Rescue plan

Electricity Amendment Bill 2022 – What’s the bailout for struggling discoms and why the opposition is protesting

The long-awaited, much-needed and yet controversial Electricity Amendment Bill 2022 has been sent to the Standing Committee for consideration after opposition opposed its passage and it also saw protests from other quarters including the All India Power Engineers Federation (AIPEF) and farmers, particularly in Punjab.
Electricity sector workers fear that the bill, which proposes certain amendments to the Electricity Act 2003, could privatize the sector. Farmers fear their subsidies will end if the bill passes. The opposition has raised both issues, including the allegation that it has not been consulted on an issue where states have traditionally had the right to intervene because it falls on the concurrent list – topics that can be reviewed by both the state and the central government.

The government dismissed all concerns and sent the bill to the parliament’s standing committee for its suggestions.

The bill is being pushed at a time when the poor health of the electricity sector requires life support. A Reuters report showed India faced its worst power shortage in 2022 in more than six years. It affected almost every state from Delhi to Andhra Pradesh where power cuts were recorded for 2-8 hours.

What is the bill about?

The bill will allow consumers to select their choice of electricity distributor and will also open up space for more suppliers who will now be able to use the existing supplier’s distribution infrastructure. It also allows the presence of more than one distributor in an area. This will inject some much-needed competition into discoms, boosting their efficiency.

The bill states that regulators will set a minimum price cap to prevent discoms from offering unrealistic prices to chase rivals and will also cap the maximum price to protect customers. The bill also provides for the automatic granting of a license to an entity after a period of 90 days if the regulator does not approve or reject the application within that period. Regulators will have civil court status and can enforce compliance by issuing orders.

The bill establishes rules for appointments and removals from the regulatory body. It also proposes that if a state commission is unable to perform its duties, the center may, in consultation with the state, temporarily assign the duties to other state commissions or joint commissions so that the work may continue. without hindrance.

The bill also encourages the use of green energy and aligns the states’ vision with that of the center.

The changes are largely desirable and driven by the urgency in the power distribution sector – the weakest link in the electricity sector.

What are the problems in discom difficulty?

Discotheques or distribution companies have growing losses of income that remain unpaid by the States. As a result, discoms also owe massive dues to gencos (power generation companies). Reports indicate that the average transmission losses in India are over 20%. This is much higher than in advanced economies where these losses are in the single digits.

States have accumulated heavy debts due to the subsidies they provide to low-income consumers. According to a report by news agency PTI, total unpaid dues owed by discoms to power producers increased by 4% year-on-year to reach Rs 1,32,432 crore in June 2022. Discoms owed a total of Rs 1,27,306 crore to power generation companies in June 2021.

According to data from the Office of the Chief Economic Adviser (CEA) and reported by Business Standard, Indian states and union territories (UTs) owe over Rs 1 trillion to gencos.

Why are there protests?

Protesters say the bill will allow private players to cater only to profitable industries and commercial consumers, leaving large areas unattended with only government-owned discoms forced to meet the electricity needs of the rest.

Electricity workers say state-owned companies will turn into loss-making companies and lose leverage to buy power from gencos or maintain infrastructure.

The farmers’ unions believe that the subsidies given to them will eventually come to an end because of the bill which will introduce competition into the sector and that private actors will aim for profits.

The Center, meanwhile, rejected the claims even as it agreed to broader consultations on the bill which raised objections even from parties considered pro-BJP like the YSRCP and BJD.

Energy Minister RK Singh said the Center was not privatizing the electricity sector, but “opening the door” to competition. He said the existing discoms would continue as they are.