Power Sector Needs Critical Reforms to Move Forward, Energy News, ET EnergyWorld


New Delhi: It has now been 18 years since the Electricity Act of 2003 (the Act) was notified by the Indian government in June 2003. These 18 years have been a fairly successful journey for the electricity sector, the countries that have made significant progress on many fronts. such as achieving self-sufficiency to meet the electricity needs of consumers, innovative reforms in the country’s regulatory system and consumer empowerment. It is not wrong to say that the Electricity Law was really the harbinger of reforms for the sector and laid the groundwork for many other reforms that followed. Thanks to these reforms, our electricity consumption per capita has reached around 1,200 units, an increase of nearly 2.3 times since 2003. All the villages of the country now have access to electricity. The country’s installed capacity has grown to 388 GW, with renewable energy capacity (solar, wind, etc., excluding hydropower) exceeding 100 GW, which is remarkable.

However, a period of almost two decades is a long time for a policy to remain effective. These tumultuous times are witnessing an unprecedented rate of technological innovation and rapidly changing aspirations of consumers in all sectors of the economy, including electricity. In the electricity sector, we are moving to the next level of development. Innovative technological solutions will play a more important role. Batteries, other innovative storage solutions, electric vehicles and distributed supply are expected to drive a major structural change. Thus, statutes and laws must be developed to act as facilitators and create an environment conducive to the deployment of these technologies. With an increasing dependence on electricity in all areas of life, the demand for 24-hour, uninterrupted electricity supply in homes, industries and commercial establishments is likely to increase. We are entering an era where electricity will be treated as a service and consumers will not hesitate to ask for a service even if it comes at a cost. At the same time, the pressure on electricity distribution will also increase. This requires the dismantling of the existing structure and the transition to a new framework.

The decommissioning of production and transmission authorized under the 2003 law, resulted in an increase in additional capacity of 50,000 MW and 88,000 MW during the 11th and 12th plans respectively, against 20,950 MW in the 10th plan . This has enabled the country to meet the ever increasing peak demand and energy demand and the evolution of National Grid.

However, the distribution sector remains the problematic area in the entire value chain. The proposed new set of reforms, which will allow the delicacy of the distribution sector with separation of content (electricity) and transport (wire) is necessary to improve sector efficiency, service to consumers and reduction of AT&C losses. The impact of these losses is also reflected in the coal sector. The recent electricity crisis, despite the excess generating capacity available, is attributed to the coal shortage and has further accentuated the need for such reforms. Besides the impact of Covid-19 and the prolonged monsoon, the unpaid contributions of Rs 23,000 crore from GENCO (generating companies) to coal companies are also a major factor in this coal shortage. Indeed, the distribution companies (DISCOM) are not able to pay the GENCOs on time, which leads to a vicious circle. DISCOM contributions to electricity producers currently stand at a whopping Rs 116,127 crore.

With a massive mandate, the current central government is uniquely positioned to undertake these massive and bold reforms to take the sector to the next level. To be fair, the government has launched innovative reforms, especially in the distribution sector in recent years. It must now move forward with its promulgation and implementation. In fact, the Union budget 2021-2022 spoke of offering choice to electricity consumers:

“Distribution companies across the country are monopolies, public or private. It is necessary to offer a choice to consumers by promoting competition. A framework will be put in place to give consumers alternatives to choose from among several distribution companies. An expenditure of 305,984 crore rupees over 5 years has also been proposed for a reorganized power distribution program, based on reforms and linked to results.

Last year, a series of amendments were proposed by the government, which included reforms to the distribution licensing system, overhauling the regulatory system and improving the financial health of electricity distribution companies. . Likewise, changes have been proposed in tariff policy in areas such as improving the payment security mechanism for the supply of electricity and ways to reduce losses and cross-subsidies. With these measures, the government had made it clear that the reforms would be pushed ahead. It is time to act on this intention.

It would not be an exaggeration to say that the potential impact of these proposed reforms would be profound on the electricity sector, much like the economic liberalization of the 1990s. Without these reforms, it might be difficult to continue and reap all the benefits. benefits of the reforms initiated under the 2003 law. It is time for the government to move on to the next phase of reforms.

(This article was written by Anil K Jha, Former Chairman and CEO, NTPC and Former Member, MPERC)


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