What is the Electricity (Amendment) Bill 2022 ? Latest Updates

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The government Monday submitted the Electricity (Amendment) Bill 2022 in the Lok Sabha, soon after which it was mentioned to the parliamentary standing committee on energy for broad consultation with stakeholders.

Under the amendments proposed, the government is providing consumers an option of power suppliers like mobile and internet service providers. It also has a provision for timely and adequate tariff revisions to allow state utilities come out of losses and make payments for power in-time.

Recently, the Electricity (Amendment) Bill 2022 was introduced in Parliament in the midst of protests and later sent to the standing committee for more deliberation. Many power engineers objected the Bill across the country, in states like Tamil Nadu, Telangana, Rajasthan, and others.

The Electricity (Amendment) Bill, a key bill of the Bharatiya Janata Party (BJP)-led central government, targets to bring changes in India’s power sector. It proposes certain amendments to the Electricity Act, 2003. The bill seeks to delicense the power distribution and allow private sector companies to enter the sector and compete with state-owned firms.

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What is the Electricity (Amendment) Bill 2022?

The Electricity Amendment Bill, 2022 targets at giving several players open access to distribution networks of power suppliers and also letting consumers to select any service provider.

Implication:

The Bill looks forward to alter Electricity Act 2003:

To ease the use of distribution networks by all licensees, under provisions of non-discriminatory “open access” with the objective of enabling competition, enhancing efficiency of distribution licensees for improving services to consumers and ensuring sustainability of the power sector.
To smoothen non-discriminatory open access to the distribution network of a distribution licensee.
To make provisions vis-à-vis graded revision in tariff over a year besides mandatory fixing of maximum ceiling and minimum tariff by the appropriate commission.
To change the rate of punishment from imprisonment or fine to fine.
To build up functions that will be discharged by the regulators.

What are the Protestor’s Arguments Against the Bill?

Federal Structure:

The Constitution lists ‘Electricity’ as Item 38 of List III (Concurrent) of the Seventh Schedule, so both the Central and state governments have the control to make laws on this subject.
With the proposed amendments, the federal structure of Indian polity, a part of the ‘basic structure’ of the Constitution of India, is being violated.

Electricity Subsidy:

Free power for farmers and Below Poverty Line population will go away eventually.

Differential Distribution:

Only government discoms or distribution companies will have universal power supply obligations.
Therefore, it is likely that private licensees will prefer to supply the electricity in profit-making areas – to industrial and commercial consumers.
Once this takes place, profit-making areas will be seized from government discoms and they will become loss-making companies.

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How will this Bill impact the Power Employees & Consumers?

Monopoly of Private Players:

It will result in a major loss for government distribution companies, in due course allowing to establish the monopoly of a few private parties in the country’s power sector.

Operational Issue:

About 80% of the cost of supply is on account of power purchase, which will be the similar for all distribution licensees operating in an area.
Having different retailers will open a plethora of operational issues.
By bringing in more retailers or distribution licensees, the quality of service or price is not going to be any different.

Hit on Consumers:

According to a report of UK auditors, due to adoption of such wrong models the consumers had to pay in excess of 2.6 billion pounds.

The cost of such transfers was charged to the ordinary consumer.
While the private companies failed, consumers were hit the most.

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What is the Government’s Rationale for the Bill?

Government has specified that no provision in the bill lessens the powers of the states to control the power distribution sector, payment of power subsidy.
The government has showed that several discoms can already exist in the same area and the bill only shortens the process to confirm that competition results to better operations and service.
The government has stated that it had consulted every state and many associations in writing, including a separate written assurance to the Agriculture Ministry, that there is nothing anti-farmer in the bill.
- The bill enables the use of additional cross-subsidy that is collected from industrial and commercial users in one area, for subsidising for the poor in other areas.
- With India targeting to attain 50% of its installed power capacity from renewables by 2030, the government is of the view that the push for Renewable Purchase Obligations (RPOs) mentioned in the bill will augment India’s power demand, which is expected to double in the next eight years while moving to achieve green targets fixed as per the Paris and Glasgow Agreements.

Way Forward

Being a subject of Concurrent List of Indian Constitution, recommendations from states should be taken into consideration for effective implementation of the provisions of the bill.
Provision concerned to subsidies should be put up in a detailed manner to eradicate any scope of confusion/ conflict.
Regulations for private players should be brought in to avoid differential distribution.

Under the Electricity (Amendment) Bill 2022, the government aims to bring in the principle of open access — which will enable consumers the right to select their electricity provider, nevertheless of who manages the physical infrastructure in their locality or state. This would be same to the way in which they can choose their mobile and internet service providers. How will it do that? The Bill, which proposes significant changes in the power distribution sector, will enable multiple distribution licensees to function in an area. Having been cleared by the Union Cabinet, the Bill proposes to alter Sections 42 and 14 of the Electricity Act. Thus, it will allow competition in retail power distribution

The proposed amendment to these Sections will enable the use of distribution networks by all licensees “under provisions of non-discriminatory open access”. The freedom to select will be provided through multiple distribution licensees on the same network. This is significant because while the incumbent Act did let several licensees to function, it did not give them access to the existing power distribution network.

Earlier open-access provisions were damaged by exceptions and legal disputes. In the past, only large consumers were able to select their provider. With this new Bill, Business Standard has argued that consumer rights must be respected through a principle like open access and that its application is overdue. Anyhow, consumer choice will mean that poorly-performing state electricity utilities could end up being shunned in favour of their better-performing counterparts.

The Bill will also alter Section 62 to enable graded revision in tariff over a year. The Bill also says that an appropriate commission will fix the maximum ceiling and minimum tariff. An amendment to Section 166 is also slated to build up the regulators and the functions carried out by them. However, the Centre has dropped the proposal of privatising state-owned power distribution companies.

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Overall, the Bill has proved to be unsure. So, what’s behind the opposition to its proposals? Farmer bodies and the Opposition believe that by enabling multiple private agencies to distribute power in one place, the amendments will destroy the power of states. The Opposition has said that the amendments will effectively stop the right of state governments to regulate tariff and distribution and are against India’s federal structure. They also claim that these amendments will lead to the indiscriminate privatisation of the power distribution sector. Delhi Chief Minister Arvind Kejriwal described the Bill as “dangerous” and claimed that it would only benefit a few power distribution companies. Meanwhile, the central trade unions have also said that the Bill targets to privatise electricity distribution. One of the main concerns is that the Bill will make electricity unaffordable for both ordinary power consumers and farmers by ending all subsidies.

Key specifications of the bill

The bill proposes a framework to allow consumers to choose between different service providers. It provides for the formation of the Electricity Contract Enforcement Authority (ECEA), which will deal with contract-related disputes in the electricity sector. Further, the bill proposes penalties in case of non-compliance by licensees in meeting the obligations. It requires all licensees to purchase or produce a minimum specified quantity from renewable energy sources as a percentage of their total electricity consumption. A selection committee would be constituted to appoint the chairperson and members of the Appellate Tribunal (APTEL), the central and state regulatory commissions (CERC, SERCs) and the ECEA, according to the bill.

A timeline of events

The Electricity Act was passed by the Indian Parliament in 2003. It covers issues related to the generation, distribution, transmission, and trading of power in the country. The Centre is expected to introduce the Electricity (Amendment) Bill in the 2022 monsoon session of the Parliament. The session is due to begin on July 18 and will commence on August 13.

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What is the opposition to the Electricity (Amendment) Bill 2022?

According to Ajaypal Singh Atwal, the General Secretary of Punjab State Electricity Board Engineers Association (PSEBEA), “In this Bill, Section 42 of the Electricity Act will be amended to allow ‘non-discriminatory open access’ to the distribution network, allowing private companies to supply electricity provided they get a license.”

Atwal further said, “Section 14 of the Electricity Act has also been proposed to be amended, allowing private companies to use distribution networks built by public sector electricity companies, enabling competition and enhancing the efficiency of power supply across the country.”

Under the Bill, consumers will be able to choose from multiple electricity providers, essentially like how they choose currently between telecom providers like Airtel, Vodafone, etc., he added. Several bodies and political parties have opposed the Electricity (Amendment) Bill, 2022. Ahead of the monsoon session 2022, the All India Power Engineers’ Federation (AIPEF) wrote to the Union Power Minister R K Singh and Chief Ministers of all states, requesting to stop the bill. The federation suggested the government hold discussions with electricity sector workers and power consumers. The bill faces criticism that it would dilute the power of the states and shift it to the Centre and its agencies. Critics further say the bill allows private players an easy entry into the electricity sector, thus granting them an undue advantage.

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What are the Bill’s implications, as per protestors?

Protesters claim that as per the Bill, only government discoms or distribution companies will have universal power supply obligations. Therefore, it is likely that private licensees will prefer to supply the electricity in profit-making areas – to industrial and commercial consumers.

Jagtar Singh Dhiman, President of the PSEBEA, said that once this happens, profit-making areas will be snatched from government discoms and they will become loss-making companies. It will be difficult for them to purchase electricity from generators or to undertake infrastructure upgradation, he said.

Another problematic aspect, as per the Bill’s critics and the Chief Minister of Punjab, is that the Constitution lists ‘Electricity’ as Item 38 of List III (Concurrent) of the Seventh Schedule, so both the Central and state governments have the power to make laws on this subject. They said with the proposed amendments, the federal structure of Indian polity, a part of the ‘basic structure’ of the Constitution of India, is being violated.

Labour unions and the Sanyukt Kisan Morcha, an umbrella organisation that was at the centre of the Farmers’ Protests in 2020 and 2021, are of the view that free power for farmers and Below Poverty Line population will go away eventually.

Presently, around Rs 15,000 crores are spent on the various power subsidies that the Punjab government offers. ‘Zero power bills’ or free electricity in the domestic sector are given out if consumption is up to 600 units in two months per family. Around 61 lakh households come under this criterion, for which the subsidy amounts to around Rs 1,800 crore according to Vinod Gupta, the spokesperson of the All Indian Power Engineers Federation.

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Aims of the Electricity (Amendment) Bill 2022

The bill aims at allowing the licensing of multiple discoms for supply in the same area as well as the fixing of minimum and maximum tariffs. While the bill intends to impose a universal service obligation on all licensees, it allows national and state dispatch centres to cut power supply if the discoms don’t give bank guarantees.

The bill provides for management of power purchase and cross-subsidy in case multiple distribution licensees exist in the same area of supply, it allows network sharing for optimum utilisation as well as proposes an enhanced rate of penalty for non-compliance with the revised provisions.

The bill also mandates discoms to abide by the Renewable Purchase Obligations and ensures removal of members of regulatory bodies in case they neglect rules or willfully violate legal provisions.

Objections to the Electricity (Amendment) Bill 2022

The federation claims that the universal service obligation will cover only the existing companies which will lead to indirect privatisation. The federation also fears that multiple licensees in urban areas will result in loss-making areas remaining underserved, and power cuts for want of bank guarantees will disrupt power supply, destabilise grids and burden ailing discoms.

The Union government’s rationale

Government sources questioned the objections raised against the bill, stating that those objecting to the it have either not read it, didn’t understand it or didn’t want to understand it. The Union Government has maintained that no provision in the bill reduces powers of the states to regulate the power distribution sector, payment of power subsidy.

Citing Mumbai’s example, where multiple power licensees operate in the same area of supply, the government has indicated that multiple discoms can already exist in the same area and the bill only simplifies the process to ensure that competition leads to better operations and service.

The Centre has maintained that it had consulted every state and many associations in writing, including a separate written assurance to the Agriculture Ministry, that there is nothing anti-farmer in the bill. Rather, the government has said that the bill allows the use of additional cross-subsidy that is collected from industrial and commercial users in one area, for subsidising for the poor in other areas.

Stating that the Centre referred the bill to the standing committee to ensure more stakeholder consultation, government sources are maintaining that there hasn’t been any encroachment on the domain of states, this issue is in the concurrent list. The Centre has stressed on the need to strengthen the power transmission network and put up defenses to guard against cyber attacks.

With India aiming to achieve 50 percent of its installed power capacity from renewables by 2030, the government is of the view that the push for Renewable Purchase Obligations (RPOs) mentioned in the bill will augment India’s power demand, which is expected to double in the next eight years while moving to achieve green targets fixed as per the Paris and Glasgow Agreements. The government has accused a section of politicians distributing everything for free for “bringing the nation to ruin”, pointing out that such politicians aren’t spending money from their pocket but from the exchequer.