Power politics

Whatever hope consumers across the country had of being able to get lower-priced power at some point may suffer another setback if the ministry of power has its way and changes crucial sections of the Electricity Act in a manner that all regulators in various states will have to do the bidding of the central/state governments.

So, if the central/state government wants to delay the introduction of competition in the sector, that is what the regulators will have to do. Right now, the regulator is “guided by” government policy, but is free to act on his/her own.

If the provisions go through, the regulators “shall act in conformity with” the state governments’ policies. Various states, for instance, have been forced to provide explicit subsidies in their budget with the state regulator refusing to allow them to be passed on to the state electricity boards, and this is something they would clearly love to change.

Last year, to cite another example, the central government had come out with a draft tariff policy which stipulated a 14 per cent guaranteed rate of return for power sector investments—once the proposed amendments come in, if the tariff policy gets accepted, all state regulators will have to fix tariffs in such a way as to guarantee this return. In other words, it’s goodbye to any hopes of lowered tariffs through increased competition.

The best example of this, of course, is Delhi, where the government privatisation gave Reliance Energy/NDPL a monopoly over power distribution in the capital, and electricity tariffs have gone up dramatically as a result.

Apart from the fact that the proposed amendments are also an attempt by the Centre to usurp the authority of the states since the national policy will become binding (and is therefore against even the Common Minimum Programme), what is disturbing is that, so far, the central government has supported measures to reduce competition in the sector. The states haven’t acted any differently, either.

So, for instance, when the Electricity Bill 2001 spoke of the need to increase competition in the sector by granting two or more licences to people in the same geographical area, when the Bill came to Parliament, it had two new provisos which delayed the issuance of fresh licences.

The original draft Electricity Bill had said that open access, which would allow you to buy power from a company which did not necessarily hold the distribution rights for the area, should be allowed within a maximum of three years.

The Electricity Bill 2003 left it to the state regulators to decide the period, and gave them up to a year to decide. Indeed, since the power sector is eventually to be controlled/regulated by regulatory commissions, an attempt was even made to ensure the regulators were dependent. This was done in two ways.

One, the Bill allowed regulators to be re-employed in the same state in which he/she served, thereby creating an incentive to do the government’s bidding. Two, the Electricity Bill 2003 allowed for the central government setting up an appellate tribunal, which, apart from hearing appeals against the orders of the state regulators, would also administratively control the state regulators!

It was only after a handful of alert parliamentarians raised a hue and cry that the government agreed to change these provisos. It would be a pity if the wheel is allowed to turn full circle.