Faced with an acute power crisis caused amongst others by sudden spurt in power demand in this season, Modi – government has fired all cylinders to tackle the most crucial of all bottlenecks in the way, namely coal which accounts for nearly 52 percent of total power generation capacity in the country. During April/May 2022, the Union Power Ministry – using powers vested in the government under Section 11 of the Electricity Act, 2003 – issued directions to (i) all imported coal-based plants (ICB) to operate and generate power to their full capacity and (ii) all generation companies (gencos) based on domestic coal to import at least 10 percent of their fuel requirements (there is a move to further raise...
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Category: Tariff Policies & Subsidies
Power subsidy – Kejriwal’s volte face
Arvind Kejriwal, Chief Minister, Delhi has come up with a proposition i.e. ‘from October 1, 2022, electricity subsidy will be given only to those households who ask for it’. This is bizarre. If, the head of a State takes an in-principle decision to give subsidy to anyone who wants it, as a natural response, almost every one will say ‘Yes’. But, over 75 percent of the households (HHs) are already getting subsidy. So, why ask them? There is something more than what meets the eye. At present, HHs consuming up to 200 units per month are fully exempt from paying any charges. Their number is around 3 million. For HHs consuming between 201 – 400 units per month, the State...
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The tale behind putting off key power reforms
DBT and de-licensing of electricity distribution hold the key to extricate the sector from morass and make power available to consumers at affordable rates In the draft Electricity (Amendment) Bill, 2021, there were four provisions— direct benefit transfer (DBT), de-licensing of the electricity distribution business, creation of the Electricity Contract Enforcement Authority (ECEA) for adjudication of contract disputes, and a single choice committee for appointment of chairman and members of state and central tariff regulators. Reportedly, the Central Government has dropped all four. While the third and fourth proposals are procedure-oriented aimed at ensuring effective enforcement of contracts, the first two are revolutionary reforms. If implemented in letter and spirit, they have the potential to drastically improve the Indian power...
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Privatising power distribution: A hoax
It cannot happen because political parties need discoms to run their populist schemes of subsidised power A major plank of the Electricity (Amendment) Bill (EAB), 2021, is to de-license the electricity distribution business, bring in competition, and give the consumer power to choose her supplier (‘open access’). This is easier said than done. It has to do with the fundamental weakness of State-owned and controlled power distribution companies (discoms), who will come under greater stress if private players also get involved. What makes discoms weak? The states order them to sell electricity to poor households and farmers at a fraction of the cost of purchase and distribution, or even free. On units sold to them, discoms incur huge under-recovery. This...
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Power reforms — a distant dream
Unshackling of discoms will take away the leverage parties enjoy to serve their populist goal of giving cheap/free power to people at election time Since last year, there have been several announcements regarding the reformation of power distribution companies (discoms). They include the Electricity (Amendment) Act, 2020,Reforms-Linked, Result-Based Scheme for Distribution (RLRBSD), and a special loan of Rs 90,000 crore(subsequently raised to Rs 130,000 crore)to discomsin 2020, and the new draft National Electricity Policy, 2021. The key reform measures included (i) developing an efficient market for electricity distribution; (ii) de-license the distribution business, bring in competition, and give the consumer power to choose supplier (or “open access”); (iii) direct benefit transfer (DBT) of subsidy; (iv) putting a cap on the...
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NEP: A bundle of pious intentions
The Government should avoid overambitious targets that will result in gross underutilisation or even scrapping of the assets already created In yet another attempt to improve the power sector, the Modi Government has come up with a new draft National Electricity Policy (NEP), the major objectives being to promote clean energy such as power based on renewable and gas without debunking coal; revitalise power distribution companies (discoms) and developing an efficient market for electricity distribution. All the three objectives are laudable. These are crucial to development of an efficient, competitive and sustainable power sector to meet the needs of the economy on a high growth trajectory while at the same time, meeting the environment goals (especially India’s commitments under the...
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National Electricity Policy – a bundle of pious intentions
In yet another attempt to improve the power sector, Modi – Government has come up with a new draft National Electricity Policy (NEP) its major objectives being (i) to promote clean energy such as power based on renewable and gas – without debunking coal; (ii) revitalize power distribution companies (discoms) and (iii) developing an efficient market for electricity distribution. All the three objectives are laudable. These are crucial to development of an efficient, competitive and sustainable power sector to meet the needs of the economy on a high growth trajectory while at the same time, meeting the environment goals (especially India’s commitment under the Paris Agreement on Climate Change). What is being done on ground zero to achieve these goals?...
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Power Struggle: Centre’s reform scheme is a mere bailout package for discoms
The Rs 3 lakh crore channeled via RLRBSD is merely another bailout for discoms. The only obligation placed on them is meeting targets they Should have to met in 2018-19 That the money is being offered on a platter is clear from virtually no obligation on the discoms (the performance targets set for 2018-19 now gets shifted to 2025). In her FY22 Budget speech, FM Nirmala Sitharaman announced that under the proposed Electricity (Amendment) Bill, 2021, the government intends to delicence the distribution business, bring in competition, and give the consumer power to choose her supplier. She also unveiled the Rs 3 lakh crore electricity distribution reform programme to reduce losses and improve the efficiency of discoms. Tantalisingly christened ‘Reforms-Linked,...
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No power in these reforms
Just as the UDAY scheme was meant to extinguish the liabilities of discoms, the proposed electricity distribution reform programme, too, seeks to give them the money on a platter The Government is expected to announce a Rs 3,00,000 crore electricity distribution reform programme to reduce losses and improve the efficiency of power distribution companies or discoms. Christened ‘Reforms-Linked, Result-Based Scheme for Distribution’, the move is aimed at helping discoms trim their electricity losses to 12-15 per cent from the present level and gradually narrow the deficit between the cost of electricity and the price at which it is supplied, to ‘zero’ by March 2025. This is quite similar to the Ujwal Discom Assurance Yojana (UDAY) launched in 2015, wherein the...
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Electricity distribution reforms – a hoax
Amidst the cacophony of farmers’ protest over the enactment of three farm laws by Modi – government (they don’t want to settle for anything short of their repeal), a demand that went unnoticed relates to doing away with an amendment to the Electricity Act (2003) that requires farmers to pay tariff for electricity supply at the un-subsidized rate even as the concerned state provides for direct cash/benefit transfer (or DBT as it is known in common parlance) of subsidy to their bank account. Reportedly, the Centre has accepted this demand. What it means is that the Centre will continue with the existing dispensation of supplying power at subsidized rates to farmers (in some states, it is even free of charge)....
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