In Blow To Power Reforms, Key Provisions In Draft Electricity Bill (amendment) 2021, Dropped

The Draft electricity amendment bill (2021), whose withdrawal was one of the demands of the agitating farmers, has gone through some major changes after ‘feedback’ from ‘stakeholders’. And it is clear who has been winning the arguments, if one goes through the (dropped) changes that have been shared by the sources in the Power Ministry. The opposing states have prevailed, for now. The dropped provisions in the proposed final draft include:

1. Creation of Electricity Contract Enforcement Authority (ECEA)

No new body is being proposed to be created

2. Single Selection Committee for appointment of Chairman and Members of SERCs and CERC.

The selection process will continue as per the present provisions in the Act.  

3. Distribution Sub-Licensee

The concept of distribution sub-licensee has been dropped.

4. Direct Benefit Transfer

This proposal has also been dropped.

All 4 of the dropped proposals were painted as attacks on the federal structure of the country by those opposed to them, seen as a way to usurp the power of the state governments by the central government and its appointed agencies. Be it West Bengal government, various industrial bodies within discoms, or even some ‘experts’ ranged against the government, these were invariably the issues raised against the bill. With the farmers effectively in their camp, it does look like the victory of the farmers has blown some good news to opponents of the bill too. For the central government, after months of mounting a strong defence of these provisions on the platform of customer service and transparency besides financial discipline, the changes will be a bitter pill to swallow. They will also disappoint vast sections of the private sector especially who saw a major reform in the bill’s passage.

At Saurenergy, we have regularly supported the bill and its provisions as a net positive for the power sector, and in fact, vital for the recovery of the sector from the tyranny of delayed payments and loss making discoms right now.

The new, watered down version will need to suffice for now. In effect, what it means is simply that on key issues, instead of a sector specialist deciding issues faster, we will continue to depend on the country’s stretched judicial system to adjudicate, in its own time. Subsidies will take longer to untangle, especially in states where agricultural subsidies for instance are a high share of overall power consumption and losses.

That state government’s have managed to protect their hold over SERC’s is also a signal that change will be slow and hard fought for consumers and industry as well,  as states with an exceptionally poor record in appointment as well as  decisions (or the lack of them) that fly in the face of reason continue to get away.

The good news is that some good does seem to have survived the hack. Be it the provision to have more discoms in each operating area,

even as existing distribution companies continue to operate as they are at present.

Strengthening of SERCs as per the Supreme Court order will continue with:

1. Civil Court Powers to Appropriate Commission
2. Increase in number of members in SERCs from two to three
3. Suo motu determination of tariff by the Appropriate Commission and reduce the time required for tariff determination

The National Load Despatch centre will continue to strengthen the payment security mechanism which seeks to reduce the risk of non payment from discoms, besides facilitating a non discriminatory open access regime for new discoms as they enter the market.

Penalties linked to RPO (Renewable Purchase Obligations) will also survive, hopefully serving to push laggard states towards faster adoption now.

All in all, after the complete overhaul the Electricity Amendment Bill (2021) promised, one would have to say that the version we seem set to get finally is more like a light shake up of the sector, until we see real movement on the key issues that have been retained, be it the entry of new discoms, or a truly real open access regime, and states that actually make an effort to meet their RPO obligations.