Sarat Chandra IAS Academy

UPSC Civils Daily Mains Question 4th March-2021

Q) “The recent Electricity amendment bill 2020 is to promote growth in line with the GoI vision of a $5 trillion economy. Discuss the key provisions of and concerns raised over the bill.”

Answer :

The Electricity (Amendment) Bill, 2020 aims to reduce subsidies and push for privatisation, especially in the distribution segment of the power sector. Undertaking structural changes in a core sector at a time of crisis from the COVID-19 pandemic and its economic effects defies logic.

Key provisions of the bill

  • National Selection Committee: Instead of the separate Selection Committee (for the appointment of Chairperson and members of State Electricity Regulatory Commissions-SERCs), the bill proposed to set up a National Selection Committee.
  • Direct Benefit Transfer: The bill proposed Direct Benefit Transfer (DBT) which will be beneficial for both the State Governments and as well as Distribution Companies.
  • National Renewable Energy Policy:India is a signatory to the Paris Climate Agreement. It is therefore proposed to have a separate policy for the development and promotion of generation of electricity from renewable sources of energy. The policy in the Bill prescribes a minimum percentage of purchase of electricity from renewable sources of production. It also seeks to give special attention to hydro power.
  • Sustainability: In the past, there have been issues of lazy attempts from the commissions in adopting the tariffs determined, causing cost escalation problem. To address this problem, the Amendment prescribes a period of 60 days to adopt the determined tariffs. Failing to do so would result in the tariff being deemed to be accepted.
  • Payment Security:The Bill also proposes to empower Load Dispatch Centres to oversee the establishment of adequate payment security mechanisms before dispatch of electricity, as per contracts. This has been proposed keeping in view the case of late payment of dues of generating and transmission companies which have reached unsustainable levels as they not only impair the finances of the Gencos and Transcos but also increase the Non-Performing Assets of the Banks.
  • Ease of Doing Business:The Bill also proposed the establishment of Electricity Contract Enforcement Authority (ECEA), an Authority headed by a retired Judge of the High Court with powers to execute their orders as decree of a civil court. The Authority will enforce performance of contracts related to purchase or sale or transmission of power between a generating company, distribution licensee or transmission licensee.
  • Subsidy:The Bill proposes for the SERCs to reduce cross subsidies as per the provisions of the Tariff Policy. Additionally, it also proposed strengthening of the Appellate Tribunal by increasing the strength to at least seven to facilitate quick disposal of cases.

Concerns over the bill

  • the Telangana State Legislative Assembly unanimously adopted a resolution opposing the Bill, stating it is detrimental to State and farmers’ interests.
  • Cost reflective tariff has been a concern for states like Telangana which provide free electricity to the farming sector.
  • Formation of ECEA has also been criticized as a move towards centralization of power.
  • Recognition of franchisees and sub- licensees might open the sector to private players.

Since electricity is a Concurrent subject, States must not be deprived of their powers, through this Amendment.


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