Electricity (Amendment) Bill 2018 will bring competition and choice for the final consumer, claims the government but practically this is going to further divide the unbundled electricity industry into numerous fragments making the way for private companies to cherry-pick the profitable areas and consumers. The state sector incumbent power distribution companies will be left with the obligation of serving loss-making areas comprising of low paying consumers.

Government is pushing the Bill, meant clearly for the profit of private companies, on the false premise that competition will lead to better services for consumers. But the fact is that it is bound to lead to the supply of electricity becoming more expensive.

In the present scenario, every state pools the availability of power and implements merit order dispatch at the state level so that energy requirement is met at least cost. With proposed setup how the intermediary private companies will implement merit order with multiple supply licensees.  It will lead to endless disputes as each licensee will claim power from least cost power purchase agreements (PPAs) and it will result in the acute problem of stranded PPAs.

The amendment proposes new criteria of the selection committee for state regulators wherein majority of state representatives will be reduced and leading to a majority of central representatives. The central government will have more say in the power sector and the role of state governments will be reduced.

Under the Electricity Act 2003 the Central Electricity Regulatory Commission (CERC), as well as State Electricity Regulatory Commissions (SERCs), is to be guided by tariff policy but under the draft amendment, the tariff policy will become mandatory.  This will make CERC as well as all SERCs subservient to policy dictates of central government. The concept of independent electricity regulator will be over and replaced by subservient regulators.

The draft tariff policy further proposes the same tariff for all categories of consumers (domestic and commercial).The states may have little choice in the formulation of respective tariff policy for the welfare of some section of consumers.

The cross-subsidy payable to a different set of consumers within the distribution area will be reduced progressively and eliminated in a period of three years. To start with the difference between different categories of consumer’s tariff will be capped at 20%.

The Regulator shall determine the trajectory for reduction of cross-subsidization of tariff to zero within a span of three years and this shall be not less than six per cent in one year. Because of the political nature of subsidies the government may find it difficult to implement.

Further, any subsidy payable to a consumer will be through the provision of direct benefit transfer and this proposal is practically unworkable and sure to fail.  This policy must not be dictated by the central government through Act. This is clearly in the purview of state governments and state electricity regulators as electricity is a concurrent subject.

With the abolition of the cross-subsidy surcharge the floodgates for large consumers to migrate through ‘open access’ to cheaper sources without paying any subsidy leaving the state Discoms in the lurch.

The power sector is facing serious challenges such as large scale financial losses, rising tariffs, deteriorating performance of existing plants, fuel availability and quality related concerns and poor quality of supply and service. The proposed amendments aim at making fundamental changes to the sector structure and organization, but it is not clear how these changes will help in tackling the issues mentioned above.

A number of states have already raised their voice against the proposed changes which are against the spirit of the constitution as electricity is a concurrent issue. Power sector employees have recently protested against these drastic changes. The government must discuss the issues with all stakeholders in the larger interest.