Bill to amend electricity 2021: why states such as the World Bank oppose it?
The central government faces opposition to the bill amending the Electricity Bill 2021 even before it is presented to parliament. West Bengal Chief Minister Mamata Banerjee wrote to the prime minister asking him not to bring the bill to parliament, saying it was “anti-people” and would promote crony capitalism. We examine the main provisions of the bill amending the Electricity Bill 2021 and the reasons why they raise major concerns.
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What are the main changes to the Electricity Act that the amendment seeks to make?
The amendment introduces provisions to remove electricity distribution licenses allowing private sector actors to enter the sector and compete with state-owned electricity distribution companies (discoms). This decision would allow consumers to choose between electricity distribution companies. Finance Minister Nirmala Sitharaman announced in the union’s budget that the government would provide a framework for consumers to choose between electricity distribution companies.
Electricity distribution in most of the country is currently controlled by state-owned distribution companies, with some cities like Delhi, Mumbai and Ahmedabad being exceptions where private actors operate the electricity distribution.
Nightclubs, however, are struggling with high levels of losses and debt. The government has put in place a number of plans to restructure the unpaid debts of nightclubs while giving them incentives to cut losses. However, such programs only provided short-term financial space for nightclubs which tended to continue accumulating losses and debt after restructuring programs such as the UDAY program launched by the government in 2015.
What are the objections to the decommissioning of electricity distribution?
States stressed that they were concerned that allowing the entry of private actors could lead to a ‘choice of the cake’, with private actors providing electricity only to commercial and industrial consumers and not to residential consumers. and agricultural. Electricity tariffs currently vary widely in India, with commercial and industrial players subsidizing the electricity consumption of rural residential consumers and agricultural consumers by paying much higher tariffs.
Mamata Banerjee said in her letter to the Prime Minister that the amendment would lead to “a concentration of private and profit-oriented public service actors in the lucrative urban-industrial segments, while poor and rural consumers would be left to care for. of the public sector. “
Experts also said it was possible that the move would lead to selection by the private sector, especially until the tariff structure incorporates cross-subsidies.
“How is it possible for nightclubs to continue to operate if all of their industrial advertising is taken over by the private sector?” Said one expert who declined to be cited, adding that previous plans to introduce private sector actors had also envisioned a gradual transition. reduced levels of cross-subsidies that have not materialized.
The expert also noted that a universal service obligation in which any private actor will be required to provide electricity to all consumers, including residential and agricultural consumers, could help solve the problem of cross-subsidies.
According to the minutes of a meeting held between the Ministry of Energy and state governments, Union Energy Minister RK Singh assured that the minimum area to be covered by competitors in the sector private sector would be defined to include an urban-rural mix, a universal service obligation, and cross-subsidy elements in the ceiling tariff.
What are the other key concerns?
Other main concerns raised by states are higher penalties for non-compliance with renewable energy purchase (RPO) obligations and the requirement that regional load-balancing centers and load-balancing centers state follow the instructions of the National Load Balancing Center.
Mamata Banerjee said in her letter to the Prime Minister that the proposed amendment “attacks the roots of federalism”.
So far, states have also failed to comply with previous RPOs and have also called for streamlining of penalties for non-compliance with RPO requirements.