By Nantoo Banerjee
Whoever may be behind the preparation of The Electricity (Amendment) Bill, 2021, the initiators have ignored a simple logic that India should first strive to generate enough electricity for its people before recasting its distribution policy. The aspect of cost of electricity to consumers should also guide the lawmakers in formulating any new electricity policy. While the Bill fails to recognise the first thing first — the need for a rapid increase in the generation capacity — it is more concerned with selective distribution through private participation
The document seems to have been designed in a manner that benefits a select group of private distributors (Discoms) more than electricity generators, in general. This is more so when, in the government’s own admission in the Economic Survey, the share of private sector in power capacity addition is dwindling. The survey noted that installed generation capacity addition in the power sector was entirely driven by the government in 2019-20, while the private sector failed to add even a single unit.
Technically, the union government is free to enact any law with regards to power generation and distribution as the area falls under the concurrent list of the constitution (List III in the Seventh Schedule). A good number of non-BJP ruled states are, however, upset. Under the constitution, the legislature of any state also have power to make laws with respect to any of the matters under the concurrent list. Some of the states have demanded that the Bill be sent to the select committee of Parliament. The Bill appears to be wrongly designed as the opposition states have been kept out of the loop on an issue as important as power generation and distribution.
Going by India’s per capita consumption of electricity, in terms of kilowatt hours, the country ranks lowly at the 13th position in the community of nations. Today, India’s population is almost the same as China’s at 1.4 billion people. The per capita power consumption in China is nearly 5,000 kWh as against India’s less than 1,000 kWh. China is by far the world’s largest producer of electricity, generating a significant portion of its 7,503 TWh of power in 2019 through coal and hydro-power, as against India’s only 1,559 TWh. China also tops the world in electricity consumption, using more than 6.3 trillion kilowatts of energy per hour annually. The country is the world’s largest producer and consumer of coal. Of late, China has partly shifted its focus to natural gas and renewable sources. The State Grid and the China Southern Power Grid are the country’s two wide-area synchronous grids.
In this context, a new electricity bill in India would have been highly welcome if it sought to give a gigantic push to power generation and had set generation targets for the country’s public sector, state sector and the private sector. To increase demand for electricity, the bill could have also dealt with the power pricing aspect by fixing targets for maximum retail distribution rates for various types of consumers, including rural, agricultural, domestic, export and general industrial users. The electricity bill offers little to restrain high retail power tariffs, especially by private sector Discoms, led by the Adanis, Reliance Infra, CESC and Tatas. The high retail power tariffs in India have little connection with the country’s low generation cost. In fact, India is the cheapest producer of electricity from coal, solar and wind sources in the entire Asia Pacific region. It is the only country in the region where solar power costs almost 14 percent less than that of thermal power. Yet, Indian consumers are made to pay among the highest electricity tariffs in the region, including those in countries such as Malaysia, Vietnam and China. According to global consultant Wood Mackenzie, the levelised cost of electricity generation from fossil fuel at around $44.5 per MWh (Rs 3.05 per unit) in India is the cheapest in the region. In China, it is $48.5 per MWh (Rs 3.33 per unit) and Australia $50.9 per MWh (Rs 3.49 per unit) among other 12 countries in the region. The same is for solar power. In India, the cost is estimated at around $38.2 MWh (Rs 2.62 per unit), the lowest. In Australia, it is $52.7 per MWh (Rs 3.62 per unit) and China $61.2 per MWh (Rs 4.2 per unit). India’s levelised cost of onshore wind power generation, estimated at $48.9 per MWh (Rs 3.36 per unit), is also the cheapest in the region. Much of the credit should go to India’s government-controlled power generating firms, led by NTPC Limited.
Unfortunately, the Electricity (Amendment) Bill of 2021 fails to recognise and reward those efficient power generation firms. Most opposition states, including West Bengal, Kerala and Delhi, think that the Bill is largely intended to benefit private sector Discoms. It will provide private Discoms a distribution stranglehold over lucrative urban industrial segments while poor and rural consumers would be left to public sector Discoms. Significantly, the Bill gives freedom to private power utilities to cherry-pick consumers. The Bill, in its current form, may take away powers of the State Electricity Regulatory Commission (SERC). It seeks to establish an Electricity Contract Enforcement Authority, which will have the sole power to decide contract-related disputes in the electricity sector. The bill misses the most important point that is how to reduce the retail tariff of electricity at all levels to bolster the demand for power consumption and generation.
The country has accomplished two landmarks in rural electrification arena — 100 percent village electrification under Deen Dayal Upadhyaya Gram Joyti Yojana and universal household electrification under ‘Pradhan Mantri Sahaj Bijli Har Ghar Yojana’ (Saubhaagya) — solely under public utility services. However, these pro-poor schemes hardly pushed up the demand for power. Though India is the world’s third largest producer of electricity after China and the US, it ranks far below in terms of per capita consumption. At the current high tariff levels — mostly under the influence of some of the private sector Discoms — India’s power demand is unlikely to increase substantially to energise its future economic growth. Maybe, the government should rework on the bill to provide a big push to power generation and consumption. It mustn’t be forgotten that power consumption is the single most important indicator of a country’s economic strength and prosperity. (IPA Service)