An Assessment: The Electricity Act, 2003 vs. The Electricity Amendment Bill, 2020

Introduction to the Electricity Act, 2003  

The Electricity Act, 2003 is an Act of the Parliament of India and was enacted to transform India’s power sector. The Act encompasses major issue like distribution, generation and trading in power. The key features of the Act are:

• Any generating company may establish, operate and maintain a generating station without obtaining a license under this Act, with the only exception that it should comply with the technical standards relating to connectivity with the grid.
• No person shall:

1. 1. transmit electricity; or
   2. distribute electricity; or
   3. undertake trading in electricity, unless he is authorised to do so by a license issued, exceptions are informed by authorised commissions through notifications.

• The Central Government may make region-wise demarcation of the country and from time to time make such modifications therein as it may consider necessary for the efficient, economic and integrated transmission and supply of electricity, and in particular to facilitate voluntary inter-connections and co-ordination of facilities for the inter-State, regional and inter-regional generation and transmission of electricity.
• Setting up State Electricity Regulatory Commission (SERC) has been made mandatory.
• Central government to prepare National Electricity Policy and Tariff Policy. Central Electricity Authority (CEA) to prepare National Electricity Plan.

The Electricity Amendment Bill, 2020  

The Electricity Amendment Bill has been introduced to promote private players’ entry into the market in the generation, distribution, and transmission of electricity. According to some experts, the provisions of the Act had become archaic, and hence, this Amendment has been introduced with some policy modifications (Thakur & Chamariya, 2020).

Policy Amendments:

• Renewable Energy: The Amendment, via an insertion, delegates the Central Government with the power to prepare and notify a National Renewable Energy Policy “for promotion of generation of electricity from renewable sources”, in consultation with State Governments.
• Cross Border Trade: The Central Government has been delegated to prescribe rules and guidelines to allow and facilitate cross border trade of electricity.
• Electricity Contract Enforcement Authority: This authority has been proposed to be given sole jurisdiction to adjudicate upon matters on the performance of obligations under a contract regarding sale, purchase and transmission of electricity, but,
• Exclusion of this specialised authority’s jurisdiction on the determination of tariff or any other dispute regarding tariff.

Electricity (Amendment) Bill, 2020 and the Various Viewpoints

The bill incorporates the National Renewable Energy Policy (NREP), which is likely to push the generation of electricity from renewable sources of energy and prescribe a minimum percentage of the purchase of electricity from renewable and hydro sources of energy. With more renewable energy incorporated into the generation mix, the Indian electricity sector would undergo a green transformation.

The existence of a National Electricity Policy and the existence of a separate NREP might create discontinuity within the overall thinking and approach. Rather than having two independent policies, the renewable energy policy would serve its purpose better being an integral part of the National Electricity Policy.

There are some opposing views as well. The All India Power Engineers Federation (AIPEF) has raised some points regarding the Amendment. The States fear that it will affect their free power programs and work against the interest of farmers and poorer sections of the society. Some experts from the private and government sector think that the transfer of cash subsidy directly to farmers and domestic consumers’ accounts may not be practically possible as timely payments by the States cannot be guaranteed.

Soumya Dutta, MAUSAM, said that the whole focus of the amendment bill was very clearly to make electricity a commodity rather than a service. But according to Soumya, what also needs to be highlighted are questions like whether the country needs to produce as much electricity as the bill proposes, which sections of the society will be affected if the country goes for such productions and what will be the nature of the source of such energy productions. Soumya asserted that Hydropower was introduced in an electricity bill for the first time (Huque, 2020).

The other points that were not favouring the Electricity Amendment Bill were that privatisation would not eliminate costs. The franchisee selection would be made in a manner that might not favour the rural sector due to the low revenue and subsidies. It also shifts the state’s burden as cross-subsidies are removed, and the states might not have sufficient funds at all times. So, there are a lot of aspects that have to be reconsidered and discussed.

According to the Institute for Energy Economics and Financial Analysis (IEEFA), the opportunity cost of delaying India’s electricity sector is high. International investors need policy certainty and commitment from the Government of India. If this is built, it will increase the capital deployment in the renewable energy market (Shah, 2020).

Some general recommendations to improve the fluidity in the renewable energy sector are planning for transmission network expansion and modernisation and incorporating large-scale renewable energy hubs. It contradicts the opinions of many but striking a balance by improving domestic and international access to capital for large-scale and small renewable energy players would be beneficial for the people at large.

It is imperative for development to enhance economic efficiency, but it is also important to strike a balance between sustainable practices and developmental activities. The rural sector’s needs should also be kept in mind while providing them with sufficient opportunities to help them get better economically.

Purnima Tandon wrote this piece as part of Yugma Network’s renewable energy series. You can read more research papers here.

References  

1. Huque, S. (2020, May 7). Withdrawal of Electricity Amendment Bill. Retrieved from Center for Financial Accountability.
2. Shah, K. (2020, February). India’s Renewable Energy Policy Headwinds. Retrieved from Institute for Energy Economics and Financial Analysis.
3. Thakur, D. K., & Chamariya, P. (2020). The Electricity (Amendment) Bill, 2020: An Overview. Economic Times.