The Electricity Act Amendment draft Bill is not in the interests of people

The Ministry of Power (MoP) has issued a draft Bill on 17th April 2020 for amendment of the Electricity Act 2003, inviting comments, suggestions, and objections by 8th May, 2020.

This is the fourth draft put forward by the Ministry for discussion. The MoP had prepared the first draft in 2014 and introduced it in the Lok Sabha but the Bill lapsed due to the dissolution of the Lok Sabha. The second and third drafts were circulated in 2018 and 2019.  They met with strong opposition. The MoP is once again trying to push the anti-people anti-worker Bill by taking advantage of the preoccupation of people with the Covid crisis.

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The draft Bill pushes for privatisation of distribution companies (discoms) and fixation of electricity rates based on unsubsidised cost. It also envisages surcharges presently levied on industrial consumers to be reduced. As a result, the domestic electricity rates for daily use of people will significantly go up from the present level while they will come down for capitalists running industries. As per one estimate, the power rate could go up to Rs. 10 per unit.

At present electricity rates are decided by the State Electricity Regulatory Commissions. The Bill proposes that state commissions set the rate for the retail sale of electricity without any subsidy. In case any subsidy has to be given to any specific category of consumers, the government should directly pay it through a Direct Benefit Transfer (DBT). The amendment also emphasizes that the tariff has to reflect the cost of the supply of electricity, and cross-subsidies and surcharges levied on industrial consumers should be reduced.

The privatisation of power distribution has been pursued since the Electricity Act was amended in 2003, despite strong opposition of workers and consumers. While distribution has already been handed over to private power companies in a few areas, it is still with state owned distribution companies (discoms) in large parts of the country. The draft law now makes provision for state owned discoms to hand over distribution to private operators by appointing a sub-licensee or a franchisee, without requiring a separate licence from respective state regulatory commissions. The sub-licensing will allow state governments to hand over the distribution of electricity supply to private companies, achieving privatisation of distribution in a more surreptitious manner. This franchisee model is already being pursued at Bhiwandi in Thane district of Maharashtra where Torrent has been given the contract by the state-owned Maharashtra State Electricity Distribution Company Limited (MSEDCL).

One of the provisions of the Bill relates to setting up of an Electricity Contract Enforcement Authority, to provide assurance to capitalists that their capital investments will be protected. Capitalists want contracts entered into between state-owned discoms (State Electricity Boards) and privately owned generating companies to be honoured, as long as they are profitable to them.  At the same time, they want revision of contract to be allowed if and when conditions are not profitable enough.

Recently, in response to the Andhra State Electricity Board complaining of excessively high rates charged by private generating companies, the state government decided to review all the power purchase agreements (PPAs) entered into by the previous government with private generating companies.  Capitalists strongly opposed this move of the state government, calling it a violation of contract. At the same time, they have been asking for revision of PPAs for mega generating plants set up by them, using imported coal. Due to a big increase in the price of imported coal from the sources they had planned, these plants have become unprofitable.

The draft Electricity Amendment Bill has been strongly opposed by electricity workers all over the country, and by the All-India Power Engineers' Federation (AIPEF).

Electricity is a basic necessity of life today. Providing it to people at a rate that can be afforded by all is the responsibility of the state. Fixing of exorbitant rates of electricity to guarantee maximum profits to private companies, using a cost-plus pricing formula, as proposed in the Bill, is not acceptable.

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.

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