The Electricity (Amendment) Bill, 2021 which was to have been approved by the Cabinet and introduced in the monsoon session of Parliament has been facing severe opposition from the electricity sector workers, from kisans and other consumers. The united opposition of electricity workers from across the country under the banner of the National Coordination Committee of Electricity Employees and Engineers (NCCOEEE) and the threat of strike all over the country has forced the cabinet to defer approval of the Bill.
Electricity which reaches our homes and offices, factories and agricultural fields passes through three main distinct stages: Generation, Transmission and Distribution. The three put together constitute one of the largest single businesses in the country, with an annual revenue of more than Rs. 7 lakh crores. The previous amendment in 2003 unbundled generation, transmission and distribution, and it delicensed generation. The current amendment seeks to delicense distribution.
The Electricity (Amendment) Bill 2021 is aimed at the privatisation of electricity distribution all over the country. It proposes to do this by allowing private companies to enter into distribution alongside the existing distribution companies (state-owned discoms). Even as the COVID-19 pandemic was raging in 2020, the Centre decided that the time was right for privatising the power distribution system, which belong mostly to the state governments. While the states are taking steps towards this move, the finance minister announced on 16th May 2020, the privatisation of the distribution systems of the Union Territories (including J&K and Ladakh, that together were a state just a year earlier). This was done as a part of the Covid-19 stimulus package! It is to be noted that the Puducherry assembly unanimously adopted a resolution in July 2020, against power privatisation in the UT.
While the government is claiming that the purpose of the amendment is to provide a choice to consumers in selecting their supplier and making electricity distribution more efficient, the real intent is to hand over public assets and open the market to private distributors. This claim is very similar to the claims made by the government when it introduced the farm laws. It claimed that kisans were being offered full freedom to sell their produce wherever they wanted to, across the country, without any restrictions. The reality is that these laws will enable monopoly corporations to take over agricultural trade. Which kisan would be able to travel thousands of kilometres from his farm to sell his produce at a better price? Likewise, crores of consumers do not want the option of selecting which private distribution entity is going to fleece them every month.
The other claim being made by the government in support of this amendment is that competition will ensure cheaper and better service. The experience so far, of privatisation of electricity generation and distribution in various states tells a very different story. Consumers in Mumbai have a choice between Tata and Adani, but they still pay one of the highest electricity tariffs. Likewise, the recent experience in Orissa – the electricity tariff shot up shortly after take-over by Tata Power Ltd. of the management of Central Electricity Supply Utility of Odisha (CESU) in Odisha’s five circles for the distribution and retail supply of electricity in June 2020. This, despite the fact that Odisha is a state generating surplus power.
The government’s claim of potential reduction in tariffs hides the fact that 75%-80% of the cost of power is on account of generation. Discoms have to pay the price agreed upon under Power Purchase Agreements with generation companies. The privatisation of the power generation sector has proceeded rapidly over the past two decades. Nearly half of generation capacity (47%) is already owned by private monopolies. Big capitalist groups like Tata, Anil Ambani, Jindal, Torrent group, GVK, Jaypee, Hindujas, etc. are in generation. Various state discoms are forced to purchase electricity from them at much higher rates than the cost of generation.
That private sector entry in power generation is against public interest is well exemplified by the experience of Enron. The American company, Enron was invited in 1992 with open arms to set up a power generation facility in Dabhol, Maharashtra, in spite of tremendous opposition from electricity workers and the people at large. The terms and conditions assured to Enron were blatantly against the national interest. Due to increased opposition from workers of MSEB and people of Maharashtra, the agreement with Enron had to be cancelled on 23rd May 2001, but only after a huge compensation was paid to the company. However, since then, post the 2003 Amendment, generation has been increasingly privatised.
The consequence of privatising electricity generation is starkly visible right now when the country is facing shortage of electricity. Private generators are profiteering by selling electricity at even Rs. 20 per unit on the Energy Exchange to state governments. The cost of state governments buying such exorbitantly expensive electricity will finally be borne by the people.
As in the case of generation, different approaches have been tried to privatise distribution. In many states and cities, privatisation of distribution failed because capitalists did not find it attractive and state DISCOMS had to take it back, leading to loss of hundreds of crores of rupees of public money. This happened in Orissa with the private company Applied Energy Services Transpower (AES). In 1999, this company won the bid for the Central Electric Supply Company of Orissa (CESCO). But the company quit in 2001, handing it back to the state, leaving behind a huge debt that tax payers would have to bear.
The terms and conditions offered to the private distributors, under the 2021 amendment, make it clear that everything is being done to enable them to take over the sector after this amendment.
- State electricity distribution companies (discoms) are bound to provide infrastructure to private distribution companies; the bills says that an existing distribution company (i.e., mostly, the state discoms) shall provide non-discriminatory access to all distribution companies registered within the same area of operation.
- State discoms will have to maintain and invest in network infrastructure, while private distribution companies need not make any investment but only pay a nominal fee for use; they can demand compensation from the state discoms in case of breakdowns.
- Further, a private distribution company can choose its area of operation. They can avoid remote locations in rural areas, which the state discoms are obliged to serve currently. Private distribution companies will choose to serve only large profitable customers leaving small unprofitable and difficult to serve customers to state discoms. In effect, instead of customers having the choice to select a distributor, as claimed by the government, distributors will choose who to serve.
State discoms are expected to face severe constraints in cross subsidising, with profitable connections being taken over by the private distribution companies. The intention is to abolish all subsidies to facilitate complete privatisation of electricity generation and distribution. The National Electricity Policy 2021 states that the difference between the lowest and highest rate of electricity should not be more than 20%. The worst hit will be crores of farmers.
The real intent is to turn already financially stressed state discoms sick so that their huge infrastructure, worth of lakhs of crores of rupees can be sold cheap to private capitalists.
Soon after Independence, the Electricity Act 1948 was enacted to bring generation, transmission and distribution under the authority of the government. Prior to independence, there were hundreds of private electricity companies across the country but they supplied power only to a limited number of profitable consumers from cities. In 1948, it was declared that electric power is the backbone of the country and hence it is the responsibility of the government to ensure supply of power in every nook and corner of our country at affordable rates. It was also declared that profit should not be the motive of the power sector. State Electricity Boards were created in each state to generate and supply electricity; they were guaranteed a very nominal return of 3%.
Since the 1980s however, state policy changed to destroying all the public assets created hitherto and liberalise sector after sector. The Central and state governments started throttling power generation systematically by stopping any fresh government investments in it. As a result of that, power shortage was artificially created leading to frequent power outages across the country. This was used to create public support for opening up the power sector for private investment. Governments started talking of opening up the private sector for foreign investment. These steps gained tremendous momentum with the announcement of the New Economic Policy of Globalization through Liberalization and Privatization (LPG) announced by the Narsimha Rao led Congress government at the centre in 1991-92.
The Electricity Amendment Bill 2021 is the fourth attempt, since 2014, to amend the Electricity Act 2003 – there have been three bills in 2014, 2018 and 2020, but all of them were dropped due to severe opposition.
Electricity is a basic necessity of life and it is the responsibility of the state to ensure that it reaches everyone at an affordable rate. It is not acceptable that private companies are allowed to set the price of this necessity or decide to whom they will provide the service. Electricity generation and distribution is an essential public service. It cannot and must not be made a source of private profit. Privatisation of electricity distribution is an anti-people measure. It is against the overall interests of society and must be opposed.