case of the telecom sector – and they will need to improve operational efficiency. At the center of the bill is the electricity consumer.
A major challenge for power companies is to recover the cost of providing electricity to rural India. How does this new bill address this question?
A large number of consumers -80 to 90% – are willing to pay provided they are given an accurate bill on time. The big problem is that our utilities do not provide this, and they are unable to maintain proper metering. To address this, we are promoting the adoption of smart meters (prepaid electricity bills) and it has been found from many places that the adoption of such meters has improved the collection charges. As far as agriculture metering is concerned, we are not insisting on it and have left it to the states to install electricity meters at the consumers or feeder level. We are not making metering mandatory for farmers; However, our requirement is that the agricultural feeders have to be segregated; We should know how much energy is consumed and how much of it goes to the farmers.
States can give subsidy but how will private players agree to it?
The Electricity Act does not differentiate between state and private sector licensees. The decision of the state government to provide subsidy is applicable to both public and private sector entities.
Is the telecom sector the reference point for which reforms in the power sector are envisaged?
The economic principle is that the same wire or network should not be replicated, it should be shared. We are also not changing the ownership structure of any property.
Changes in the telecom sector led to job losses and churn. Do you expect similar things to happen here?
Job loss will happen hardly, in fact, there will be new jobs as there will be new people to cater and hence more metering, infrastructure maintenance etc. is required.
Like in the telecom sector, will we see bidding by interested distribution companies for certain sectors?
No, because bidding is not relevant to the power sector as it is a wired infrastructure unlike spectrum. We will increase the area that will be available to a potential licensee and any interested person will have to approach the regulator and they will issue the license if certain conditions are met. There may be multiple distribution companies in the same area, all serving consumers with similar obligations. There was a proposal to make the distribution unlicensed, but many states did not agree to this and so it was dropped.
How enthusiastic are the private players about the provisions of the Bill?
The industry wish list is huge and we cannot agree to all of them. There are business models that can provide better services to the consumer without harming the infrastructure of the area and without compromising on the standards.