Date: 24th December 2022
The Electricity Amendment Bill 2022 was tabled in the Parliament on the 8th of August 2022. The Bill was then referred to the Standing Committee on Energy. Through this letter we, the civil society organizations would like to bring to your notice some pressing concerns, comments and suggestions.
Electricity, which was first a privilege, slowly moved to being one of the basic necessities for all, especially after the advent of technology and the dependence of our lives on them. Over the years, we have seen focused programs run by the government to ensure electricity and power lines reach every household. Electricity is also the only infrastructure that finds its place in the concurrent list to ensure the larger public interests are always catered. With time, electricity has also been associated with the safety and security aspect of our country. Healthcare, education, food and water, all services are directly connected to electricity and the access to electricity affects these services directly. Therefore, the core of the legislation related to electricity should be affordable and equal access and not privileged access which is the objective of the proposed amendment in the Electricity amendment bill. Along with affordable access to all, the focus should also be on ensuring electricity security of the country.
The proposed amendment to the Electricity act has many concerns and aspects that need your attention to be addressed. Over the past few years, the health of DISCOMs has been a constant concern with the DISCOMS being in constant debt, loss making and being bailed out by the government. Electricity being a concurrent subject between the states and the center, both federalism and welfare are at the core of the electricity laws. This Bill, proposing amendments in the Electricity Act 2003 and subsequent amendments in the Act from 2007 in many ways violates this arrangement. Over the past few years, the Government’s focus has also been on electrification of the villages and have claimed to have “achieved 100% electrification”. To achieve this we have invested significant amounts of public money in constructing the electricity transmission and distribution lines and other necessary infrastructure. The power sector DISCOMS, mostly public sector, have created this infrastructure with huge investments which also resulted in their indebtedness. Over the years, the ‘loss-making’ discoms have been bailed out, again using public money. Through this amendment we will be pushing them further into the debt, and wasting the massive public finance already invested in them.
Through this proposed amendment, we are afraid that this bill is nothing but an effort to transfer wealth to the private players. We would like to draw your attention to our concerns, comments and suggestions that we have detailed in these submissions.
The Constitutional Violation
The spirit and purpose of the Constitution is to work towards a welfare state wherein the Directive Principles of the Part IV of the Constitution clearly state that “minimising income inequalities” [Art 38(2)], “ownership and control of material resources of the community are so distributed as best to subserve the common good” [Art 39(2)9b)], “operation of the economic system does not result in the concentration of wealth and means of production to the common detriment” [Art 39(2) ( c)] and so on.
As per article 19(6)(ii) read along with article 12 of the Constitution of India defining states, all the power infrastructure that has been developed by the State run companies is owned by the State. Thus –
- This Act is an attack on federalism and it violates the constitution. It reduces state autonomy on electricity regulation by stating that CERC will provide directives to SERC. Electricity is a concurrent subject. However, this act reduces SERC’s independence.
- Privatizing parts and pieces of electricity transmission and supply mechanism will not only mean that profit making sections would be taken by private distributors leaving the less profitable and welfare areas for the state run discoms. This would force the already ailing and loss making discoms to incurring further losses.
- The states give subsidies to the citizens and this differs from state to state. Privatization of the electricity supply would make this process complicated. This would also mean that the subsidies would have to be transferred directly to the banks. DTS or Direct Transfer of Subsidy and the challenges related to the same would be discussed further.
Private Players in Distribution
It is a well-known fact, no private company would invest in welfare or non-profit making systems. Similarly, the investments by the private player in electricity will also not be for the larger public good, affordability and equitable access, it will be purely for profit making.
As private players suggested in this act are not investing in any infrastructure but will use existing infrastructure that was developed by the discoms using public money. It is essentially a transfer of wealth from public to private as the major investments are at the phase of construction of generation and distribution infrastructure and the major profits are made in supply and billing.
Further, the private players will be free to lure high paying bulk consumers who will have additional money to pay in recreating additional infrastructure like electricity meters and connections. The other less lucrative areas and rural areas where the electricity will not be as profitable, will remain with the public sector DISCOMS. This will significantly demotivate the DISCOMS to invest in creating more infrastructure to support such areas, as the element of cross subsidy to provide services to poorer consumers will go.
With the private players only paying the wheeling charges, it is not clear if the wheeling charges would include the debt and interest that the DISCOMS have incurred while constructing such infrastructure.
Further, the profits made by the state run DISCOMs were earlier transferred or used to cross-subsidise other consumers which are less profitable, after privatization, it is not clear if there will be any cross subsidisation and how it will be managed. The farmers will especially be affected by this arrangement.
Further, the guarantee of payment that is being assured in the bill to private players, if such guarantees are offered to the DISCOMs, they would not be ailing.
Privatization being offered as profitable V/s increased inequality in access of power –
Cities like Delhi have already privatized their power supply companies. However, they have also had troubles being profitable.
This will also impact remote areas where population is sparse such as in Himachal Pradesh. Any gains in access to electricity in rural areas that we have achieved in the last decade will be lost
The charges of electricity and its transmission have ever since increased. Privatization in the various cities has in no manner reduced the electricity charges. The electricity charges have continuously increased and the entire burden has been pushed to the consumers.
Majority of the consumers are not able to pay the actual electricity charges. Such costs were recovered by the DISCOMs from commercial, industrial and prosperous areas and then would cross subsidize the poorer or less profit making areas. Would this legislation affect this cross subsidization? There is no clarity on the same.
Renewable Energy mandate
The proposed amendment mandates that renewable energy will have to be purchased by the DISCOMS, failing which, the DISCOMS would be penalized. Mandatory Renewable energy purchase and supply as proposed in the bill is a welcome step, however, there are some concerns that we would like to put forth for your consideration
a.The renewable energy with the updated definition also includes large hydropower. Large hydropower being implemented all around india have shown devastating impacts on the communities and the environment. Beyond, large hydropower dams have been one of the major sources of methane emission that directly causes global warming. In no manner large hydropower counts as renewable energy and we would like to register our protest against the same through these submissions.
b.The clause to penalize the DISCOMs failing to source renewable energy could be counterproductive since the penalty and the losses the the DISCOMS would incur would directly be pushed to the consumers.
c.Another reason for this provision to cause the DISCOMs to incur more loss is due to the long term power purchase agreements that the DISCOMs have entered into. While the renewable energy sourced from the solar power plants will see supply to the grids during the day time, the thermal power plants will have to be kept idle during that period since during the nights, the lack of renewable energy would have to be compensated by the coal fired thermal power plants. This would cause the DISCOMS to pay for the time the power plants remain idle, causing more losses. It is necessary that these power purchase agreements be revised to accommodate the renewable energy related provisions.
Direct Subsidy Transfers
While privatization of the power supply sector is being promoted as a promising and lucrative market driven business model, there are some significant concerns with regards to the transfer of subsidies to the beneficiaries.
- For years, we have seen electricity subsidies being one of the major election promises and the poor and farmers have largely benefitted from these subsidies. When privatization would be pushed on the electricity supply side, there is no clarity how the subsidies will be transferred to the beneficiaries. Direct Subsidy Transfers that are proposed by the government have many difficulties and road blocks. Some of the concerns are –
Direct subsidy transfers should be first tried and tested and should be run on a pilot mode. Only on the success of these pilot projects, should the direct subsidy transfers be implemented.
- There are thousands of illiterate people, those who do not have permanent houses and necessary documents to open bank accounts would be automatically excluded from the benefits.
- The direct subsidy transfers would mean that the electricity bills have to be paid by the consumers first. In case there is a delay in the transfer of the subsidies, the burden on the consumers will increase. Also, this system will directly affect the poor and the farmers who will have to shell money from their own pockets.
Small Scale Renewable energy
The proposed bill in this form, nowhere intends to support and motivate the consumers to consider small scale and decentralized power generation systems like the solar panels which is the need of the day. Mandating 10% purchase of the renewable energy, we are ensuring that the renewable energy projects will only be big and would cause tremendous impacts on the ecology and the communities.
The proposed amendment also does not ensure that there will be continuous and uninterrupted supply of electricity. If there will be any problem at the power production stage, transformers and transportation, there will be power cuts, power disconnections and so on.
- This Electricity Amendment Bill 2022 should be dropped and a new legislation should be drafted based on the principles of just and equitable electricity access and distribution.
- The Electricity Amendment Bill 2022 should be taken back and redrafted after wider consultations with all stakeholders.
- The Bill was published in the Gazette of India on the 8th of August 2022 when it was tabled in the Parliament. This Bill was published only in English which automatically keeps several sections of the society out of the process of consultation. This bill should be withdrawn and published in English and local languages for wider awareness and consultations.
- We demand that energy from large hydropower should not be considered as renewable energy.
- We demand that electricity to our farmers, the key to the food security of our nation should be made more accessible and affordable. We, as a country, are not doing enough for our farmers.
- We demand that affordable electricity and equitable access should be the key of this policy as the poor and weaker sections of the society are not left out of the development paradigm as electricity is now a necessity and not a privilege.
- The Centre should realise that it has to discharge the obligations cast on it by the Constitution in terms of the Fundamental Rights and the Directive Principles and it has no other alternative than to comply with the same. The Central and the State PSUs are instrumentalities of the State. Private control over the PSUs, either through outright privatisation or through any other means, including monetisation of assets, will violate the letter and the spirit of the Constitution.
Endorsed by –
Financial Accountability Network
Soumya Dutta, MAUSAM Network
Sreedhar R, Environics Trust
Prakash Bhandari, Himdhara – Environment &Research Collective, Palampur (HP)
Rajkumar Sinha, Bargi Bandh Visthapit Evam Parbhavit Sangh, Madhya Pradesh
Anil Chaudhary, Indian Social Action Forum – INSAF
Nityanand Jayaraman, Chennai Solidarity Group.
Dr. Bharat Patel, Machchimar Adhikar Sangharsh Samiti
Mujahid Nafees, Convener – Gujarat Collective
Arundhati Dhuru, NAPM
Thomas Franco, Joint Convener, People’s First
Gautam Bandhopadhyay, Nadi Ghati Morcha and People’s Alliances in Central East India
Ajay K Jha, PAIRVI, Delhi
Willy, Indian Social Action Forum – INSAF
Deepak Das, General Secretary – Jharkhand Mines Area Coordination Committee
Gajendrasinh Jadeja, Ashapura Charitable Trust
Jakharia Suleiman, Chairperson, Kutch District Machchimar Association
Manshi Asher, Himdhara – Environment &Research Collective, Palampur (HP)
Nikhil Dey, Mazdoor Kisan Shakti Sangathan (MKSS)
Prafulla Samantara, Lok Shakti Abhiyan, Lohia Academy, Bhubaneswar
Shalmali Guttal, Focus on the Global South
Usmangani Sherasiya, Samast Machimar Samaj, Gujarat
Joe Athialy, Centre for Financial Accountability