Policy Wise: India’s Power Sector

Electricity (Amendment) Bill


From UPSC perspective, the following things are important :

Prelims level: Electricity Amendment Bill

Mains level: Read the attached story

The government has tabled the Electricity (Amendment) Bill 2022 in the Lok Sabha. This has drawn huge protests across the country, in states like Tamil Nadu, Telangana, Rajasthan, and others.

Electricity (Amendment) Bill

  • This Bill amends the Electricity Act, 2003. The Act regulates the electricity sector in India.
  • It sets up the Central and State Electricity Regulatory Commissions (CERC and SERCs) to regulate inter-state and intra-state matters, respectively.

Key provisions under the Bill are:

  • Multiple discoms in the same area:  The Act provides for multiple distribution licensees (discoms) to operate in the same area of supply. The Bill removes this requirement.  It adds that a discom must provide non-discriminatory open access to its network to all other discoms operating in the same area, on payment of certain charges.
  • Power procurement and tariff:  Upon grant of multiple licenses for the same area, the power and associated costs as per the existing power purchase agreements (PPAs) of the existing discoms will be shared between all discoms.
  • Cross-subsidy Balancing Fund:  The Bill adds that upon grant of multiple licenses for the same area, the state government will set up a Cross-subsidy Balancing Fund.  Cross-subsidy refers to the arrangement of one consumer category subsidising the consumption of another consumer category.  Any surplus with a distribution licensee on account of cross-subsidy will be deposited into the fund.
  • Rules of Centre: The Bill specifies that the above matters related to the operation of multiple discoms in the same area will be regulated in accordance with the rules made by the central government under the Act.
  • License for distribution in multiple states:  As per the Bill, the CERC will grant licenses for distribution of electricity in more than one state.
  • Payment security:  The Bill provides that electricity will not be scheduled or despatched if adequate payment security is not provided by the discom.   The central government may prescribe rules regarding payment security.
  • Contract enforcement:  The Bill empowers the CERC and SERCs to adjudicate disputes related to the performance of contracts.  These refer to contracts related to the sale, purchase, or transmission of electricity.  Further, the Commissions will have powers of a Civil Court.
  • Renewable purchase obligation:  The Act empowers SERCs to specify renewable purchase obligations (RPO) for discoms.  RPO refers to the mandate to procure a certain percentage of electricity from renewable sources.  The Bill adds that RPO should not be below a minimum percentage prescribed by the central government.  Failure to meet RPO will be punishable with a penalty between 25 paise and 50 paise per kilowatt of the shortfall.
  • Selection committee for SERCs:  Under the Act, the Chairperson of the Central Electricity Authority or the Chairperson of the CERC is one of the members of the selection committee to recommend appointments to the SERCs.  Under the Bill, instead of this person, the central government will nominate a member to the selection committee.  The nominee should not be below the rank of Additional Secretary to the central government.

Other key provisions

  • Tariff Ceilings: The Bill makes provision for “mandatory” fixing of minimum as well as maximum tariff ceilings by the “appropriate commission” to avoid predatory pricing by power distribution companies and to protect consumers.
  • Tariff revisions: The amendment has several provisions to ensure graded and timely tariff revisions that will help provide state power utilities enough cash to be able to make timely payments to power producers. This move is aimed at addressing the recurrent problem of default by distribution companies in payment to generation companies.
  • Payment security mechanism: The bill through amendments in Section 166 of the Act also seeks to strengthen payment security mechanisms and give more powers to regulators. It has become necessary to strengthen the regulatory mechanism, adjudicatory mechanism in the Act and to bring administrative reforms through improved corporate governance of distribution licensees.

Why is it being opposed?

  • Provisions of the Bill are being opposed by a number of opposition-ruled states.
  • It is being termed anti-federal in spirit.
  • Power as a subject comes under the Concurrent List and it was the “the bounden duty or the mandatory obligation” of the Centre to consult the states.


  • If passed in its current form it will lead to a major loss for government distribution companies, eventually helping to establish the monopoly of a few private companies in the country’s power sector.
  • By bringing in more retailers or distribution licensees, the quality of service or price is not going to be any different.

How will these amendments help?

  • Power freebie: The Bill comes at a time when there is a debate around freebies being offered by political parties.
  • Discom crisis: Various state power distribution companies (Discoms) have not been able to raise enough resources to make timely payments to power generating companies.
  • Empowering discoms: Empowering the regulator to be able to take calls on tariff revision and ensuring that the government freebies, even on electricity, should be through direct benefit transfer.


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