Policy

Proposed Electricity Act may rework slabs for residential consumers

Twesh Mishra New Delhi | Updated on April 21, 2020 Published on April 21, 2020

Uniform price for power consumption likely but load-based distinctions may remain

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.

Published on April 21, 2020

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.