powering the energy sector

In an energy-dependent country likeIndia, the availability of energy sup-plies at aff�ordable rates is pivotal forfulfi�lling developmental priorities.But the energy sector is beset withproblems. The distribution sectorhas for long been the bane of thepower sector, consistently makinghuge losses owing to problems suchas expensive long-term power pur-chase agreements, poor infrastruc-ture, ineffi�cient operations, and leak-ages and weaknesses in State-leveltariff� policies. Most discoms are deepinto the red as high aggregate techni-cal and commercial (AT&C) losses arechipping into their revenues.

Dismantling state monopolyAgainst this backdrop, the Electricity(Amendment) Bill of 2020 is a game-changing reform. The wide-rangingprovisions of the Bill will set the pro-cess of de-licensing power distribu-tion after the monopoly of the state isdismantled. This will provide theconsumers with an option of choos-ing the service provider, switch theirpower supplier and enable the entryof private companies in distribution,thereby resulting in increased com-petition. In fact, privatisation of dis-coms in Delhi has reduced AT&C loss-es signifi�cantly from 55% in 2002 to9% in 2020.

Open access for purchasing powerfrom the open market should be im-plemented across States and barriersin the form of cross subsidy sur-charge, additional surcharge andelectricity duty being applied byStates should be reviewed. Discomsand regulators should be brought onboard for proper implementation ofopen access, which will providemore options to consumers tochoose their discom just as they areable to choose telecom providers.

The question of tariff�s needs to berevisited if the power sector is to bestrengthened. Tariff�s ought to be re-fl�ective of average cost of supply tobegin with and eventually move tocustomer category-wise cost of sup-ply in a defi�ned time frame. This willfacilitate reduction in cross subsi-dies. All this will happen when dis-coms are made autonomous and areallowed by regulatory authorities to

revise tariff�s without interferencefrom the States.

Electrical energy should be co-vered under GST, with a lower rate ofGST, as this will make it possible forpower generator/transmission/distri-bution utilities to get a refund of in-put credit, which in turn will reducethe cost of power. Other antidotes tothe problem include use of technolo-gy solutions such as installation ofsmart meters and smart grids whichwill reduce AT&C losses and restorefi�nancial viability of the sector.

Push for renewal energyThe impetus to renewal energy,which will help us mitigate the im-pact of climate change, is much need-ed. One option is to encourage roof-top solar plants. Despite its inherentbenefi�ts, the segment has shown rela-tively slow progress with an estimat-ed installed capacity of 5-6 GW as ondate, well short of the 2022 target.

Another welcome feature of theBill is the strengthening of the regula-tory architecture of the sector. Thiswill be done by appointing a memberwith a legal background in everyelectricity regulatory commissionand strengthening the Appellate Tri-bunal for Electricity. This will ensurefaster resolution of long-pending is-sues and reduce legal hassles.

The Bill also underpins the impor-tance of green energy by proposing apenalty for non-compliance with therenewable energy purchase obliga-tions which mandate States and pow-er distribution companies to pur-chase a specifi�ed quantity ofelectricity from renewable and hydrosources. This will ensure that Indiagradually moves towards non-fossilfuels thereby helping it meet its glo-bal climate change commitments.

Some other signifi�cant features ofthe Bill such as the creation of anElectricity Contract EnforcementAuthority to supervise the fulfi�llmentof contractual obligations underpower purchase agreement, cost re-fl�ective tariff�s and provision of subsi-dy through DBT are commendable.Early passage of the Bill is critical as itwill help unleash a path-breaking re-form for bringing effi�ciency and prof-itability to the distribution sector.

T.V. Narendran is President, CII

Powering the energy sector The Electricity (Amendment) Bill is a game-changer

T.V. Narendran