Context: The Union cabinet may shortly consider the landmark Electricity (Amendment) Bill, 2021, to reform the power distribution business and make it more competitive.

• The Landmark Electricity (Amendment) Bill, 2021 is expected to be introduced in the monsoon session of the parliament.

Need

• “We have a growing economy and demand has crossed 200 GW.  “Our demand is substantially more than what was in the peak covid times. The demand will grow and it will grow rapidly.”
• India’s electricity demand has been growing, with state-run NTPC Group companies achieving over 100 Billion Units (BU) of generation in the current financial year. 
• In comparison, the group crossed this 100 BU mark on August 7 last year.

Provisions of the Landmark Electricity (Amendment) Bill, 2021
Aims of the bill

• To de-license power supply to increase competitiveness.
• Allows multiple distributors in the same area
• Gives consumers the option to switch power suppliers.

The bill also proposes appointing a member with a legal background in every electricity regulatory commission and strengthening the Appellate Tribunal for Electricity (Aptel).

• It also spells out penalties for any failure by power distribution companies to meet renewable purchase obligations. Discoms are required to buy a fixed amount of renewable energy to reduce their reliance on fossil fuels.
• In addition, the Electricity (Amendment) Bill also lays down the rights and duties of electricity consumers.

Additional Steps to improve the electricity market

• Apart from the above-said reforms, issues related to high levels of cross-subsidy, losses, and poor infrastructure will also need to be resolved.

The success of de-licensing or retail competition will critically depend on its ability to address the core issues relating to

• the high level of cross-subsidies in retail tariffs;
• inefficiencies in the form of T&D (transmission and distribution)/ AT&C (aggregate technical and commercial) losses; and
• poor state of T&D infrastructure

Imposition of restrictions to address existing tariff distortions or imposition of universal supply obligation on new suppliers would defeat the objective of creating a market-driven industry structure.

• In addition, the Electricity (Amendment) Bill also lays down the rights and duties of electricity consumers, as the government plans to ensure round-the-clock supply to consumers across the country.
• India has an installed power generation capacity of 383.373GW, the demand has usually been lower than 200GW. However, this changed on 7 July when India’s peak electricity demand breached the 200GW mark. And this (electricity demand) gives us the space to carry out energy transition which otherwise would have been difficult.