Historical Background of Legislative Initiatives
The Indian Electricity Act, 1910
- Provided basic framework for electric supply industry in India.
- Growth of the sector through licensees. License by State Govt.
- Provision for license for supply of electricity in a specified area.
- Legal framework for laying down of wires and other works.
- Provisions laying down relationship between licensee and consumer
The Electricity (Supply) Act, 1948
- Mandated creation of SEBs.
- Need for the State to step in (through SEBs) to extend electrification (so far limited to cities) across the country.
- Main amendments to the Indian Electricity Supply Act
- Amendment in 1975 to enable generation in Central sector.
- Amendment to bring in commercial viability in the functioning SEBs – Section 59 amended to make the earning of a minimum return of 3% on fixed assets a statutory requirement (w.e.f 1.4.1985) .
- Amendment in 1991 to open generation to private sector a establishment of RLDCs.
- Amendment in 1998 to provide for private sector participation transmission, and also provision relating to Transmission Utilities.
The Electricity Regulatory Commission Act, 1998
- Provision for setting up of Central / State Electricity Regulatory Commission with powers to determine tariffs.
- Constitution of SERC optional for States.
- Distancing of Government from tariff determination.
The Electricity Act, 2003
The Electricity Bill, 2001 was introduced in Lok Sabha on 30th August, 2001 and was subsequently referred to the Standing Committee on Energy for examination and report. The Standing Committee submitted its report on 19th December, 2002. Based on the recommendations of the Standing Committee on Energy, the Government of India moved certain amendments. The Electricity Bill, 2001 along with these amendments, was passed by Lok Sabha on 9th April, 2003.
The Bill as passed by Lok Sabha was considered and passed by Rajya Sabha on 5th May, 2003. The Electricity Bill, 2003 as passed by both Houses of the Parliament received President’s assent on 26th May, 2003 and was notified in the Gazette of India on 2nd June, 2003.The provisions of the Act except section 121 were brought into force with effect from 10th June 2003.
Background and salient features of the Act :
- Power is today a basic human need. It is the critical infrastructure on which modern economic activity is fully dependent. Only 55% households in India have access to electricity. Most of those who have access do not get uninterrupted reliable supply. The industry in India has among the highest tariffs in the world and is not assured of the quality of supply.
- In this era of globalisation, it is essential that electricity of good quality is provided at reasonable rates for economic activity so that competitiveness increases.Being internationally competitive is now essential for achieving the vision of 8% GDP growth per annum, employment generation and poverty alleviation.
- In recent years the financial health of SEBs has been deteriorating. There is a big gap between unit cost of supply and revenue and the annual losses of SEBs have been increasing and have reached unsustainable levels (over Rs. 33,000 crores).
- In the last two Plan periods, barely half of the capacity addition planned was achieved. The optimistic expectations from the IPPs have not been fulfilled and in retrospect it appears that the approach of inviting investments on the basis of government guarantees was perhaps not the best way. The energy as well as peaking shortages across the country is a matter of concern and the situation would have been worse but for the slowdown in manufacturing sector.
- The Hon’ble Prime Minister and Chief Ministers have set before the nation the goal of electrifying all our villages by 2007 and all our households by 2012. Access is yet to be provided to about 80,000 villages. Uninterrupted and reliable supply of electricity for 24 hours a day needs to become a reality for the whole country including rural areas. Enough generating capacity need to be created to outgrow the situation of energy and peaking shortages and make the country free of power cuts with some spare generating capacity so that the system is also reliable. The sector is to be made financially healthy so that the state government finances are not burdened by the losses of this sector. The sector should be able to attract funds from the capital markets without government support. The consumer is paramount and he should be served well with good quality electricity at reasonable rates.
- It is in this context that the Electricity Act, 2003 seeks to bring about a qualitative transformation of the electricity sector through a new paradigm. The Act seeks to create liberal framework of development for the power sector by distancing Government from regulation. It replaces the three existing legislations, namely, Indian Electricity Act, 1910, the Electricity (Supply) Act, 1948 and the Electricity Regulatory Commissions Act, 1998. The objectives of the Act are “to consolidate the laws relating to generation, transmission, distribution, trading and use of electricity and generally for taking measures conducive to development of electricity industry, promoting competition therein, protecting interest of consumers and supply of electricity to all areas, rationalization of electricity tariff, ensuring transparent policies regarding subsidies, promotion of efficient and environmentally benign policies, constitution of Central Electricity Authority, Regulatory Commissions and establishment of Appellate Tribunal and for matters connected therewith or incidental thereto.”
- The Act strikes a balance which takes into account the complex ground realities of the power sector in India with its intractable problems.
The salient features of the Act are:
1. Generation has been delicensed and captive generation freely permitted.i.e. Any generating company may establish, operate and maintain a generating station without obtaining a licence under this Act with only exception that it should comply with the technical standards relating to connectivity with the grid referred to in clause (b) of section 73.
Note: Hydro-projects would however need concurrence from Central Electricity Authority
2. No person shall
(a)transmit electricity; or
(b)distribute electricity; or
(c)undertake trading in electricity,
unless he is authorised to do so by a licence issued, exceptions informed by authorised commissions through notifications
3. No license required for generation and distribution in rural India
4. Central Government may, make region- wise demarcation of the country, and, from time to time, make such modifications therein as it may consider necessary for the efficient, economical and integrated transmission and supply of electricity, and in particular to facilitate voluntary inter-connections and co-ordination of facilities for the inter-State, regional and inter-regional generation and transmission of electricity.
Transmission utility at the central and state level to be a government company-with responsibility of planned and coordinated development of transmission network
5. Open access in transmission with provision for surcharge for taking care of current level of cross subsidy, with the surcharge being gradually phased out.
6. The state government required to unbuldle State Electricity boards. However they may continue with them as distribution licensees and state transmisison utilities
7. Setting up state electricity regulatory commission (SERC) made mandatory
8. An appellate tribunal to hear appeals against the decision of (CERC’s) and SERC’s
9. Metering of electricity supplied made mandatory
10. Provisions related to thefts of electricity made more stringent
11. Trading as, a distinct activity recognised with the safeguard of Regulatory commissions being authorised to fix ceiling on trading margins
12. For rural and remote areas stand alone system for generation and distribution permitted
13. Thrust to complete rural electrification and provide for management of rural distribution by panchayat, cooporative societies, NGOs, franchises etc.
14. Central government to prepare National Electricity Policy and tariff Policy
15. Central electricity authority to prepare National electricity plan.
The Electricity (Amendment) Bill, 2005
- The Electricity (Amendment) Bill, 2005 was introduced in the Lok Sabha on December 23,2005 to amend the Electricity Act, 2003. The Bill was referred to the Parliamentary Standing Committee on Energy (Chairperson: Shri Gurudas Kamat), which was scheduled to submit its report on March 23, 2006.
- The Bill proposes to amend the Act by deleting the provision for ‘elimination’ of cross subsidies. It , however, retains the provision for reduction of cross subsidies. The provision was deleted taking into concern the fact that it might not be possible to eliminate cross subsidies in the near future.
- The Bill seeks to provide that both the Central Government and State Government would jointly attempt to supply electricity to all areas including villages and hamlets through rural electricity infrastructure and electrification of households. In the Act, the onus of rural electrification was solely on the State Government.
The offences relating to theft of electricity, electric lines, and interference with meters are cognizable offences. There was concern that the Act stood as a barrier to investigation of these offences by the police. The Bill seeks to amend the section in the following manner:
It emphasizes that a person cannot be prosecuted for any offence punishable under the Act without the permission of the Central Government or Appropriate Commission or a Chief Electrical Inspector or an Electrical Inspector or licensee or the generating company. An Appropriate Commission could be the Central Regulatory Commission or State Regulatory Commission or Joint Commission.
It clarifies that the police have the power to investigate cognizable offences under the Act.
In order to facilitate speedy trials, it provides that a Special Court (the state government can constitute any number of Special Courts for such areas as may be specified, to facilitate speedy trials of offences) shall be competent to take cognizance of an offence without the accused being committed to it for trial.
The Financial Memorandum of the Bill estimates that the Rajiv Gandhi Grameen Vidyutikaran Yojana (with an outlay of Rs 16,225 crore) would have a subsidy component of Rs 14,750 crore to be funded from the Consolidated Fund of India in two phases. Phase 1 of the scheme has begun from the financial year 2005-2006 with a sanction of Rs 5,000 crore of subsidy from the Consolidated Fund of India. No other expenditure, recurring and non recurring, from Consolidated Fund of India would be involved.