The proposals in the draft Electricity (Amendment) Bill, 2020, will make it tougher for State governments to cross-subsidise consumers. According to industry watchers, provisions that ensure cost reflective tariff in the draft Bill will ensure that all consumers pay for at least the cost of power once the new Electricity Act is enacted and enforced.

This will be a deviation from the current approach adopted across States to keep power tariffs lower for residential consumers and significantly higher for industrial consumers. Some States also offer free power to agricultural consumers in a bid to keep farm produce costs lower.

But this may change when all consumers end up paying a uniform price for power consumption. Industry watchers say different tariff slabs for consumption might be done away with but load-based distinction will remain. This will result in consumers with less power consumption paying less fixed charges than those with higher consumption.

But everyone will have to pay the same tariff per unit of power consumption.

The State governments will then be free to subsidise any section of consumers through a direct benefit transfer of the desired amount. This approach is expected to plug rampant cross-subsidy and bring transparency in the operations and finances of power distribution companies. But it will increase upfront costs for a large section of consumers who would otherwise be falling under lower consumption slabs and were incurring lower bills.

Privatisation push

Other provisions of the draft Bill that seeks to amend the Electricity Act, 2003, eye strengthening the sanctity of contracts signed by power distribution companies (Discoms). The proposed Electricity Contract Enforcement Authority (ECEA) is expected to supersede existing Electricity Regulatory Commissions. Its role will be to resolve disputes between power generation companies and Discoms. A decision taken by this ECEA can only be challenged at the Appellate Tribunal for Electricity (APTEL) and, subsequently, at the Supreme Court.

Another proposal in the draft Bill suggests more privatisation of Discom operations by introducing sub-licensing.

Employee associations are harsh in their reactions to the proposed Bill.

“The draft seeks privatisation of Discoms by way of sub-licensing and franchisees. This will be complete privatisation of the power sector. Further, state regulatory commissions will determine the tariff for the retail sale of electricity without any subsidy under Section 65 of the Act,” said Shailendra Dubey, Chairman of the All India Power Engineers Federation.

In a statement, the Electricity Employees’ Federation of India said that the Centre is “only attentive to look after the interest of profit-greedy business community seeking entry into the power sector.”

On its part, the Centre is focused towards reducing politicisation of the power sector while improving the health of loss-making Discoms.