Electricity Act 2003
The Electricity Act 2003 has generated enthusiasm in the power sector. The Act, which supersedes three earlier ones including one enacted in 1910, will give a new push to much-needed reforms, according to Union power secretary R V Shahi. The following are the excerpts from an Interview carried out by Times Of India.
How will the new Act help in power sector reforms?
The Act focuses on the consumer. It aims at introducing competition by making the process of setting up a thermal power plant easier. Henceforth, such plants will not require techno-economic clearance. In rural India, an entrepreneur can have a stand-alone system, that is, he can have both a generation and a distribution plant and he won't require a licence for either.
This has a huge potential. Earlier, people complained of shortages in average and peaking power. In different states, there was a shortage of peaking power to the tune of 15 to 18 per cent, particularly in the evening. Today, the country's per capita consumption of electricity is about 400 kW/hr. We need to add over 1,00,000 MW to our present generation capacity in the next 10 years. For that to happen, we need to remove all bottlenecks. About half of the country's population doesn't have access to electricity. To provide them power, we have to create a situation of surplus. If you inhibit the process through various mechanisms such as clearances and sanctions, the progress will be slow. Hence, the Act.
Will the Act help the Centre bypass inefficient state electricity boards (SEBs) while distributing power?
The question is not of the Centre bypassing SEBs. It's one of facilitating power sector reforms. The Centre doesn't have to encroach on the jurisdiction of state governments. The Act only opens new avenues.
Suppose an entrepreneur wants to set up a facility in a Bihar town, which gets irregular power supply. Will he still have to take approvals from the state government?
Except on safety and environment issues, none for the rural areas. For urban areas you don't need permission from the state but a licence from the regulatory commission. That's one feature of this Act.
Will the Act revitalise the SEBs then?
The Act empowers the regulatory institutions to oversee that the utilities function efficiently. They will be watched and rewarded for their efficiency. Determinants of efficiency, like norms for availability-based tariff (ABT), will ensure that those who fail are adversely affected while those who improve gain financially. For example, if the distribution licensees gradually reduce the technical and commercial losses, the power tariff for consumers will fall. Today, the tariff bears the burden of technical and commercial losses almost to the extent of 40 to 50 per cent.
Suppose some residents' welfare associations, or similar civic bodies form a consortium to install a captive power plant, will that be permitted now?
On a captive basis, yes. The definition of a captive power station has been enlarged, although setting up one is not easy. But so far as the law is concerned, it permits consumers' associations, cooperatives, etc to set up projects for captive use.
But won't they still have to take permission from the CEA?
No. They'll only have to observe prescribed safety and environment norms.
What kind of new players do you think will emerge?
Under the Act, the SEBs will need to be reorganised; their functions disaggregated in terms of generation, transmission and distribution. Most states — Andhra, Karna-taka, MP, Haryana, Rajasthan, UP, Orissa, Delhi etc — have already started doing that. West Bengal has split the state board into two — a rural electricity company and a non- rural board. Generation has been entrusted to a different company. North-eastern states are also trying to reorganise.
Out of 80,000 villages that go without power today, 25,000 are in the N-E. Any plans there? Since power can't be stored, the unused power has to be transferred to other regions where the demand exists. This is happening in the east and north-east today. Accelerated power development and reforms programme, therefore, is particularly focused on distribution. The projects there are being funded to the tune of 90 per cent.
What's the latest on hydro electricity?
We have identified 162 projects, which will generate over 50,000 MW, half of it from Arunachal. Another 5,000 MW will be generated in other N-E states, and the balance in J&K, Himachal and other states. We are working in a systematic manner.
Isn't that hyperbolic given that NHPC added only 65 MW to its capacity in the ninth Plan?
That was because of a number of factors: Difficult locations, rehabilitation and resettlement issues and agitations. In the 10th Plan, NHPC aims to add over 4,000 MW. You've recently claimed that by 2012, India will reach close to China's current rate of per capita power consumption.
The government has decided that by 2007 all villages will be electrified and by 2012 electricity made available for all. An additional 41,000 MW of electricity will be generated during the 10th Plan and about 60,000 MW during the next five years. The targets have been questioned, because in the ninth Plan we only managed 35,000 MW. But don't forget that plants for another 25,000 MW capacity will soon be commissioned.
How will the new Act help in power sector reforms?
The Act focuses on the consumer. It aims at introducing competition by making the process of setting up a thermal power plant easier. Henceforth, such plants will not require techno-economic clearance. In rural India, an entrepreneur can have a stand-alone system, that is, he can have both a generation and a distribution plant and he won't require a licence for either.
This has a huge potential. Earlier, people complained of shortages in average and peaking power. In different states, there was a shortage of peaking power to the tune of 15 to 18 per cent, particularly in the evening. Today, the country's per capita consumption of electricity is about 400 kW/hr. We need to add over 1,00,000 MW to our present generation capacity in the next 10 years. For that to happen, we need to remove all bottlenecks. About half of the country's population doesn't have access to electricity. To provide them power, we have to create a situation of surplus. If you inhibit the process through various mechanisms such as clearances and sanctions, the progress will be slow. Hence, the Act.
Will the Act help the Centre bypass inefficient state electricity boards (SEBs) while distributing power?
The question is not of the Centre bypassing SEBs. It's one of facilitating power sector reforms. The Centre doesn't have to encroach on the jurisdiction of state governments. The Act only opens new avenues.
Suppose an entrepreneur wants to set up a facility in a Bihar town, which gets irregular power supply. Will he still have to take approvals from the state government?
Except on safety and environment issues, none for the rural areas. For urban areas you don't need permission from the state but a licence from the regulatory commission. That's one feature of this Act.
Will the Act revitalise the SEBs then?
The Act empowers the regulatory institutions to oversee that the utilities function efficiently. They will be watched and rewarded for their efficiency. Determinants of efficiency, like norms for availability-based tariff (ABT), will ensure that those who fail are adversely affected while those who improve gain financially. For example, if the distribution licensees gradually reduce the technical and commercial losses, the power tariff for consumers will fall. Today, the tariff bears the burden of technical and commercial losses almost to the extent of 40 to 50 per cent.
Suppose some residents' welfare associations, or similar civic bodies form a consortium to install a captive power plant, will that be permitted now?
On a captive basis, yes. The definition of a captive power station has been enlarged, although setting up one is not easy. But so far as the law is concerned, it permits consumers' associations, cooperatives, etc to set up projects for captive use.
But won't they still have to take permission from the CEA?
No. They'll only have to observe prescribed safety and environment norms.
What kind of new players do you think will emerge?
Under the Act, the SEBs will need to be reorganised; their functions disaggregated in terms of generation, transmission and distribution. Most states — Andhra, Karna-taka, MP, Haryana, Rajasthan, UP, Orissa, Delhi etc — have already started doing that. West Bengal has split the state board into two — a rural electricity company and a non- rural board. Generation has been entrusted to a different company. North-eastern states are also trying to reorganise.
Out of 80,000 villages that go without power today, 25,000 are in the N-E. Any plans there? Since power can't be stored, the unused power has to be transferred to other regions where the demand exists. This is happening in the east and north-east today. Accelerated power development and reforms programme, therefore, is particularly focused on distribution. The projects there are being funded to the tune of 90 per cent.
What's the latest on hydro electricity?
We have identified 162 projects, which will generate over 50,000 MW, half of it from Arunachal. Another 5,000 MW will be generated in other N-E states, and the balance in J&K, Himachal and other states. We are working in a systematic manner.
Isn't that hyperbolic given that NHPC added only 65 MW to its capacity in the ninth Plan?
That was because of a number of factors: Difficult locations, rehabilitation and resettlement issues and agitations. In the 10th Plan, NHPC aims to add over 4,000 MW. You've recently claimed that by 2012, India will reach close to China's current rate of per capita power consumption.
The government has decided that by 2007 all villages will be electrified and by 2012 electricity made available for all. An additional 41,000 MW of electricity will be generated during the 10th Plan and about 60,000 MW during the next five years. The targets have been questioned, because in the ninth Plan we only managed 35,000 MW. But don't forget that plants for another 25,000 MW capacity will soon be commissioned.
Times of India
