New Delhi: The Centre has approved draft of Electricity (Amendment) Bill, 2020 with an aim to effect major reforms in the power sector. Besides, it plans to extend DBT to the power sector so as to make subsidy benefits more targeted towards the poorer sections of society.
The Power Ministry proposes introduction of Direct Benefit Transfer (DBT) in the sector, wherein the electricity tariffs will be determined by commissions without taking subsidy into account, which will be directly given by the government to the intended consumers.
The draft Bill intended to replace the Electricity Act, 2003, has been put into public domain on Saturday for comments from various stakeholders within 21 days. The ministry will then move a Cabinet note on the Bill before placing it in Parliament during the upcoming session for final approval.
The DBT system in the power sector, once implemented, would not only reduce the power subsidy burden of the state governments but also help in making electricity tariffs more economical through sharp reductions in cross-subsidy surcharges.
At present, the state governments subsidise electricity tariffs of all households by keeping tariffs for commercial and industrial consumers higher. This has meant that commercial tariffs remain almost twice the level fixed for households (between Rs 6-8 per unit), thereby affecting business activities and economic growth.
The new Bill aims to end industrial and commercial consumers subsidising electricity charges for domestic consumers and farmers.
For the needy, electricity charges would be lowered by transferring subsidy directly into the accounts of beneficiary consumers through the DBT platform.
The scheme could reduce the cost of electricity for businesses by up to 25-40 per cent to around Rs 6 per unit, helping them increase their earnings at a time when Covid-19 has completely disrupted operations.
However, the proposed changes could severely dent receipts of cash-strapped electricity distribution companies which, helped by the revival scheme UDAY, are still struggling to cut losses.
Apart from the DBT, the new Electricity Bill has also proposed that electricity regulatory commissions will determine cost-reflective tariffs so that discoms are able to recover their costs and not end up in losses.
Another issue plaguing the Indian power sector is non-adherence to terms as agreed to in contracts. This has resulted in a situation wherein several states have asked for revision of tariffs from power producers even after the inking of power purchase agreements (PPAs).
To ensure that this does not result in disputes, the draft Bill proposes establishment of Electricity Contract Enforcement Authority headed by a retired High Court Judge and with powers of a civil court to enforce implementation of the contracts.
Besides, the regulatory regime will be strengthened by increasing the powers of the Appellate Tribunal for Electricity. The tribunal will also be empowered to enforce its decisions.
The new Bill proposes a system of higher penalties to enable adherence to the guidelines outlined in the proposed legislation.
It also proposed a National Renewable Energy Policy for the development and promotion of generation of electricity from renewable sources of energy.
A minimum percentage of purchase of electricity from sources of hydroelectricity is to be specified by the electricity commissions. Non-fulfilment of obligation to buy electricity from renewable and/or sources of hydroelectricity will attract hefty penalty.
Other measures in the new Bill include provision for cross-border trade in electricity, franchisees and distribution sub-licensees. Distribution Companies, if they so desire, may engage franchisees or sub-distribution licensees to distribute electricity on its behalf in a particular area within its area of supply. However, it will be the DISCOM which shall remain the licensee and, therefore, ultimately responsible for ensuring quality distribution of power in its area of supply.