Bengal Chief Minister Joins Building Chorus Against Electricity Act Amendments

Bengal CM Protests Against Electricity Amendment Act 2020

The Electricity Act Amendment Bill (2020), slated for a possible introduction in the coming session of parliament, faced a predictable salvo yesterday. West Bengal Chief Minister Mamta Banejee termed its provisions ‘anti- federal’ and even ‘inhuman’ to be brought up at a time when the pandemic is raging.

In a strongly-worded letter to Prime Minister Narendra Modi, Banerjee said the move by the Centre to amend the Electricity Act, 2003 was “completely unjustified” amid the socio-economic crisis brought upon by the COVID-19 pandemic.

The chief minister placed her resistance on record to pretty much most of the key features of the amendments, from removal of cross subsidies, to the idea of direct benefits transfer to beneficiaries, and even the establishment of a national Electricity contracts enforcement authority.

Even the possible push for enforcement of renewable purchase obligations (RPO’s) by state discoms was resisted.

Coming soon after the apprehensions voiced by the Tamil Nadu Chief minister, Ms Banerjee’s diatribe against the proposed bill is ominous, as she has demonstrated a far higher willingness and capability to successfully resist central diktats earlier.

In pushing for status quo, it has also become quite apparent that entrenched interests in the existing system have enough motivation, resources and  wide ranging support to stymie the bills progress, if a few more supporters come through. The addition of a key industrial state like Maharashtra, for instance, could ensure a block on the bill , or at least its deferment to yet another parliamentary commitee to slow cook it for any amount of time.  Keep in mind that this is a bill that was considered important enough till barely a month back to be rammed in by the ordinance route, as stressed by them MNRE Secretary, Anand Kumar. One hopes the change in secretaries does not signal a change in momentum for the bill too.

The implications  for the renewable sector will be grave, as the sector’s long term growth is inextricably linked to the health of the power sector which the bill seeks to fix. The tragedy is that India today finds itself in a situation where an all out push on renewable energy, including storage backed renewables, is perfectly possible. Ironically, this has been made possible due to years of poor demand demand forecasting, thanks to which the country finds itself with an unholy amount of spare thermal and gas fired capacity. Thus, even if there are slippages in renewables generation over the next 2 years for instance, enough capacity remains, that can be called upon to fill any gaps.

Keep in mind that some of the states mentioned here, from Maharashtra, to Madhya Pradesh to even Delhi, are already paying very high fixed charges to thermal plants where they contracted to pay for electricity, and are doing so, but are actually not availing any due to lack of demand. Adding eventually to final consumer prices. Even West Bengal’s own discom, WBSEDCL, which spends around Rs 1,800 crore per month for purchasing power, has only been able to cut some minimal costs despite the crash in demand since April. Further reduction in purchase bills has become impossible thanks to its long-term power purchase agreements that have to be honoured. One of the reasons why the discom has been forced to ask for state guarantees on fresh loans to pay May salaries.

For industry, the bill is a critical step in the move to make India more competitive, by cleaning up the power system, and stopping the practice of adding high costs to industrial power bills. Even rating agencies like ICRA have welcomed the bill.

In fact, if there was to be zero new capacity creation for the next 2-3 years, chances are that India will still manage comfortably. The onus of fresh renewable capacity creation is driven by both their lower costs now, as well as the country’s climate commitments.

There is probably a far stronger case for closure of  older, polluting thermal stations from 1970’s and 60’s vintage, which continue to get extensions on meeting pollution control norms for the past 4 years. Making the central government equally culpable at times, as the state governments who use discoms to pass on freebies without fiscal consequences.