Centre should tread cautiously on Power Bill

Eleven States including the two Telugu States and one Union Territory are opposing the Electricity Amendment Bill 2020 saying that it threatens to violate the principles of cooperative federalism. The Telangana Assembly had even passed a resolution to the effect.

The Centre claims that the Electricity (Amendment) Bill would address "critical issues weakening the commercial and investment activities in the electricity sector". It prescribes multiple policy tools to achieve this objective. If passed, the power sector would be moving from government control to the hands of private sector.

The question now is how will it help the nation? Are the solutions provided in the bill viable and sustainable? Can they address the core problems of power sector? There have been several reforms in the past and yes, today the power situation in the country is good. But all the while the control has been with the respective State governments. It now needs to be seen if privatisation could be the solution for further improving the power situation in the country.

Many discoms are facing operational and financial inefficiencies in terms of power generation, transmission and distribution utilities, access and quality of power supply, political interference, lack of private investments, inadequate public infrastructure and lack of consumer participation. Will centralisation of decision making in power sector help in addressing the present problems is the million dollar question.

The protagonists of the proposed reforms feel that the objective of this bill is to bring uniformity in governance of power sector. This will make it mandatory for States to align themselves with the vision of Centre and the problems like PPA reviews as attempted by Andhra Pradesh which had led to serious problems from private investors from across the globe can be avoided. The bill would expand the scope of privatisation in the power sector.

The Centre appears to be of the opinion that this will help in flow of private investments into distribution business and privatisation of utilities would being in operational efficiency. The bigger aims seem to be de-stressing the discoms. While an in-depth, open minded discussion is needed and the Centre should not rush through passing the Bill and should have a structured roadmap to bridge the gaps. The existing disconnected dots should be joined. According to the draft, ECEA will have sole authority to adjudicate matters related to specific performance of contracts related to purchase or sale of power. The States fear that it will affect the free power programmes and would work against the interest of farmers and poorer sections of the society. The Centre says that to overcome this problem they had incorporated a provision for direct benefit transfer of subsidy to help the farmers and domestic consumers from weaker sections of society.

The Bill also aims to ensure a mandatory minimum purchase of power from renewable sources of energy and enforce stringent penal measures for non-compliance with the provisions in the act. Since it is going to be a very major reform the Centre has to take all states into confidence and if need be hold meetings like it did in case of GST and then take a final decision.