Industry Reacts: Electricity (Amendment) Bill 2022

As the Electricity Amendment Bill (2022) finds itself drawing the ire of the opposition parties, some farmer organisations, and even employees from the public sector power sector, who are vehemently opposing it, industry leaders speak exclusively to Saur Energy International to offer their views on the Bill that has become synonymous with controversy.

What The Bill Means For The Private Players & Consumers

Disha Agarwal, Programme Lead, CEEW, (Council for Energy, Environment and Water) a leading think tank, provides an insight into the provisions of the Electricity Amendment Bill, “Furthering the principle of competition embodied in the Electricity Act 2003, the Bill paves way for a competitive power distribution sector to realise financial and operational efficiencies, and increase consumer choices. This includes interventions such as aiding non-discriminatory access to supply sources (retail open access) as well as the distribution network (multiple licensees in a service area).”

Vineet Mittal, Director & Co-Founder, Navitas Solar, a leading manufacturer and EPC player in the solar industry, is of the view that the Bill is a two-pronged approach that will benefit both the private players as well as the customers, “The purpose of the Electricity (Amendment) Bill is to make the power sector more efficient, improve services for customers, and ensure its sustainability. Having a new set of ground rules will help fix the challenges in the sector now that there are more private players, a stronger emphasis on renewables, and other structural changes. The Bill will make it easier for quick adoption of renewables by allowing solar companies to compete directly with traditional fuels like gas. It will not only make the market more competitive, but also give customers more choices and rights.”

Vineet Tyagi, Head Sales & Marketing, Insolation Energy Pvt Limited a leading solar module manufacturer), echoes the views of Mittal, “Once implemented, the Bill will provide world class services to consumers. We have already seen the benefits of such reforms in the communication and insurance Sector, wherein the customers have the option of selecting the service provider as well the option of portability if not satisfied with the existing service provider.” He further opines that the Bill with facilitate “the introduction of new players” while strengthening  the “transmission infrastructure”. The “transmission losses and power thefts will be taken care of” at the same time, he says.

It may be pointed out that several reports agree that the transmission losses in India are extremely high. The Economic Survey of 2020-21 revealed that the country’s T&D losses with respect to the power sector (20 per cent) are more than twice the world average.

Tyagi’s stance is clearly in favour of the Bill, “It is aimed to bring out the far reaching reforms in the power sector by way of streamlining the payment framework, empowering regulators and encouraging competition in the sector.

Vaibhav Roongta, Chief Business Officer, Rays Power Infra (a large solar park developer), sees the Bill in positive light himself, “The recently introduced Electricity Amendment Bill 2022 has the potential to transform the power distribution sector completely. It suggests beleaguered power distribution, which has somewhat derailed the advancement in the industry. This bill primarily focuses on optimising the use of the exiting distribution network, strengthening it to reduce losses, streamlining the payment framework, strengthening the regulators and boosting healthy competition in the power sector. Naturally, this visionary bill will accredit the organisations in the power sector, DISCOMs and private sectors both, to gain more prominence and improve their efficiency.”

Taking The Pressure Off DISCOMS

Mittal adds that the early passage of the Bill, following three unsuccessful attempts, is essential to recovering from the Achilles’ Heel, which is, the financial strain that the Indian DISCOMs are reeling from. Terming the Electricity (Amendment) Bill “a welcome step in the right direction”, Tyagi says it could help “redress the inefficiencies and the mounting debts of the DISCOMs.” Its implementation, he adds, will “improve the health of the DISCOMs.”

The figures only reaffirm the dismal situation of the DISCOMs, given that their arrears witnessed a surge to 23 per cent- the highest in a period of five years at Rs 1 lakh crore- in Financial Year 2022.

Agarwal underlines why the RE sector stands to gain from the implementation of the Bill, “Competition is also being aided through enhanced regulatory monitoring, oversight and enhanced guiding functions of the Forum of Regulators – to encourage DISCOMs to rationalise costs, reduce losses and provide quality services to consumers. This in turn would have a significant positive trickle effect for the RE sector as its growth is largely dependent on the health of the DISCOMS.”  However, she adds an afterthought at this point, “The Centre and states must deliberate on how to provide a level playing field for existing and new entrants in the distribution space.”

Plugging The Loopholes

While Agarwal applauds the Bill for facilitating “green open access to consumers through standard processes, and approval procedures” that  “can unlock a huge demand for solar and wind among commercial and industrial consumers who account for almost half of the total electricity consumed in the country,” she adds in the same breath the challenges that could spring from this, “Under the large-scale migration of sales under open-access, DISCOMs would be left with costly power purchase agreements (PPAs)”. “This is also a key reason why DISCOMs have resisted open access for large consumers thus far,” she explicates.

The Bill, however, can mitigate this concern by “sharing of existing PPAs among all suppliers according to the specifications by the regulatory commissions,” she shares. She sheds light how on how DISCOMs can navigate through this transition, “They can perform robust demand forecasting, understand changing consumer needs, monitor energy flows, revisit their long-term portfolios, and take steps to leverage the potential of energy efficiency and demand side management. The market-based economic dispatch is also a step in the right direction to optimise power procurement costs under existing PPAs,” she makes viable suggestions.

Roadmap To India’s Climate Objectives

“The Bill concentrates on the climate crisis, consumer rights, competition, and regulation, all of which are needed to make the sector more sustainable, transparent, and viable,” Mittal says. He further shares, “Considering our national climate objectives, these amendments,  combined with severe penalties for noncompliance, will significantly incentivize solar energy players. The proposed reforms should energize the electricity sector as we strive for a greener and more affordable power for all.” Tyagi agrees, “The amendment is also necessary to push the green energy in view of the global climate change concerns and our commitments.”

His stance on the delay of the Bill is loud and clear, “A delayed implementation would hinder the long-term push for more renewable energy.”

Just as Mittal and Tyagi, Roongta voices his support for the Bill as far as meeting the country’s climate goals are concerned, “In addition, the Amendment will likely encourage distributed consumption of green power in the C&I space our green energy resources and help the country meet its global renewable energy commitments, to its people and to the world at large.”

What If The Bill Is Delayed, Or Never Sees The Light Of The Day?

Industry professionals from the power sector argue for the early passage of the Bill, so that it can be implemented as law at the earliest.

Mittal stresses the importance of the Bill being passed without further hiccups, “In the interest of a sustainable, efficient, and future-ready power sector, timely implementation of the Bill is critical.”

Roongta, on the other hand, is extremely hopeful that the Bill will see no more delays, “We are optimistic that this Bill will be passed by the Parliamentary standing committee, considering it sets the tone for the direction the Indian power sector strives to take. We are positive that the Electricity Amendment Bill introduced by the central government will pass. We believe that our leaders in the parliament will take a progressive decision to empower the Indian power sector. This Bill is a step in the right direction, and there’s no reason for it to get held up.” But what its destined for further delays? He addresses the question promptly, “Our targeted timelines will move further that much.”

Agarwal, however, argues for “collective political momentum” which she says “is essential for introducing and implementing fundamental reforms in the sector.” She indicates that the Bill will be left toothless without consensus, “Even if the Bill is passed, or rules are notified, it will be hard to deliver the transformation that the sector needs. Therefore, it is essential to create trust and alignment amongst central and state entities and establish the benefits of the reforms through a robust and deep consultation process.”

The urgency in Tyagi’s voice, when asked about the deferrals of the Bill, is hard to miss, “If the Bill is held up now, the situation will be similar to wasting the initial critical period in case of medical emergencies. We are already seeing the problems of mounting losses of DISCOMs. Reforms are the need of the hour. Protectionism cannot be the solution to the inefficiencies. Regulators need to be empowered to make timely quick decisions. Having said that, the Bill should also ensure that the apprehensions of all the affected parties are taken care of.”

As the industry seems to unanimously voice its approval of the Bill, clouds of uncertainty continue to gather over it. Tyagi further leaves us with a well-founded question over the fate of the Bill, that is worth pondering over, “We always say indecision is a decision too. If not now, then when?”

The impact of opening up any sector to the private sector has been well documented. Efficiency has improved in almost every case, and so has choice and availability. IN a core sector like power, caution was always needed, and governments have been duly wary, but perhaps for too long, without looking at the evidence on the ground. There is no doubt that key protections, be it rights of consumers, or independent regulators to oversee markets, or even ensuring public sector sector discoms are not unfairly hamstrung by USO obligations for instance. But opening up is badly needed to both finance and ensure that the power sector grows, most importantly is healthy enough to sustain its growth. The current situation is far from that, unfortunately. PSU discoms have taken refuge behind political interference for too long to justify poor performance. In its essence, the bill also seeks to take away that political oversight largely, and that is why it needs to be supported.