Affordable electricity is a right

Burdening consumers with high rates and taking over States’ power to determine tariffs and subsidies are retrograde steps

The Modi government has proposed drastic amendments to the Electricity Act, 2003, that will hugely alter Indians’ right to affordable and stable electricity. The draft Electricity (Amendment Bill), 2003, not only makes electricity unaffordable to the vast mass of India’s poor but also takes over States’ power to determine tariffs and subsidies. These amendments cannot be seen in isolation. They are part of a constant attempt to curtail States’ powers to tailor their policies. They also reflect a striking tendency to burden States while providing no financial or technical support.

Access to electricity is a right and not a luxury. It cannot be provided to only those who can afford it. It plays an essential role in improving overall living standards and spurring economic activity. By supplying it at affordable prices, certain State governments have leveraged electricity as a development and welfare measure, rather than a mere ‘service’.

Engine of Development

For example, in Telangana, power bills for farmers are borne by the State government. Free power has played an important role in mitigating farmer suicides and also contributed to the State’s food security. By tailoring tariff policies according to their specific needs, State governments have also attracted investments in job-creating sectors. Therefore, electricity cannot be viewed in isolation, but as part of a broader programme dealing with States’ social and economic development.

The 2003 Act permits States to provide a subsidy to any class of consumer. This enabled State governments to set lower electricity rates for households while setting a higher price for industries. However, the 2020 Amendment will do away with subsidised tariffs. The amendment will require that electricity rates should reflect the average cost of supply.

The estimated cost of supply in Telangana in 2018-19 was Rs 6.05 per unit. However, small consumers paid as low as Rs 1.45 per unit while certain industries have had to shell out as high as Rs 7.50 per unit, in addition to fixed/demand charges.

Similarly, Telangana government allocates budgetary amounts to Transmission Corporation of Telangana (Transco) for agriculture and allied subsidies. Instead of an individual subsidy, higher tariffs for commercial and industrial consumers help recover the costs of low electricity charges for small consumers.

At Union’s Mercy

According to the amendment, States will have to charge consumers according to the Union’s preferences. States are currently permitted to plan their electricity supply and cross subsidise between different classes of consumers. Now, the Union seeks to take over this power. Families will pay significantly higher as the bill will require tariffs to be charged without any subsidy. Eligible consumers may receive the subsidy in the form of Direct Benefit Transfer (DBT). This will only increase the administrative hoops that farmers and the poor will be put through to access something as basic as electricity.

However, that is not the only problem. The State government provided a subsidy of Rs 3,705 crore to farmers through Transco in 2018-19. The revised estimate for 2019-20 is Rs 5,984 crore. The budget estimate for subsidy in 2020-21 is Rs 7,587 crore. This tripling in budgetary allocations points to Telangana’s success in expanding acreage and increasing power consumption. If the amendments become law, Telangana will have to transfer at least Rs 7,587 crore in the form of DBT.

Use of Jargon

The Union government argues that the Draft Bill is essential to address a “few critical issues, which have weakened the commercial and investment activities” in the power sector. Beyond the unnecessary use of jargon, one can only assume that the Union was referring to the mounting debt that many State governments owe to state-owned utilities.

The Union government has used a narrative of “inefficient” States to push through “reforms” that will privatise the sector and punish State governments for their success. For example, Telangana was able to meet 99.9% of its energy requirement in 2018-19. This reflects the State’s ability to expand its electricity distribution infrastructure and ensure a more inclusive consumer base. This would be a difficult feat for a State if its power sector was suffering from “weakened” investments. Similarly, Telangana’s Aggregate Technical and Commercial (AT&C) losses – power for which a distribution company did not receive any payment – stood at 10%, which was 55% less than the national average and 20% less than Uttar Pradesh.

Evidently, not all States are dealing with a “power crisis” and in need of “reforms” such as forced privatisation and costlier electricity. This compels States to give up on their successes in expanding access to electricity for the poorest.

Delineation of Powers

The Constitution envisioned a clearly delineated system of administrative and legislative powers between the Centre and States. Certain subjects were also enumerated under the Concurrent List where both the Union and the State could legislate. States enjoy exclusive power to deal with agriculture, irrigation, industries and taxes on the consumption and sale of electricity. Both the Union and States enjoy the power to legislate on electricity. This constitutional framework was reflected in the 2003 Act, which gave States important powers to protect vulnerable consumers and ensure a fairer pricing policy.

Ignoring this clear delineation of powers, the Union has chosen to propose a law that will essentially reduce States to mere ‘enforcers’ of the Union’s desires. This pattern of arrogating State powers by the Union runs contrary to the constitutional framework, and to common sense. It is simply not possible that New Delhi can determine electricity policies for a country as large and diverse as India. States are constitutional functionaries with elected governments, they cannot be demoted to being the Union’s agents.

There is no doubt that Indian electricity utilities are under severe strain and require significant support in terms of technology and finances. However, these amendments will not help these utilities, while only exponentially increasing costs for consumers and leaving them with few safeguards.

The 2020 Amendments will not only burden consumers with extremely high rates but also pave the way for the private sector to participate in the distribution of electricity. Previously, States had significant leeway in resolving issues pertaining to disputes between power generation companies and power distribution companies. This power has also now been taken over by the Union, leaving State governments no significant powers to intervene in public interest.

The Union government must understand that affordable and accessible electricity spurs economic growth and supports human development. By viewing the question of electricity supply solely as one pertaining to finances, it is likely to condemn many poor families to go without electricity.

(The author is Member of Parliament from Hyderabad)

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