Electricity amendment bill 2021: Why are some states opposing it?

The Centre is facing opposition by states like West Bengal to the Electricity Amendment Bill 2021 even before it is introduced in the parliament. Bengal Chief Minister Mamata Banerjee has written to the Prime Minister urging to avoid bringing the Bill to the Parliament claiming it as “anti-people”. She said the Bill would promote capitalism more than required.

What is the Electricity Amendment?

The amendment has provisions to de-license the power distribution, allowing private players to enter the sector and compete with state owned power distribution companies (Discoms). This Bill would also allow consumers to choose between the power companies. Finance Minister Nirmala Sitharaman had announced the Bill’s intention in the annual Union Budget.

The state government generally controls the Power distribution in most of the country but there are some exceptions including Delhi, Mumbai, Ahmedabad etcz where private players distribute power.

What is the need of this Bill?

Discom are running under huge losses and debts. The central government has brought many schemes to restructure the outstanding debts of these power companies and in turn would incentivise them to reduce their loss. However, these schemes are only of short term financial use for the discoms and the debts have tended to accumulate. This happened after the UDAY scheme was launched by the government in 2015.

What are the objections raised against Electricity Amendment Bill?

Several states have highlighted that the entry of private players could become the reason of “cherry picking” as they would provide benefits only to industries and commercial consumers, which could lead to loss for residential and agricultural consumers.

In a letter to the Prime Minister, Banerjee’s said “concentration of private, profit-focussed utility players in the lucrative urban-industrial segments while poor and rural consumers would be left to be tended by public sector discoms.”

At present, a wide difference is observed in the tariffs of the power companies throughout the country as commercial/industrial players cross subsidize the power consumption of rural residential and agricultural consumers by paying far higher tariffs.

However, the Power Ministry has assured the state governments that minimum areas to be covered by the private sector competitors would be so defined in a way that they cover both urban and rural services and also to include the concept of cross-subsidy in ceiling tariffs. 

Meanwhile, Bengal Chief Minister is in no mood to listen to these clarifications as she writes that the Bill “strikes at the roots of federalism”.

What are other key concerns?

Other key concerns include the higher penalties for failing to meet the Renewable Energy Purchase Obligations and the need of a Regional Local Dispatch Centre and State Load Dispatch centers following the instructions of National Load Dispatch Center.

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