Centre bats for pvt players in power distribution sector

 

 

 

 

 

Central Government has circulated a draft of proposed amendments in Electricity Bill 2023, laying thrust on complete unbundling of State’s monopoly in power distribution sector. Union Ministry of Power has sought State Government’s comments on the Draft Electricity (Amendments) Bill 2025, which bats for putting an end to era of cross subsidy. As the preface states, the new bill gives an outlook of ensuring an affordable, reliable and clean power along side improving the service quality. The circular dated October 9 provides 30 days time for States to provide their feedback on the proposed amendments. The draft talks about reducing Rs 6.9 lakh crore cumulative losses and make the power sector financially sustainable.

 

As is well known, the distribution utilities are saddled with huge liabilities due to transmission and commercial losses. So the goal envisaged while trifurcating of State Electricity Board have not been met. Now Central Government wants to bring in competition in power distribution sector so that overall financial health of power utilities can be improved. The competition would ensure best of industry practices on each of the distribution company. Also, through systematic intervention, the Centre is keen to oversee transition of India to clean energy to meet the objectives and goals envisaged in Paris Climate Accord. Listing the objectives in new Act, it is stated that electricity tariff should reflect the supply cost and also placed onus on regulators to revise the same from time to time. A time period of 120-day maximum is placed on regulators for deciding the tariff petition, and in case same is not met, then the reasons are to be recorded in writing. Hike in Power Charges:

 

The draft in fact hints at substantial hike in power charges stating that for reliable and affordable electricity, the financial health of distribution companies must be healthy. But Distribution Licensees face chronic losses as tariffs currently charged does not fully recover the actual cost of supplying electricity. This gap force utilities to borrow heavily that affects the quality and long-term sustainability of power supply. To justify the hike, the draft refers to Supreme Court 2025 judgement that electricity tariffs must be cost-reflective to ensure the financial viability of the power sector. Cross Subsidy: The cross subsidy burden is most contentious issue that the industry has been demanding same be withdrawn to boost their competitiveness. Ending cross subsidy would benefit Railways, Metro, and the manufacturing units. Each of these sector can reap immense benefits, as fares would rationalise and manufacturing cost can come down.

 

The proposed amendments aim to rationalise electricity tariffs, unlock demand and reduce logistics costs, thereby strengthening India’s economic productivity and global competitiveness. The Bill lays down period of 5-year for distribution utilities to end cross subsidy. Open Access & Competition: Similarly, the current investment put in by States in erecting electricity infrastructure is proposed to be opened for sharing by all.

 

The draft refers to exempting distribution licensees from universal service obligation (USO) for consumers who are eligible for open access. Present rules bound Distribution Licensees to provide power to all consumers, including those eligible for open access (above 1 MW) that puts the companies financial health at risk. For the same the draft proposes that State Electricity Regulatory Commissions may designate one of the distribution licensees to supply power at a premium over the cost of supply, if other supply arrangements fail.

 

Also it has implied that Distribution licensees can share existing networks instead of duplicating them thus saving costs and optimising infrastructure. Captive Power & Energy Storage: The draft also clears air on captive power and more importantly energy storage with advent of batteries a legal clarity given to captive generation and new recognition of Energy Storage Systems (ESS). Clean Energy Push: To meet the target of power generation of 500 GW through non-fossil means, Centre said State must meet the minimum target set.