How the new electricity bill plans a ‘power’ cut of states

The new bill says that the states could give subsidies to consumers or certain sectors but without provisioning it in the tariff determined by the state electricity regulatory commissions

Telangana, AP and Tamil Nadu are now providing free power to the agriculture sector while certain categories of domestic consumers get power at a subsidised rate. Representative Image: iStock

The draft Electricity (Amendment) Bill, 2020, mooted by the NDA government, has heckled the states and a section of power sector experts. It is largely seen as an attempt by the Centre to usurp the powers of the states and to gradually eliminate power subsidies.

Telangana, Andhra Pradesh, Tamil Nadu, Bihar and Kerala have raised objections over the provisions of the controversial bill. Other states are also likely to follow suit because the new legislation seeks to subsume the power of the states to appoint regulatory commission chiefs and, proposes to privatise the distribution of electricity supply.

One of the most significant features of the proposed legislation pertains to the transfer of subsidy to certain categories of consumers.

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The new bill says that the states could give subsidies to consumers or certain sectors but without provisioning it in the tariff determined by the state electricity regulatory commissions. The respective states will have to grant subsidies through Direct Benefit Transfer (DBT) to consumers on the lines of LPG subsidy which is credited into their bank accounts directly.

However, the states have argued that it is impractical to follow the DBT model in the case of power subsidy policy. Both Tamil Nadu and the Telugu states of Telangana and Andhra Pradesh contend that it should be left to the state governments to decide the mode of payment of such a subsidy.

Another key feature of the new bill is the creation of Electricity Contract Enforcement Authority to be headed by a retired judge. What is being questioned is the rationale behind having another semi-judicial authority when there are regulatory commissions and an appellant authority in place.

“The setting up of electricity contract enforcing authority would dilute the authority of the regulatory commission,” the spokesman of All India Power Engineers Federation (AIPEF) VK Gupta said.

The Centre made two attempts in the past—in 2014 and 2018— to amend the Electricity Act of 2003, but failed on both occasions.

Farmers, the major beneficiaries

There are fears that the new legislation would surreptitiously work towards elimination of subsidies and bring in centralisation of power.

For instance, Telangana, Andhra Pradesh and Tamil Nadu are now providing free power to the agriculture sector while certain categories of domestic consumers get power at a subsidised rate.

The total annual burden on Telangana exchequer on account of power subsidy is ₹6,500 crore. Normally, it is released to the state-owned distribution companies whenever the government has money. However, once the new act comes into force, the private distribution companies might insist on payment of monthly bills from the government.

There are 24.50 lakh agricultural pump sets in the state which don’t have meters. It is not easy to fix meters. Same is the case with other states like Andhra Pradesh, Tamil Nadu, Karnataka and Maharashtra.

“In the case of LPG cylinders, the consumption is constant and accordingly the amount is transferred to consumers. But DBT in electricity is impossible because the consumption varies for each month. So the benefit must be transferred in kind (electricity) and not by money,” argues S Gandhi, president of Tamil Nadu Power Engineers Society.

Draconian bill

Dubbing the draft bill as ‘draconian’, Telangana Chief Minister K Chandrasekhar Rao said that if it was allowed to become a law, it would vest the powers of distribution and subsidies in the hands of the Centre.

“We will oppose it tooth and nail. We will stop it,” he said.

The draft bill was made public on April 17 and the central government initially gave 21 days for public comments. However, in view of the lockdown, the deadline has been extended to June 2.

The Chairman and Managing Director of Telangana State Southern Power Distribution Company Ltd (TSSPDCL) G Raghuma Reddy said the new legislation would prove fatal for the farming community.

“The state governments will have no say whatsoever in fixing the tariffs, providing subsidies and even in the selection of members of the State Electricity Regulatory Commission (ERC), exposing the farmers to the free market turbulence,” he said.

The new act wants the state governments to fix meters and issue bills to farmers so that they can pay the actuals and the government can later reimburse the subsidy component to them on the lines of the LPG refund.

“In such a scenario, each farmer in Telangana has to shell out ₹5,000 per month towards power bill,” the CMD said.

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AP power staff oppose

The AP Power Employees’ Joint Action Committee (JAC) and APSEB Engineers’ Association (APSEBEA) have also opposed the draft bill, alleging that its very purpose was to change the basic objective from ‘public service’ to ‘private profits’ and it would result in private monopolies.

Besides, the employees are apprehensive that the states will be dependent on the central government for subsidies and no longer have a role in the appointment of State Electricity Regulatory Commissions.

“Clearly, the bill is intended to protect commercial interests of the private investors. It leaves little scope for state governments to renegotiate and bring down the cost of electricity,” JAC chairman P Chandrasekhar and APSEBEA president M Vedyavyasa Rao said.

The draft legislation also contemplated privatising the distribution and transmission companies through the franchise route to the detriment of consumers, especially farmers and marginal sections for whom electricity would become unaffordable, they argued.

In the statement of objects and reasons for the bill, the Centre justified the need to revamp the electricity laws by pointing out that there are some critical issues which “weakened the commercial and investment activities” in the sector and that they needed to be sorted out to ensure the sustainable growth of the country.

The Centre insisted that a few provisions of the Electricity Act, 2003 are unable to cope with the rapid developments in the electricity sector, hence the move to overhaul the entire system.

“If the new act comes, agricultural subsidies will go. Tariffs will be imposed by the Centre and the ERC will be formed as per the Central government’s whims and fancies,” said power sector activist M Thimma Reddy of the People Monitoring Group on Electricity Reforms.

Another power expert, D Narsimha Reddy, said the proposed legislation would be a throwback to the old practice of centralisation of powers.

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