Electricity Regulations

The Electricity Act, 2003

œ  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

    • ƒ 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.
    • ƒThe 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.
    • ƒ 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.

    ƒ 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.

    ƒ Finances

    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.


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