August 28, 2022

Electricity Amendment Bill 2022 Last Nail on the Public Electricity Sector in India

Sudip Dutta

ON August 8, 2022, the government of India witnessed the anger and rage of more than one million electricity employees against its autocratic deceiving move to introduce the Electricity Amendment Bill 2022 in the parliament. The lightening action with the instantaneous sturdy opposition within Parliament compelled the government to push the Bill into Parliamentary Standing Committee.

After notoriously disintegrating the public generation and transmission utilities, the final objectives for introducing this Amendment Bill are to privatise electricity distribution; to turn already financially stressed state distribution companies sick to gift-over at throw-away prices to corporate; and to destroy the huge public electricity infrastructure of state discoms. We will try to put this Bill in the historic context of Reform and Resistance to understand and resist the final death knell of public electricity policies in independent India.  


Up the to late ’80s, thePower-policy inIndia was focused around developing indigenous and self-relied electricity expansion programmes and state electricity boards (SEBs) were formed in this regard. With around 10 per cent average annual growth in installed generating capacity and consumption, the average electricity price in the country remained one of the lowest in the world (around 30 per cent of the developed countries). During that period in developed countries, the investment needed for generating and distributing electricity was nearly 3 times of the revenue realisation from the sale of electricity and Indian indigenous plants and equipment were cheaper by 50 per cent compared to imported system.

But the then Indian government was forced to go for foreign loans and imported equipment under the dictate of the WB and IMF and NTPC-1974 and NHPC-1975 were set up. Electricity generated by SEBs was forced to be priced low (In 1992-93, the SEBs tariff was 65 paise per KWH where as CPSUs/IPPs was 95 paise) thus creating an inter-utility tariff problem and the crisis was deepening further.


At this historic juncture in the Indian power sector, GoI opened up power generation to private and foreign sector companies. During mid-seventies SEBs had an operating surplus equal to 24 per cent while by 1990-91 they were incurring financial losses of around 30 per cent amounting to Rs 4,320 crores. It was a five-fold increase in the tariff but a steep inversion from profit to loss.

Providing adequate quality electricity at minimum costs being the fundamental policy objective was replaced by the profit-oriented commodification of electricity and wider participation of the private sector. But against the targeted 40,000 MW (1992-97), 17,000 MW were added by private producers.And while until 1992-93, the total financial loss of the power sector was Rs 4,600 crore; in March 2001, it mounted up to around Rs 26,000 crore with the worst reliability of power supply.

Though the tariff was increasing continuously (from 105.4 paise per KWH in 1992-93 to 240 paise per KWH in 2001-02), the steep input cost was raising the gap between the average cost of supply (ACS) and average revenue realisation (ARR). In 1990-91, the ACS-ARR gap was 24 paise per KWH which became 92 paise in 2000-01. The country was facing an energy shortage of around 8.3 per cent.


In this crucial state of the power sector, the Electricity Act-2003 was passed to distance the government from regulation of electricity business with the goal of privatisation and commodification. Generation was de-licensed and a provision for private transmission and distribution licensee was made. The Act provided for unbundling of the SEBs.  

It introduced electricity trading creating a speculation market in the electricity industry, just like roaming of finance capital without any material investment in the whole gamut of industry and economy. The Electricity Act, 2003 prescribed the elimination of government responsibility for cross-subsidy and rural electrification. In spite of wide-scale contractorisation, franchising, and outsourcing it failed to provide cheap and affordable electricity to the common people.

In 2006, EEFI suggested that “The real issue to be addressed in power sector includes minimising the cost of installation, fuel cost for power generation, net outflow of foreign exchange, O&M cost and A&T losses, maximising techno-economic benefits from available power sources…etc.” But the governments were adamant to pursue the reform route accentuating the crisis further.

With this whole reform scheme, the commercial loss of discoms rose rapidly in the late 1990s and touched its ever second-highest peak, 1.04 per cent of GDP, in 2011-2012. In the first decade of the enactment of the 2003 Act, the AT&C losses reduced a bit, while in spite of the reduction in cross-subsidy, the rate of losses of discoms rose up. The accumulated loss of all the state-owned power utilities for the FY 2015-16 had reached an alarming level of Rs 4,85,922 crores, which was 4.28 per cent of the GDP.

In course of these gross debacles, the current anti-people regime of Modi-government is incessantly trying to introduce Electricity Amendment Bills since 2014. During this regime, the ACS-ARR gap increased grossly and the overdue amount to gencos reached Rs 67,917 crore in March 2021. Multiple taxes and duties that are levied on coal, in fact, get transferred via tariffs to end consumers. On the other hand, in the name of disastrous 'hair cuts', big corporates are transferring assets among themselves at a hugely discounted liability, the losers being public sector banks and hence the people.


NITI Ayog’s 2021 policy paper has blatantly proposed to destroy the state-owned discoms though globally 70 per cent of the distribution utilities are publicly owned. While promoting de-licensing, 100 per cent vertical-horizontal un-bundling of the discoms and short-term power procurement, atrociously NITI Ayog has stated “the Act requires that cross-subsidies and surcharges be progressively reduced and eliminated.”

Clearly, the government has planned to withdraw all forms of subsidies and raise the tariff. The deceiving case of DBT is apparent to everyone through the experience of the mounting price of cooking gases re-pushing them towards non-LPG fuels.


The key provisions of the Electricity (A) Bill-2022 are as follows: A paradigm shift from distribution licensee to mere registration of distribution company; no requirement of licenses for distribution i.e., delicensing; grant of permission is by only application/ registration to appropriate commission where specified qualifications will be prescribed by the central government i.e., infringement in the state government’s domain; permission to private companies to supply the electricity in their choice of areas within municipal council or corporation or revenue district or a smaller area as notified by the appropriate government; distribution can further be entrusted to an individual who need not register separately; state distribution companies are bounded to provide their distribution infrastructure for use of private distributor.

In a nutshell, private distributors will not have to invest in distribution infrastructure; only have to pay a nominal fee for its use; state discoms are being forced to offer their infrastructure to their competitors; the burden of maintenance and network development will remain with state discoms. On the other hand, private distributors can demand compensation in case of breakdown; private generators will enjoy advantages as private distributors; new PPA’s can be made by private distributors at a lower rate.

Obviously, the private distributors will offer incentives to lure profitable and large customers initially like the telecom sector (especially the example of JIO) and then will enhance the tariff as per their monopoly control over the supply system. State discoms will not be able to compete due to their universal supply obligation, vast customer base and costs associated with past regulatory gaps and will be left with small and unprofitable and far-away customers. The losses of state discoms will have to be made up of people’s money. Ultimately discoms will be fully privatised at throw-away prices.

This bill will compel the state discoms to purchase renewable electricity, while 96 per cent of India’s renewable power production is under private sectors. Failing to do this will impose a steeper penalty on state discoms. For any delay in payment, the supply of electricity to state discoms may be stopped by NLDC. This bill certainly will make the jobs of 15 lakh workers at stake, will increase tariff rate and deteriorate the remote-village services.


Undoubtedly the power reform programmes expose the desperate dictate of the WB-IMF to unbundle-disintegrate the state monopoly power sector in the name of operational efficiency. The operational efficiency obviously does not have any contradictory relationship with the volume of the capital of the firm. Rather the resilient shock absorption capacity of capital in a monopolistic production process enhances by averaging out the price-profit fluctuation of the intermediary commodities, with increased control over the entire production and circulation process up to the end product.   

Clearly, it is the oligopolistic competition between state-run and private firms. The devastating neo-liberal ideology adopted by the ruling dispensation is programmed to kill the capacity of the state-run giant public sectors through horizontal and vertical unbundling whereas the unbundling prescription has never been applied to the private firms; the top 10 private electricity companies all over the globe have integrated generation-transmission-distribution utilities till date. The global experience of unbundling is nothing but the privatisation of state utilities at throw-away prices.

The opening up of the commercial energy market, smart metering and renewable generation with real-time purchasing will enhance the fluidity and hence financialisation capacity of the product market promoting a wide level playing field for the private traders. The whole reform process is private financial monopolisation of the electricity sector.  

This historical recourse through the atrocious reform programmes and the glorious resistances mounted thereon is to empower the Indian electricity workers to rise with courage and conviction to claim that “Our words are vindicated: the Reforms are for Riches”. This is a battle India cannot afford to lose.