Electricity Act 2003 Act replaced the Electricity (Supply) Act 1948 notwithstanding the seminal role played by the Electricity (Supply) Act of 1948. The 1948’ Act had transformed the nature and the outreach of the power sector by integrating the erstwhile licensees with limited operations into State Electricity Boards that became the prime movers of rural electrification and the resultant all round economic development across the length and the breadth of the country.

 

The main justification for changing legislation was reduction of financial and line losses. The financial crisis has worsened, even a decade after the Act coming into force. That is clearly indicated by the data in the table given below:

                                                              (?. Lakh Crore)

 

 

UDAY and the NPAs of Banks and Financial institutions indicate the gravity and urgency of the financial crisis. There is nothing to indicate that change in legislation resulted in reduction of line losses. Line losses have reduced only due to improvement in both technology and investment. Dark clouds are looming large over powersector. Bailouts have been a recurrent feature as the sector is marred by shortages, high interest costs and cross-subsidies for political gains

  Consequences of structural changes in the institutions supporting the supply industry

The Electricity Act 2003 changed the structural character and charter of vital institutions like  Central Electricity Authority and the State Electricity Boards. 

 

 Removal of Techno- Economic approval of CEA

 

Experience has shown that as consequence of removal of approval by CEA has resulted in

a)   Unplanned growth and capacity addition, particularly the thermal capacity (coal and gas-based) by the private sector has accentuated the already acute hydro-thermal mix of generation. This has a steep decline in the thermal PLF resulting in stressed assets. In addition, the State Electricity Boards have been forced to back down and even shut down their stations to provide load against load guarantees given in the PPAs through regressive deemed generation clauses

 

b)   Besides creating problems for the power sector, the stressed assets are threatening the health of Banks and Financial Institutions like the Power Finance Corporation and Rural Electrification Corporation.

 

c)   Faulty fuel linkages, particularly in the case  of  import of coal has resulted not in only in high prices but also recent shut down of ultra-mega power plants. Also over-invoicing of imported coal is under investigation by the Directorate of Revenue Intelligence.The lack of supply of Natural gas has resulted in several stations, including new ones, being shut down.

 

d)   Government’s bias in favour of private gas companies resulted in unconscionably high prices for gas being conceded in their favour, which in turn resulted in a sharp increase in the price of electricity, imposing losses on PSU utilities. The inability of the private gas companies to deliver sufficient quantities of gas led to serious power shortages, especially in the Southern States.

 

e)   Excess import of capital goods resulting in losses to the Indigenous manufacturers. Imported power equipment has also added to the cost of electricity.

 

f)    Load guarantees in PPAs forcing State units to back down or even shut down.

 

g)   Long-term "Deemed Generation" and / or “Capacity Charges” clauses incorporated in the PPAs not only for coal and gas-based private thermal power plants but also for private centralized solar power developers.

 

h)   Under the guise of power trading, private licensees were allowed to cherry pick remunerative loads at the cost of viability of the PSU utilities, accentuating the latter’s inability to cross-subsidize unremunerative consumer groups.

 

It is unfortunate that not only has the role of CEA been watered down, but it is not being allowed to function efficiently. In non-compliance of Section 70 of the 2003 Act, a Chairman has not been appointed in CEA since the beginning of this year and several posts are lying vacant against 14 members stipulated in the section.

 Unbundling of State Electricity Boards.

 The creation of multiple companies in a State, has not improved the service, but instead it has added to the overhead costs and lack of clear policy for the States as a whole. Partial measures like UDAY only reduce the intensity of the financial and technical crisis but do not resolve it. 

 

Starting with Odisha, the policy of privatization of distribution has failed. Delhi’s privatization has not been a financial success and it is only the “low hanging fruits” where there has been reduction of AT&C losses. What is worrying is the huge regulatory assets that the private DISCOMS in Delhi and Mumbai have accumulated. This is a “Tariff Sword Of Damocles”   hanging on the consumers in Delhi and Mumbai. We fail to understand why a public utility, that too a monopoly should be exempted from public scrutiny in the form of RTI and CAG Audit. The franchisees in Agra, Nagpur, Aurangabad, Gaya, Jalgaon, Ujjain, Sagar, Gwalior have failed. It is truly shocking that inspite of mounting evidence the Niti Ayog advocates immediate and extensive privatization.

 

Even in developed countries there is a debate on restoring vertical integration in the power sector. In India, the experience of unbundling has been very unsatisfactory. There is a need for a serious introspection and course correction by way of integrating power utilities. It is time to review the success or failure of the Electricity Act 2003. 

 

 Electricity (Amendment) Bill 2014

 

The core issue is that the Bill envisages segregation of carriage and content. This has far reaching implications not only for the industry but also the consumer. Some of the critical concerns are:

 

·The Amendment Bill recognizes the need for a Government licensee, so that the loss making sector of the supply industry can be served by the tax payer’s company, while the private licensees cream of the high paying sections.

 

·There is a shift in emphasis of the prime interest that is to be safeguarded. While Section 61 D of the Electricity Act 2003 stipulates:  “the principle of safeguarding of consumers interest and at the same time recovery of the cost of electricity in a reasonable manner” Section D of the Amendment Bill 2014 safeguards the interest of the licensee “Safeguarding the consumer interests and at the same time recovery of cost of electricity by the licensees without any revenue deficit”

 

·With respect to tariff fixation, the Amendment Bill enables the Central Government officials to usurp the purpose and powers of the regulatory commissions and thereby undermined the consultative process. Whereas the Electricity Act 2003 stated “In discharge of its functions, the Central Commission shall be guided by the National Electricity Policy, National Electricity Plan and Tariff policy published under section 3.” The Amendment Bill 2014 states, “Notwithstanding anything contained in this Act, the provision of Tariff Policy shall be followed by the appropriate Commission for the purpose of Tariff determination. What is the purpose of ARR and stakeholder consultations if the quasi-judicial commissions “shall follow” the policy formulated by the executive. Even the Hon’ble Supreme Court order in the Adani Tariff Case dated 11^th April 2017 has relied upon the Statement of objects and reasons  for the Electricity Act 2003 wherein  distancing of government from determination of tariffs is stated.

 

·The burden of serving the unviable PPA would be the responsibility of the intermediary company, while exempting the private licensee. This would ensure that the intermediate company is born and survives as a sick unit. The provision of Fixed Cost payment enforced by the PPAs has proved not only very costly but also counter-productive. State after State are annually paying private Independent Power Producers thousands of Crores of rupees only as capacity charges, even when not a single unit is consumed by the state.  There is a need to re-examine the PPA and ensure that such payments are not made.

 

·Even the present open access has worsened the financial health of power companies and made it difficult for DISCOMS to serve the agricultural and domestic consumers. To overcome this, in any states, additional surcharge has been levied, making electricity more costly.

 

·Implementing segregation of wire and content would require huge investment in metering, computerization and Information Technology. This cost burden would be passed on to the consumers who even today do not have the paying capacity.

 

A misguided analogy is made with consumer choice in mobile phones. Whereas the mobile tariff is based on cost to serve and the tariff is the same of all class of consumers (Ambani and a Rickshaw puller pay the same for a call) that is not applicable for the electricity supply industry. Also mobile is a wireless system, whereas electricity is a wired system.

 

 STANDING COMMITTEE ON ENERGY OF PARLIAMENT HAS SUBMITTED REPORT TO LOK SABHA WITHOUT GIVING HEARING OPPORTUNITY TO ALL INDIA FEDERATIONS OF ENGINEERS & EMPLOYEES, COMMON CONSUMER FORUMS WERE ALSO NOT INVITED BY STANDING COMMITTEE. AS REPORTED IN PRESS CONGRESS , CPM,CPI AND SOME OTHERS HAVE OPPOSED THE AMENDMENT TO SEGREGATE CONTENT & CARRIAGE IN POWER DISTRIBUTION TERMING IT AS ANTI PEOPLE. CONCERNS RAISED BY THESE PARTIES ARE SIMILAR TO VIEW POINTS RAISED BY A I P E F IN IT's SUBMISSION. A I P E F VIEW POINTS AGAINST AMENDMENT BILL ARE AS FOLLOWING -------------

-- That translating “POWER TO ALL “ objective into implementable action plan which ensures access to quality affordable supply for poor and newly electrified households.

-- Mitigating the possibility of cherry picking of high paying consumers by new supply licensees.

-- Protecting interests of small consumers by ensuring they alone do not bear the burden arising out of these changes and are not subject to sudden tariff shocks.

-- The incumbent supply licensee being vested with universal supply obligation will become the default supplier for agriculture and rural low tension consumers. As such it will be financially impacted most on account of migration of high paying consumers to new supply licensees and open access.

-- Promoting energy efficiency along with renewable energy.

-- Ensuring institutional autonomy of regulatory commissions.

-- Avoiding needless complexity and thus reducing scope for misinterpretation and unnecessary litigation.

 

 AIPEF along with National Coordination Committee Of Electricity Employees And Engineers (NCCOEEE) had meetings with former Central Power Minister Sri Piyush Goyal in this regard. Power Minister had assured that no unilateral decision will be taken to rush through Electricity (Amendment) Bill 2014 and detailed discussions will be held with power employees & engineers. Sri Piyush Goyal had assured us that following changes are to be made in the Bill---

1- Electricity Amendment Act shall be enabling provision & shall not be mandatory on states.

2- No cherry picking will be allowed & all power supply companies including private shall have universal power supply obligation.

3- State Govt’s will have option to go with only Govt Supply Company/Companies for power supply, no compulsion for private power supply companies.

4- State Govt’s have to notify their road map in 5 years time after enactment of Act for segregation of carriage & content and there will not be any time limit for it’s implementation.

5. Discussions with Federations of power employees & engineers will be held in detail before finalization of Electricity (Amendment) Bill.
 

AIPEF demands Government of India to put on hold the proposed electricity amendment Bill till the modified draft of the Bill is discussed in detail with all the State Govt’s and other stake holders including power engineers & power workers and their concerns are addressed. AIPEF also demands review of power policies of last 25 years before going on for any further amendments & experiments in already ailing power sector.
                              
 

Government of India should recognize and accept that the conditions prevailing in the power sector are not at all favorable for introducing far reaching changes in distribution. The major issues which includes turnaround of financial health and restoring financial viability ,  curbing / minimizing of thefts of electricity , development of energy accounting, metering and IT systems and last but not the least the practical impossibility of successful operation by the Intermediate company should be examined in detail before processing the amendments in electricity bill.

However power engineers & employees have to be watchful and vigilant on any unilateral move of Central Govt to pass Electricity (Amendment) Bill 2014 and for this all State Constituents of AIPEF along with power workers will have to campaign and mobilise for LIGHTNING ACTION whenever it is required.

Integration of state power utilities

 

          With the enactment of Electricity Act 2003, different states re-structured the State Electricity Boards as per their own whims. While in some states there were multiple distribution Companies like Karnataka (5 DISCOMS), UP (5 DISCOMS), MP (3 DISCOMS), Haryana (2 DISCOMS), other states retained the entire state under one DISCOM as in Maharashtra & Uttrakhand. In case of Punjab and Tamil Nadu generation and distribution were retained as one company while transmission was separated out. In case of Kerala and Himachal Pradesh the integrated structure of generation, transmission and distribution was retained.

 

2.      It is seen that there is no uniformity and wide diversity in structure of state power utilities across the country.

 

3.      The experience since 2003 has however shown some results and lessons which are summarized.

 

a)           One common argument for creating multiple DISCOMS within a state was that smaller DISCOMS would be more efficient and better managed. This has not been proved as correct. On the other hand multiple DISCOMS with their separate Board of Directors create coordination and inter-organization problems within the state.

 

b)           The other argument for multiple DISCOMS was that it would create competition and peer pressure to improve performance has not been proved practically for example if the T&D losses in different DISCOMS are widely different it is explained by the type of consumer mix-for example a DISCOM with higher industrial load would have lower loses as compared to a DISCOM with higher agricultural load.

 

FACTORS IN FAVOUR OF INTEGRATED STRUCTURE

 

i)     Every state has one SLDC where the entire state is considered as one control area. This gives SLDC a clear advantage to manage load dispatch over the state as one entity. For example if there is load crash in one portion of state (due to rain, storm etc.) SLDC can order additional supply or loading in other areas of state to offset load crash, so that overall drawl by State remains without deviation.

 

ii)       With one state DISCOM concept the state thermal and hydro generation can be optimally dispatched by SLDC in the most economic and optimum manner.

iii)      Manpower and HR functions are performed more efficiently and with uniformity with one organization as opposed to multiple companies. In some states, like Karnataka the entire engineering manpower is under TRANSCO, i.e. KPTCL while the DISCOMS draw their manpower requirement from KPTCL. IF there is only one DISCOM instead of 5 the problem is automatically solved.

 

iv) In regulatory matters of state level, and dealing with SERC, it is practically effective with one DISCOM and generation and transmission combined. Creation of multiple units only complicates SERC issues.  

 

v)      Similarly, in dealings with CERC and APTEL etc. it is practically possible and justified considering the state as one entity in case of Rajasthan, for example, it is only on paper that the three Discoms are shown as separate parties.

 

vi)      IN several states a separate coordination body has been created which is the controlling body of multiple DISCOMS. This body is the URJA VIKAS NIGAM. In states like Gujarat, MP, Rajasthan the Urja Vikas Nigam has been established it is opined that instead of having multiple companies in distribution, generation and transmission controlled has Urja Vikas Nigam, It would be more effective, coordinated and economical to have one organization integrating the functions of distribution, generation and transmission as in case of KSEB Ltd and HPSEB Ltd.

 

It is worthwhile to mention that Vice Chairman of Niti Aayog Dr Rajiv Kumar has asked UP Chief Minister Yogi Aditya Nath on 09^thNovemner 2017 at Lucknow to integrate various departments running same sectors so that Prime Minister Narendra Modi's governance mantra can be implemented properly and departments can work smooth and in a speedy manner. Electricity Generation ,Transmission & Distribution is an integrated subject therefore as per the advice of Niti Aayog also all power utilities in states be integrated on topmost priority which will not only ensure a better coordinated effort but also be helpful in reducing unnecessary administrative expenses of nine power corporations.

 

AIPEF therefore is of firm opinion that GOI should introduce a separate section in National electricity Policy whereby the objective to integrate the state power sector is contained. The objective of combining generation, distribution and transmission under one integrated in one company is stated as a matter of policy for the States to adopt. Even without a provision in National Electricity Policy the States are empowered and at liberty to re structure their respective power utilities so as to achieve the objective of integrated operation since Electricity is a Concurrent subject.

 

 Shutting Down Of State Thermal Power Stations

          The policy of Govt. of India as contained in the Electricity Act 2003 has resulted in deregulation of thermal power generation whereby a project developer does not need any permission from CEA or Ministry of Power or any other Govt. for setting up a new thermal power station anywhere in the country. However, two related issues are vital for the setting up of the thermal station. First is that no developer is willing to take the risk of finding a purchaser for the power in case the power station is to be setup as merchant plant. As a result most or majority of the new or private power plants are setup on the basis of a long term power purchase agreement which could be with the state in which the power plant is setup or also with any other purchaser in the country through long term open access. The second condition for setting up of the plant is the long term coal linkage. While the project developer can source the coal supply from anywhere in the country on spot purchase basis or even import the coal from any source outside India, the generator or developer generally minimizes the fuel risk by securing a long term coal linkage through Coal India Limited.

           The availability tariff regime is in force throughout the country wherein capacity charges are to be paid on the basis of declared capacity whereas energy charges (fuel charges) are payable on the basis of scheduled energy.

          With uncontrolled and unplanned capacity addition by private sector developers several states in the country are now having surplus generation capacity available with the result that a considerable percentage of thermal power capacity in the state sector is being shut down for extended periods going upto six months or more even every year in order to accommodate the private sector plants to enable these plants to operate at high PLF by which they can maximize their profits.

          The principle generally adopted is summarized as under

a)      Fixed charges representing capital investment in the project are payable (as per declared capacity) irrespective of energy scheduled. In the extreme case in case the purchaser gives a generation schedule of NIL, the power station would be entitled to the capacity charges even if it is completely shut down due to NIL schedule.

b)      Fuel charges or variable charges determine the merit order of the station. Those stations with better heat rate and / or lower fuel cost have a better merit order in terms of ? / Unit. On the other hand stations with lower efficiency (higher heat rate) and / or higher cost of fuel would be having a variable rate on the higher side.

          The state generally schedules the various power stations in the merit order with the stations having lower / lowest variable charges are given the full schedule and this process is carried out in the ascending order of variable charges which becomes the merit order for that state.

2.      There are instances when private sector plants having higher variable charges and lower schedules are still allowed to run to full capacity while the state thermal plants having lower variable charges may be kept shut down to enable the private plants to run.

3.      The following steps are required to be taken in the situation of surplus capacity resulting in prolonged shut down of the state thermal stations.

      a) Merit order scheduling procedure to be followed strictly without giving any undue preference to private sector plants for keeping this plants in operation while shutting down state thermal capacity. This proposal is within the prevailing ABT regime and principle of merit order scheduling.       

      b) The present PPA’s signed between the state DISCOM and private / IPP developer need to be amended as under

      i)  The state DISCOM / State must be given the option to give the monthly MW requirement from that IPP station and the capacity charges for that month should be payable only up to the requisition or requirement given for that month. The surrendered MW capacity is at the disposal of the IPP / developer who should be free to sell power from that surrendered capacity to any purchaser at any rate, as a merchant sale or a third party sale. The fixed charges for that surrendered capacity should not be payable by the state DISCOM.

          In case the IPP / developer does not agree to this monthly requisition procedure, the state govt. should take measures for cancellation of the PPA totally. A consensus amongst all states must be developed so that a common procedure can be evolved to be followed for cancellation of PPA’s under these circumstances.

SAUBHAGYA – DUE TO OVER DEPENDENCE ON PRIVATE HOUSES

Govt to miss deadline

There is a big question mark over the success of ‘Saubhagya’, the programme to electrify all households by end of 2018. India continues to harbour energy poverty; 31 million rural households and about five million urban households are still to be connected to the grid — the highest in any single country. At the same time, a significant portion of connected rural households is yet to get adequate quantity and quality of supply. The Central government has set itself an ambitious target of connecting all remaining households by the end of March 2019 and made budgetary allocations to cover the cost of electrification. As part of a Centre-State joint initiative on 24×7 ‘Power for All’, State governments have already committed to ensuring round-the-clock supply to all households from April 2019. The aspiration for access to clean, reliable and affordable power for all is not free from barriers and fallibility.

Seven States (Uttar Pradesh, Bihar, Odisha, Jharkhand, Assam, Rajasthan and Madhya Pradesh) account for 90% of un-electrified households. Coincidentally, these States are ranked poorly in social development indices and house about two-thirds of the population living below the poverty line. This concurrence between economic poverty and energy poverty will be a barrier to the goal of universal . Who pays for the cost of supply will also be a critical driver. Electricity distribution companies (discoms) in these seven States are already highly indebted, accounting for 42% of accumulated debts of all discoms as on March 201 Given the context, it is uncertain whether the goal of electrifying all ‘willing households’ by March 2019 would translate into universal access to electricity. The assumption that a waiver of the connection charge and easing the connection process (but with no further rebate on lifeline tariffs) will make poor households willing to take up electricity connection is questionable.6. 

One thing is clear that if Govt Of India is keen to achieve the targets of Saubhagya scheme in given time then both Central and State Governments will have to review the present energy policy and strengthen state owned DISCOMS instead of overdependence on private sector because it is only state owned DISCOMS on whose shoulders Saubhagya Scheme can get the success.

ELECTRIFICATION OF VILLAGES

In a significant development, the government announced on April 29 that the electrification work of all inhabited villages in India has been completed. There are 597,464 inhabited census villages in India. This means that all the inhabited villages have now joined the country’s mainline electricity supply network. In the last three years, around 18,000 non-electrified villages have been connected to the mainline power supply network. While this is a significant achievement, it is still largely symbolic in nature. According to government’s definition of village electrification, a village is deemed electrified if only 10 per cent of its households and public places such as schools, health centres and panchayat offices have access to power supply. At end of April 2018, less than 8 per cent of the newly electrified villages had all homes electrified. This means large part of rural India is still without electricity.

The second task is to ensure uninterrupted power supply in electrified villages. Power ministry data has it that as of December 2017, only six states had 24-hour uninterrupted power supply to rural areas. A vague definition of electrification creates a false sense of achievement and the claim of 100 per cent rural electrification, therefore, is not substantive in nature because what has been achieved is mere connectivity to the electricity grid of villages. It is also no certification for power availability. According to government data, there are still 32 million households without electric connection. This makes the scale of the task ahead before the government quite enormous, given the fact that access to uninterrupted power supplies is still a luxury in large parts of the country.

Gujarat is facing a power crisis, but Gujarat government is instead going all out to bail out  corporate houses — Adani, Essar and Tata. The three are running thermal power plants in the state — even as Adani and Essar have cut supply, in violation of their Power Purchase Agreements (PPAs) — and have been demanding a hike in tariffs to compensate for the increased cost of coal imported from Indonesia. Last April, the Supreme Court (SC) had ruled against Adani and Tata charging compensatory tariffs to recover imported fuel costs — as was decided by the Appellate Tribunal for Electricity (APTEL) in July 2014.

But instead of taking action against Adani and Essar for violating their legally binding agreements, the Gujarat government has now formed a high-powered committee to chalk out a solution for making these three companies’ power plants viable again.

Tata Power’s subsidiary Coastal Gujarat Power Limited (CGPL) runs a 4,000-megawatt (MW) Ultra Mega Power Project (UMPP) while Adani Power’s subsidiary Adani Power Mundra runs a 4,620-MW power plant — both located at Mundra in Gujarat. Essar Group’s arm Essar Power Gujarat has a 1,320-MW power plant at Salaya near Jamnagar in Gujarat.

Of this, Gujarat alone has PPAs for 4,800 MW of electricity, which is why it has been the worst-affected. Adani Power is contracted to supply 2,000 MW to Gujarat, Essar Power is supposed to supply 1,000 MW while Tata Power is contracted to supply 1,805 MW.These three private power plants have PPAs with five states — Gujarat, Maharashtra, Rajasthan, Haryana and Punjab — for providing a total of 8,224 MW of power.

But after the SC order in April 2017, Adani began cutting the power supply in a phased manner, as did Essar, citing unviability — eventually stopping the contracted supply entirely. Reportedly, Essar stopped the supply from 15 December last year while Adani discontinued the supply from 20 January this year — both without any prior notice to the Gujarat Urja Vikas Nigam Limited (GUVNL) or the Gujarat Electricity Regulatory Commission (GERC).

This has forced the GUVNL to buy electricity at much higher costs from the open market through power trading exchanges, especially the Indian Energy Exchange (IEX). Gujarat, formerly a ‘power surplus’ state, is also coping by buying additional electricity from the state government-owned plants under the Gujarat State Electricity Corporation Limited (GSECL).

In 2010, the Indonesian government introduced a law that required the mining companies to benchmark the price at which they exported coal to the prevailing international rates, and all existing agreements of mining companies were brought in line with this change by 2011, which led to increased costs of coal for the power plants importing from the country. The power generating projects of Adani, Essar and Tata in Gujarat were all based on imported coal from Indonesia. This prompted the private power producers to demand higher tariffs. Adani and Tata approached the Central Electricity Regulatory Commission (CERC) seeking higher tariffs to compensate for their increased input costs.Tata had won the UMPP in 2006 while Adani had won the project in Mundra in 2007. Essar commissioned the first power generation unit at Salaya in 2012.

It is pertinent to remember here that any increase in tariffs would not be borne just by the power distribution companies, but would be finally passed on to the consumers. In April 2013, the CERC passed an interim order allowing Adani and Tata to raise tariffs, and regulator set up a committee to work out the compensatory tariffs. In February 2014, the CERC settled on compensatory tariffs of 52 paise per unit for Tata’s CGPL plant and 41 paise per unit for Adani’s plant, as well as decided to award compensation in lump-sum for costs from 1 April 2013 onwards.

But the CERC order was challenged by the DISCOMS of the five states buying from these plants — Gujarat, Maharashtra, Haryana, Rajasthan and Punjab.

In an interim order in July 2014, the APTEL allowed Tata and Adani to charge higher tariffs. Then in April 2016, the APTEL passed an order that the price agreed upon in the PPAs should not be binding for the producer if the cost of coal goes up. Based on this, the CERC in December 2016 had awarded compensatory tariffs to the power producers.

Finally, on 11 April 2017, the Supreme Court squashed the compensatory tariffs for Adani and Tata. Meanwhile, in 2016, the Directorate of Revenue Intelligence (DRI) began investigating both Adani and Essar, among 40 power generating companies, for inflating the value of capital goods imported for their power plants. However, the DRI dropped the proceedings against Adani in October 2017.

In June 2017, Tata Power offered to sell 51% stake in CGPL to DISCOMS for a token sum of Re1 to the discoms in question. After this, Adani and Essar also followed suit and offered to sell stake. But instead of taking over the power projects and re-tendering them, the Gujarat government in the first week of July this year set up a three-member high-powered committee to submit a report in two monthsfor “mitigating hardship” for these private producers.

 If the tariffs are forcibly hiked by these companies, it is the consumer who will suffer, the common citizens will pay the cost. The highest court in the country has ruled against the post-bidding tariff hike. Two of these private corporate houses have deliberately stopped the power supply and are violating the PPA, which is a legally binding document, and are making Gujarat suffer. But instead of taking action against them, the Gujarat government sets up a committee to help out these plants. How is this justified?”

 These companies got the power generation projects after a process of competitive bidding, and they quoted the lowest price to win the contracts. In fact, the bidding guidelines give the bidders an option to quote various ‘escalable’ and ‘non-escalable’ tariffs. Any potential price increases in the future can be accounted for by quoting it under the escalable charges.Indeed, the appellants in the Supreme Court too had made the argument, in the words of this essay, that “Adani Power and CGPL had voluntarily decided to quote energy charges as non-escalable in order to make their bids competitive and, therefore, to win the contracts. The bids were not premised on the import of coal from Indonesia only and it was open to them to get coal from any source.”

 The government has no role in fixing tariffs. In fact, this move of the Gujarat government to set up a committee will only open a Pandora’s Box as all private power producers will then want leeway and rise in tariffs, following the example of these three companies.

This is not in the public interest.

Odisha was the first state to introduce reforms in Electricity Sector in the 1995 & Odisha was also the first state to privatize Electricity Distribution in the year 1999. So Odisha understands better the ill effects of reforms and privatization of electricity sector. Till today, no state other than Odisha and Delhi have privatized Distribution sector. For ready reference, we put forth below the salient features of Odisha’s tryst with Reforms, Privatization and also the ugly face of proposed Electricity (Amendment)  Bill 2014 .

 - With the enactment of Odisha Electricity Reforms Act 1995, the Electricity Sector of ODISHA was subjected to sweeping changes. The OSEB was disintegrated with formation of separate companies for Generation, Transmission and Distribution Companies (4 nos.) which were later privatized , CESCO in 1999 (AES) and WESCO, NESCO and SOUTHCO in 2000 (Reliance). The primary objective of reforms was told -

·To make the sector financially viable

·To reduce Distribution losses (AT&C) to acceptable limits

·To get investment from Private sector for infrastructure development

None of these objectives are nowhere near achievement as the financial losses mounted from Rs 300 Crores in 1995 to Rs 6500 Crores in 2018, Almost zero investment of Private capital (except buying 49% equity amounting to around Rs 230 Crores) and AT&C losses almost at 40% barring few cities .

    -- The devastation by super cyclone in 1999 in central Odisha and by Phailin in 2013 in Southern Odisha completely exposed the private companies and their resilience and intent for restoration of power supply. In both the cases it was left to the State Govt to intervene and provide power to the people. While AES left on its own in 2001, Reliance was driven out in the year 2015 by OERC for serious non performance and non compliance.

-- After exit of AES, the franchisee model was introduced in some pockets of CESU wef. 2012