The Government of India has unveiled a draft amendment to the Electricity Act, 2003, aiming to transform the electricity distribution sector by introducing competition and enhancing efficiency.
The proposed reforms are designed to address long-standing challenges in the power sector and align with the nation’s vision of a developed economy by 2047.
The amendment seeks to allow multiple private companies to supply electricity within the same geographical area, utilizing existing infrastructure.
This move is intended to foster competition, reduce infrastructure duplication, and potentially lower costs for consumers.
Under the current law, multiple licensees in the same area can operate only if they establish their own distribution networks, a requirement that has led to unnecessary duplication and increased costs.
The proposed changes also advocate for the separation of the distribution network (carriage) from the retail supply of electricity (content).
This would enable different companies to operate within the same area, promoting competition and improving service quality.
Another key proposal is to empower State Electricity Regulatory Commissions (SERCs) to set electricity tariffs independently, without waiting for proposals from power generation utilities.
This is aimed at ensuring that revised tariffs take effect from April 1 each financial year, enhancing financial discipline in the sector.
The draft bill emphasizes the acceleration of renewable energy adoption, aiming to reduce cross-subsidies and lower industrial tariffs. It also proposes exemptions from cross-subsidy charges for manufacturing enterprises, railways, and metro railways within five years.
Consumer rights are also a focus, with measures to streamline dispute resolution mechanisms and improve the accountability of distribution companies.
Industry reactions to the proposed amendments have been largely supportive. Experts and private companies view the reforms as a step towards modernizing the power sector and encouraging private investment. Companies such as Adani Power, Tata Power, Torrent Power, and CESC are expected to benefit from increased competition and market opportunities.
However, employee unions have raised concerns. The All India Power Engineers Federation (AIPEF) warned that allowing private companies to operate in the same area could undermine the public sector’s role and potentially lead to higher tariffs for consumers.
The Ministry of Power has opened the draft bill for public consultation, inviting feedback from stakeholders over a 30-day period.
The finalization and implementation of the proposed amendments will depend on the concurrence of state governments and regulatory bodies.
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