The Hindu Business Line : A review act

THE POWER MINISTRY is all set for a review of the Electricity Act, 2003, a move that has been on the cards ever since the United Progressive Alliance Government assumed office earlier this year. As part of this process, the Prime Minister, Dr Manmohan Singh, has asked the Ministry to consult the Left parties and the States. He made his thinking on the subject clear in a recent speech when he said: "... The most important demand side initiative we have to take is related to the pricing of energy. I do believe that the single most important energy conservation step we can take is to adopt rational and economic pricing for power... I am aware that in an unequal society with unequal distribution of income and assets, it will not be politically feasible to adopt a purely economic model for energy pricing... whatever subsidies we offer to customers must be offered transparently and be justified on stated economic, social and political grounds... The free supply of power in rural areas is the effect of not only encouraging excessive use of power when it is on offer, but of also encouraging the wasteful use of groundwater... at the heart of all these problems is the irrational pricing of energy."

The Prime Minister would do well to play it back to all those demanding a review of the Act, enacted by the predecessor government. They are doing so for various reasons, one of which is the need to take care of the poorer sections, whose concerns, they say, the Act fails to address. The Common Minimum Programme, the guiding principle for this Government, specifically states that a "review of the Electricity Act 2003 will be undertaken in view of the concern expressed by a number of States." The Left parties, on whose critical support hinges the Government, too have been demanding a review, saying the Act is pro-privatisation and that it does not take into account the needs of the poorer sections and that there is need for a differential tariff structure. Others are questioning the Act, making it mandatory for States to unbundle their electricity boards when there is no evidence to suggest that this results in greater efficiency. As it is the deadline for the States to unbundle the electricity boards has been extended once.

The Power Ministry will now hold discussions before taking the recommendations to the Cabinet for approval. Of the areas that will come up for review will most certainly be Section 61, which calls for setting retail tariffs to recover the cost of supply, and reducing and eliminating cross-subsidies within a stipulated period. Those connected with the power sector welcomed the Act when it was finally approved by Parliament, after a long and tortuous process. They will now be hoping that the review does not end up in a major overhaul, as that will surely set back reforms in the power sector. The Act itself needs to be followed up with a number of policy initiatives and these may now get delayed by the review. The review and the proposed amendments will be a reflection of how the economist in Dr Manmohan Singh reconciles with the politician and leader of a coalition.