State Boards to retain distribution in new licensing regime

the much-hyped electricity bill 2001, which is awaiting the final government nod before being introduced in parliament, may not be enough to change the shape of india's electricity market and unbundle state electricity boards (sebs), as promised earlier. a last-moment insertion in the final (seventh) draft of the bill, under section 167, has diluted its primary objective — that of breaking the monopolies of sebs and making them more accountable and transparent by splitting the generation, transmission and distribution functions into separate profit centres. section 167 had earlier set a deadline of one year for seb unbundling, which has now been replaced by one year or such time being decided by the state government. indian private power companies in the sector say the bill has been heavily influenced by sebs. ajay shankar, jo- int secretary in ministry of power, said the bill now gives a lot of flexibility to the states. it is for the states to decide on unbu- ndling. the pro- cess of unbundling per se has not been made mandatory by the bill, he said. the government, according to mr shankar, has been signing mous with various states, under which fiscal benefits are offered in lieu of sincere efforts to reduce technical losses of sebs and the losses by theft. the bill, which is currently before a parliamentary standing committee headed by santosh mohan dev, is primarily an attempt to encompass three existing acts — electricity supply act of 1910, indian electricity act of 1948 and the recent electricity regulatory commission act of 1998 into one legislation. it aimed to radically change the face of indian electricity, by deregulating the market completely. the bill, once promulgaged, was expected to usher in a market-driven tariff regime, where power would be allowed to be traded commercially. it has dropped two important sections (22 and 29) of the erc act of 1998 that gave powers to state regulatory commissions to fix caps and floor rates for electricity tariffs. the private sector players complain that the final draft of the bill is heavily loaded in favour of sebs. for instance, the bill envisages a licencing regime for electricity distribution. this would mean that distribution will remain in the hands of sebs, which will charge enormous amounts for electricity wheeling, making any effort by a private generator a financially unviable proposition, said a senior official from tata power. private power utilities have demanded financial concessions under the new regime proposed under the electricity act. ``the new act, once passed, will surely jeopardise the financial and accounting structure of the existing private companies. none of the distribution licensees can afford to let the tax benefits go overnight, said the tata power official. while distribution remains to be in hands of sebs, generation has been made free under the proposed act. power generation, being capital-intensive, has to be in line with the demand scenario and long-term projections. it should follow a national plan, said the official. and if it doesn't, it would lead to a complete breakdown of the electricity market, unbundling, say consumer activists, was perceived as the first step before privatisation. these activists say that privatisation is no solution. electricity consumers have hardly benefited by the processes of unbundling and privatisation of sebs. the orissa experiment has proved disastrous. de-regulation of the immature indian electricity market could lead to making of another california here, said a mumbai-based consumer activist.

State Boards to retain distribution in new licensing regime

THE MUCH-HYPED Electricity Bill 2001, which is awaiting the final government nod before being introduced in Parliament, may not be enough to change the shape of India’s electricity market and unbundle state electricity boards (SEBs), as promised e...

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