The electricity act,2003 was sanctioned by the parliament to transform the power sector in India. The act was brought to solve major issues like generation distribution transmission and trading in the power sector.
The act brought many beneficial reforms in the power sector and according to a report by Quartz, India is the world's third-largest electricity producer with generating capacity of more than 400 gigaWatt (approximately twice the requirement).
The biggest question is why there are electricity, power cuts, load sharing problems when India is generating approximately twice the requirement? The electricity amendment bill, 2021 is brought into the picture to tie up the loose ends and resolve unsettled issues which are being faced by the power sector in India.
The Amendment Bill
The electricity amendment largely seeks to solve the issues in the power sector caused by the poor financial health of the electricity distribution companies.
The main objective of the electricity amendment bill is to de-license the electricity Power Distribution. The term de-licensing denotes the policy where there is the opening of the economy and abolishing government control by removing restrictions and licenses. The bill allows the entry of private companies in the electricity and power sector and gives competition to the government electricity distribution companies. It will also serve the consumer with the power to choose their electricity distributor at their convenience.
The bill puts forward the proposal of increasing the number of members and strengthening The Appellate Tribunal For Electricity (APTEL). The bill makes the electricity control enforcement authority (ECEA) the only body to hear the contract related disputes in the power sector.
The bill makes a mandatory provision that all the companies in the power sector should generate a minimum and specified quantity of electricity from renewable energy sources. It transfers the responsibility of solving renewable purchase obligations from the state to the central government.
The Bill comes up with some form of penalties as well. The person or the company who will act against the provisions of the Act or the Bill will be penalised up to rupees 1 crore. It also imposes strict penalties for non-compliance with the renewable purchase obligation.
Unable to recover costs
In the current model, the distribution companies purchase electricity from the generating companies and sell it to the final consumer. In this whole process distribution companies are not able to recover their money because of transition loss, electricity theft and many more issues. According to an anonymous report the distribution companies are able to recover only 75 to 80% of the cost in which power was purchased.
The Aggregate Technical and Commercial (AT&C) losses are mostly considered as a performance indicator in the electricity and power sector. According to a report released by the distribution utility forum based on the Uday dashboard in 2020 AT&C losses of 12 states were more than 25% and of six states between 15 to 25%.
The Bill has also faced much criticism. Mamta Banerjee the chief minister of West Bengal criticized the amendment bill on the grounds that if there is de-licensing and the entry of private companies, it can cause harm to the poor and rural consumers. The private companies will only be focused on providing electricity to different industrial consumers to make great profits. Sanjay Raut, a well known MP from Shiv Sena also criticized the bill on the grounds that the government did not consult on the penalties and its provisions with the states.
India is the third-largest consumer of electricity in the world and for smooth working with this huge consumer base what is required is good power sector reforms. The electricity amendment bill focuses on the most important issue in the Indian power sector. The poor financial health of the electricity distribution companies is acting as a hindrance for the further growth of the electricity and power sector of India.