The long-awaited Electricity Amendment Bill 2022 was tabled in Parliament (Lok Sabha) on August 8, 2022, despite opposition from political parties, employees, and engineers of state-run distribution companies. (DisComs). The bill was referred to the House Energy and Commerce Committee for further feedback. The right side of the markets debate views this measure as a reformist solution to fix India’s electrical system, which has suffered for four decades despite reforms owing to distribution companies’ poor financial health, operational inefficiencies, and large AT&C losses. The economics and politics of India’s ‘grid’ must be investigated to understand opposition to planned modifications to the Electricity Act 2003.
The federal government and states control India’s electrical business. State-implemented cross-subsidization for farmers and low-income users by charging industrial and commercial customers more shows electricity’s political embeddedness as a weapon for redistributive welfarism. This competitive populism has become unsustainable in the Indian electricity business, causing inefficiencies, budgetary constraints, and price distortions. The early 1990s structural-adjustment programme unbundled the electrical sector into generation, transmission, and distribution. The Indian government has chosen a business-friendly approach to energy supply, reliability, and affordability. The Power Act (EA) 2003 was a turning point in India’s energy reform. It was a watershed moment in the history of electricity law, as its derivatives on delicensing of generation, promoting competition through privatisation, adding renewable energy capacity, and Renewable Purchase Obligations (RPO) for DisComs caused widespread changes in the industry’s institutional logics and governance structures. State and Central Regulatory Commissions regulated tariffs and RPOs.
The initial concept of a robust, competitive sector supplying low-cost, dependable power to everybody has been supplanted by redistributive welfarism executed via cross subsidies, substandard grid infrastructure, and the financial crisis of State distribution companies. The Electrical Amendment Bill 2022 proposes regulatory and legislative measures to revitalise the electrical value chain’s weakest link (the distribution network). To understand the concerns of state governments and worker organisations of state-owned DisComs, one must understand the political and economic repercussions of the planned EA 2003 reforms.
Both the federal government and states have historically battled over energy policy, recognising real and intangible political gains. The Centre manages a fourth of the nation’s energy capacity and other governmental assets (such as the budgetary distribution of loans from the Power Finance Corporation, the Rural Electrification Corporation, and nationalised banks). States display political force by supplying inexpensive electricity to inhabitants and controlling the distribution system. Resistance to Energy Amendment Bill-2022 stems from a power struggle between the states and the federal government over energy, a political resource (as shown by cross-subsidies, election pledges of free electricity, etc.).
The proposed modifications would make it difficult for governments to determine electricity tariffs and keep the distribution infrastructure. In a financially vulnerable distribution system, privatising earnings and nationalising losses has been questioned. Proponents of the left of the markets discourse have strongly criticised some of this Bill’s core reformist proposals, which focus on the 4 Cs—customer, competition, compliance, and climate—and seek a mostly free markets approach to revitalise the energy business (command and control). Opposition groups stated the law violated the federal framework. These parties included the Congress, the AICC, and the RSPK.
The Bill suggests “tariff recovers all reasonable energy delivery expenditures” and “tariff lowers cross subsidies in manner stipulated by State or Central Regulatory commission” to solve State DisComs’ unsustainable business model. The tariff must appropriately reflect the cost of supplying electricity to consumers for DisComs to be financially viable. Under the Bill, SERCs may establish yearly maximum and minimum pricing. This part would restrict state governments’ ability to provide free power to small businesses and farmers. It would complicate SERCs’ multiyear charges.
The bill gives regional and state Load Dispatch Centers more power. RLDCs and SLDCs may now refuse to dispatch power to utilities without payment certainty. This clause might stop power if DisComs can’t pay their debts. Lack of accountability and strict repayment obligations make reform impossible.
The bill also demands SERCs punish utilities for not meeting RPOs. RPO is India’s sustainable energy future. Critics stated the government’s energy gigantism ideology was Crony Capitalism and favouritism. To add insult to injury, the opposition argues that RPOs will harm DisComs’ financial health by compelling generating businesses to sign long-term Power Purchase Agreements at higher costs. This preference for energy monopolies contradicts plans for decentralised, off-grid energy that would help rural communities. Massive grid-connected RE infrastructure may attain economies of scale more readily, which is vital for spreading RE technology.
More federal-state coordination is needed to effectively implement the New Electricity Policy. As a contemporary requirement, electricity has remained a focus of political and populist discourse. To ensure a fair transition to renewables, states and State DisCom employees’ interests must be considered. While this Bill proposes some forward-thinking solutions from a purely economic perspective, such as streamlining regulatory bodies for better governance and dispute resolution in the electricity sector, it also gives overriding powers to the Centre, which may be unaware of the contexts of various States. The Bill will improve India’s energy infrastructure, but it won’t fix all its issues overnight.