Electricity Act, 2003 and the Electricity Amendment Bill, 2020
By Purnima Tandon

Introduction to the Electricity Act, 2003  

The Electricity Act, 2003 is an Act of Parliament of India and is enacted to transform power sector in India. The act encompasses major issue like distribution, generation and trading in power. The key features of the act are:  

  • Any generating company may establish, operate and maintain a generating station without obtaining a licence under this Act with the only exception that it should comply with the technical standards relating to connectivity with the grid.

  • No person shall :

  1. Transmit electricity; or  

  2. Distribute electricity; or  

  3. Undertake trading in electricity, unless he is authorized to do so by a licence issued, exceptions are informed by authorized commissions through notifications  

  • Central Government may, make region-wise demarcation of the country, and, from  time to time, make such modifications therein as it may consider necessary for the  efficient, economical and integrated transmission and supply of electricity, and in  particular to facilitate voluntary inter-connections and co-ordination of facilities for  the inter-State, regional and inter-regional generation and transmission of electricity.

  • Setting up State Electricity Regulatory Commission (SERC) has been made mandatory.  

  • Central government to prepare National Electricity Policy and Tariff Policy.  - Central Electricity Authority (CEA) to prepare National Electricity Plan.  

 

The Electricity Amendment Bill, 2020  

The Electricity Amendment Bill has been introduced to promote the entry of private players into the market in the generation, distribution and transmission of electricity. The provisions of the Act had become archaic, according to some experts and hence this Amendment has been introduced with some policy modifications (Thakur & Chamariya, 2020).  

Policy Amendments  

  • Renewable Energy: The Amendment, via an insertion, delegates the Central Government with the power to prepare and notify a National Renewable Energy Policy “for promotion of generation of electricity from renewable sources”, in consultation with State Governments. 

  • Cross Border Trade: The Central Government has been delegated with the power to prescribe rules and guidelines to allow and facilitate cross border trade of electricity.  - Electricity Contract Enforcement Authority: This authority has been proposed to be given sole jurisdiction to adjudicate upon matters on performance of obligations under a contract regarding sale, purchase and transmission of electricity, which 

  • Exclusion of this specialized authority’s jurisdiction on determination of tariff or any other dispute regarding tariff.  

 

Electricity (Amendment) Bill, 2020 and various viewpoints surrounding it  

The bill incorporates the National Renewable Energy Policy (NREP), which is likely to push the generation of electricity from renewable sources of energy and prescribe a minimum percentage of the purchase of electricity from renewable and hydro sources of energy. With more renewable energy incorporated in the generation mix, the Indian electricity sector would undergo a green transformation. The existence of a National Electricity Policy along with the existence of a separate NREP might create discontinuity within the overall thinking and approach. Rather than having two independent policies, the RE policy would serve its purpose better being an integral part of the National Electricity Policy.  

There are some opposing views as well. The All India Power Engineers Federation (AIPEF) has raised some points regarding the Amendment. The States fear that it will affect their free power programmes and would work against the interest of farmers and poorer sections of the society, it said. Even some experts from the private and government sector think that the transfer of cash subsidy directly to farmers and domestic consumers’ accounts may not be practically possible as timely payments by the States cannot be guaranteed.  

Soumya Dutta, MAUSAM, said that the whole focus of the amendment bill is very clearly to make electricity a commodity rather than a service. But according to Soumya, what  also needs to be highlighted are questions like whether the country needs to produce as  much electricity as the bill proposes, which sections of the society will be affected if the  country goes for such productions and what will be the nature of the source of such  energy productions. Soumya asserted that this is that Hydro power has been introduced in an electricity bill for the first time (Huque, 2020). The other points that were not in favour of Electricity Amendment Bill were that the privatisation would not eliminate costs and the franchisee selection would be done in a manner that might not favour the rural sector due to the low revenue and subsidies. It also shifts the burden on the state as cross-subsidies are removed, and the states might not have sufficient funds at all times.  So, there are a lot of aspects that have to be reconsidered and discussed.  

According to the Institute for Energy Economics and Financial Analysis (IEEFA), the opportunity cost of delaying India’s electricity sector is high. International investors need policy certainty and commitment from the Government of India. If this is built then it will increase the capital deployment in the renewable energy market (Shah, 2020).  Some general recommendations to improve the fluidity in the renewable energy sector are planning for transmission network expansion and modernisation and incorporating the needs of large-scale renewable energy hubs. It is contradicting to the opinions of many but striking a balance by improving domestic and international access to capital for large-scale as well as to small renewable energy players would be beneficial for the people at large. 

It is imperative for development to happen to enhance the economic efficiency but it also important to strike a balance between sustainable practices along with the developmental activities. The needs of the rural sector should also be kept in mind while providing them with sufficient opportunities to help them get better economically.

  

 

 

 

 

References  

Huque, S. (2020, May 7). Withdrawal of Electricity Amendment Bill. Retrieved from Center for Financial Accountability: https://www.cenfa.org/blog/a-critique-of-the-controversialelectricity-amendment-bill-2020/  

Shah, K. (2020, February). India’s Renewable Energy Policy Headwinds. Retrieved from Institute for Energy Economics and Financial Analysis: https://ieefa.org/wpcontent/uploads/2020/02/Indias-Renewable-Energy-Policy-Headwinds_February-2020.pdf  

Thakur, D. K., & Chamariya, P. (2020). The Electricity (Amendment) Bill, 2020: An Overview. Economic Times.