Relevance: GS 2: Government Policies and Interventions for Development in various sectors and Issues arising out of their Design and Implementation.

Key Phrases: Electricity (Amendment) Bill 2022, parliamentary standing committee, Tariff ceiling, Renewable purchase obligation, Concurrent List, PRAPTI (Payment Ratification and Analysis in Power procurement for bringing Transparency in Invoicing of generators).

Why in News?

• The government has recently tabled the Electricity (Amendment) Bill 2022 in the Lok Sabha, soon after which it was referred to the parliamentary standing committee on energy for wider consultation with stakeholders.

What does the amendment Bill propose?

• Multiple discoms in the same area:
  • For consumers, the Bill, has proposed to amend Sections 42 and 14 of the Electricity Act, thus, enabling competition in the retail distribution of power by offering the customers the option to choose electricity suppliers, just like they can choose telephone or internet service providers.
  • The amendments will “facilitate the use of distribution networks by all licensees under provisions of non-discriminatory open access”, while Section 42 will be amended to “facilitate non-discriminatory open access to the distribution network of a distribution licensee”.
• Tariff ceiling:
  • The Bill, with the amendment of Section 62 of the Act, makes provision for “mandatory” fixing of minimum as well as maximum tariff ceilings by the “appropriate commission” to avoid predatory pricing by power distribution companies and to protect consumers.
  • Also, the amendment Bill has several provisions to ensure graded and timely tariff revisions that will help provide state power utilities with enough cash to be able to make timely payments to power producers.
  • This move is aimed at addressing the recurrent problem of default by distribution companies in payment to generation companies.
• Payment security:
  • The bill through amendments in Section 166 of the Act also seeks to strengthen payment security mechanisms and give more powers to regulators.
• Renewable purchase obligation:
  • The Act empowers SERCs to specify renewable purchase obligations (RPO) for discoms. RPO refers to the mandate to procure a certain percentage of electricity from renewable sources. The Bill adds that RPO should not be below a minimum percentage prescribed by the central government.

Why is it being opposed?

• Against federalism:
  • It is being alleged that the Centre did not consult the states on the Bill. Power as a subject comes under the Concurrent List and it was the “the bounden duty or the mandatory obligation” of the Centre to consult the states.
  • There are concerns that the amendments will give more power to the centre on the appointment and removal of members of regulatory bodies, thereby reducing the role of the state.
• Renewable purchase obligation:
  • If the centre dictates the minimum level of Renewable Purchase Obligation for states, the latter’s powers are reduced.
• Job loss:
  • State employee groups are worried among other things about the passing of the Bill resulting in major losses to government discoms, job losses, and a few private companies establishing a monopoly in the power sector.
• Less attention to loss-making areas:
  • As per the bill, only government discoms will have universal power supply obligations, therefore, private licensees will prefer to supply the electricity in profit-making areas only i.e., Industrial and commercial consumers.
  • The provision to encourage competition may lead to more entities entering lucrative and urban areas, while loss-making areas may continue to be underserved.
  • Thus, profit-making areas will be snatched from government discoms and government discoms by default will become loss-making companies and in the coming days will not have money to purchase electricity from generators.
• Myth of cheaper electricity:
  • It is being argued that the cost of electricity includes 85 percent cost of power purchase agreements. Since power purchase agreements are for 25 years, the electricity cost will not be reduced. Therefore, the promise of competition and cheaper electricity to consumers is a farce.
• Subsidy:
  • Farmers are concerned that it will eventually lead to the end of subsidies power.

How will these amendments help?

• The Bill comes at a time when there is a debate around freebies being offered by political parties that has also, among other things, led to various state power distribution companies (Discoms) not being able to raise enough resources to make timely payments to power generating companies.
• According to the latest government data, Discoms of three states — Tamil Nadu, Maharashtra, and Telangana –have to pay about 57 percent of the total dues owed to power generating companies, followed by Uttar Pradesh, Jammu & Kashmir, and Madhya Pradesh, who account for another about 26 percent of the total dues of Rs 114,222 crore owed to power generation companies.
• Government data updated till March 31, 2022, reveals that states owe Discoms Rs 62,931 crore for services and another Rs 76,337 as the cost of freebies announced by them.
• Among the states that have defaulted on payments to Discoms, Telangana leads the chart with a cumulative outstanding of Rs 11,915 crore, followed by Maharashtra at Rs 9,131 crore.
• Uttar Pradesh leads the pack among states that have not made payments to Discoms for subsidies at Rs 18,946 crore, followed by Madhya Pradesh (Rs 16,240 crore).
• While the top three together owe Rs 65,041 crores, the next three states owe Rs 29,280 crore of the total, according to a PRAPTI (Payment Ratification and Analysis in Power procurement for bringing Transparency in Invoicing of generators) data till July 31, 2022.
• Experts recommend empowering the regulator to be able to take calls on tariff revision and ensuring that the government freebies, even on electricity, should be through direct benefit transfer.

Conclusion:

• The Centre should address the concerns of the states and include them in the debate together with other stakeholders to ensure that the provisions of the bill are implemented effectively because power is a subject of the Concurrent List of the Indian Constitution.
• To address concerns about monopolies, the government should make sure that both government and private discoms operate on an even playing field. Appropriate regulatory procedures should also be in place to ensure that services are being offered equally throughout the nation.

Source: Indian Express

Mains Question:

Q. What are the proposed amendments through the Electricity (Amendment) Bill 2022? How will these amendments help and what are the concerns being raised? Discuss.