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Electricity (Amendment) Bill 2022

GS Paper 3

Syllabus: Infrastructure- Energy


Source: Indian Express

Context: The government has tabled the Electricity (Amendment) Bill 2022 in the Lok Sabha and then referred it to the parliamentary standing committee on energy for wider consultation.

Direction: Just go through it once. No need to make notes right now as it will undergo many changes.

Electricity Amendment Bill,2022 amends the previous Electricity Act of 2003.

  • Electricity Act, 2003 regulates the electricity sector in India by setting up the Central and State Electricity Regulatory Commissions (CERC and SERCs) to regulate interstate and intrastate matters, respectively.

Provisions of the Bill:

  • Benefits for consumers:
    • Allows multiple Discoms in the same area: More than one power distributor can operate in an area. This is aimed at boosting competition and giving more choice to the consumers. The new supplier can use existing supply lines.
    • Regulator must decide in 90 days or the application will be deemed to be approved.
    • It will end distribution monopolies and improve the viabilities of business.
  • Benefit for DISCOMs:
    • Fixing of Tariffs:There will be “mandatory” fixing of minimum as well as maximum tariff ceilings by the “appropriate commission” to avoid predatory pricing by power distribution companies and to protect consumers.
    • It aims to ensure graded and timely tariff revisions.
  • Benefits for remote areas and farmers:
    • Cross-subsidy Balancing Fund: Cross-subsidy refers to the arrangement of one consumer category subsidizing the consumption of another consumer category. E.g. commercial consumers subsidies residents or farmers. The state government will set up such a fund.
  • Benefit for Environment:
    • Renewable purchase obligation(RPO):Under the previous act SERCs are empowered to specify renewable purchase obligations(RPO) for discoms. RPO refers to the compulsory procurement of a certain percentage of electricity from renewable sources.
    • As per the Bill, RPO should not be below a minimum percentage prescribed by the central government or DISCOMS may face a penalty.
    • Promotion of green energy
  • Improved regulation: The Bill seeks to strengthen payment security mechanisms and give more powers to regulators.

Issues with the Bill:

    • Violates Federal Principal: ‘Electricity’ is a state subject and any legislation on it should be in consultation with the state government. However, no consultation was done before introducing the bill.
    • Inequity: Provision to encourage competition may lead to more entities entering lucrative and urban areas, while loss-making areas may continue to be underserved.
    • Fear of end of subsidies by farmers.
    • Privatization of distribution companies may result in job losses
      • There is a fear that the  Bill might result in the privatization of profits and the nationalization of losses
    • Multiple distribution licensees may lead to a situation similar to the telecom sector where monopoly companies will destroy the public sector and smaller companies.

Mains Links:

Q. What are the problems being faced by the Power Sector? Will the recently proposed Electricity (Amendment ) Bill 2022 help overcome these issues? Critically evaluate (15M)


Prelims Link

Which one of the following is the purpose of ‘UDAY’, a scheme of the Government? (UPSC 2016)

(a) Providing technical and financial assistance to start-up entre-preneurs in the field of renewable sources of energy

(b) Providing electricity to every household iv the country by 2018

(c) Replacing the coal-based power plants with natural gas, nuclear, solar, wind and tidal power plants over a period of time.

(d) Providing for financial turnaround and revival of power distribution companies

Answer: D

Ujjwal DISCOM Assurance Yojana is the financial turnaround and revival package for electricity distribution companies of India initiated by the Government of India with the intent to find a permanent solution to the financial mess that the power distribution is in.