Updated: August 10, 2021 5:41:01 am
Union Power Minister RK Singh on Monday questioned why West Bengal Chief Minister Mamata Banerjee wanted to protect monopolies in power distribution when asked about her opposition to the Electricity Amendment Bill, 2021, which is set to delicense power distribution. Banerjee wrote a letter to Prime Minister Narendra Modi, protesting the introduction of the Bill in the current session of Parliament without wider consultation with states, and calling the bill “anti-people”.
“Why she wants to protect monopolies is not clear, especially the private company in Kolkata, which has one of the highest tariffs in the country,” Singh said when asked about the objections raised by the West Bengal CM. He said the Bill would end government and private monopolies in power distribution.
Data from the Ministry of Power showed that representative tariffs for domestic consumers in Kolkata are the fifth highest in the country, and tariffs for medium-sized industrial consumers in Kolkata are the sixth highest in the country and the third highest for West Bengal consumers outside Kolkata.
“There must be competition in this sector so that people can choose a distribution company which gives more efficient service at lower prices,” said Singh, noting that consumers presently have to bear with their discoms even if they are inefficient, and provide poor service at high tariffs.
Banerjee had raised the issue that private entry into the power distribution sector would lead to “cherry-picking”, with private players providing power to only commercial and industrial consumers and not residential and agricultural consumers. Commercial and industrial consumers of power cross-subsidise rural and agricultural consumers by paying significantly higher tariffs.
Addressing these concerns, Singh said that the provisions would provide for a minimum area in which any new entrant would have to supply power and that cross-subsidies would continue with areas that collect more cross-subsidy transferring surplus collections to a cross-subsidy pool which would be utilised to fund areas with insufficient cross-subsidy collections.
Singh also addressed the concern about the high cost of existing power purchase agreements (PPAs) entered into by existing discoms by noting that the fixed costs of legacy PPAs would be shared by new entrants in proportion to their market share. A number of discoms have entered into PPAs on a cost plus basis prior to the introduction of mandatory bidding for PPAs in 2011. High fixed costs under these PPAs have contributed to financial stress for discoms and higher tariffs for consumers.
Singh also said that the Bill also contained proposals to encourage green energy.
“We have a renewable purchase obligation (RPO). Right now, if discoms do not abide by the RPO, there is very little, almost negligible penalty. We are increasing the penalty, “ Singh said. The Bill proposes penalties of 25-50 paise per kWh of shortfall in purchases during the first year, 50-100 paise per kWh for shortfalls in the second year, and Rs 1-2 rupee per kwh after the second year. States have different levels of RPOs for the current fiscal ranging from 6.6 per cent in Kerala to 21 per cent in Rajasthan with RPOs including mandates for a specific proportion of purchases of solar and non-solar energy.
The Power Minister noted concerns raised by some states that the target proportions of solar and non-solar energy purchases within RPOs be relaxed, adding that the ministry had formed a committee to look into the issue.
He also said that the Bill sought to strengthen the regulator, including the Central Electricity Regulatory Commission, State Electricity Regulatory Commissions, and the appellate tribunal for electricity by adding more members including judicial members.