India Plans to Let Consumers Choose Their Power Service Providers

December 5, 2017


If all goes according to plan, consumers in India could soon be able to change power suppliers as easily as they switch between telecom service providers. According to a report from the Press Trust of India (PTI), Minister for Power R K Singh is pushing proposed amendments to the Electricity Act that would allow consumers to do just that.

The power ministry plans to push the electricity amendments forward in a bill in the forthcoming budget session. The amendments would allow the distribution network business to be separated from the electricity supply business.

Put another way, the amendments would enable the separation of the carriage and content businesses. He expects to receive a draft of the amendments in another week or so, and said he will push for their passage in a coming budget session of parliament.

The separation of these businesses would pave the way for the introduction of a new system that gives consumers the option of choosing from multiple electricity service providers in their areas, like that of telecom services.

Elaborating further, Singh told PTI that once the Electricity Act is amended his agency would work with states to prepare a roadmap for separating the distribution and supply businesses of the DISCOMs.

“After that, monopoly will be eliminated in the power supply side by giving franchises to more than one player in an electricity supply area,” Singh said.

Singh said the amendments would also provide for the stricter enforcement of Renewable Purchase Obligations (RPOs). Besides that, the bill would also make it mandatory under the tariff policy to keep the cross subsidy below 20 percent. This would mean that the difference between the highest and lowest tariff rates should not be more than 20 percent.

The minister said that the bill would also help to make the currently unsustainable industrial tariff more reasonable, as well as provide for the direct benefit transfer of subsidies to farmers to make their power consumption more efficient. It also seeks to establish a service obligation for DISCOMs that would ensure that reliable power supplies are provided by March 2019.

“The power demand growth rate will be good because of two reasons. Firstly, we are adding 40 million more consumers under the Saubhagya Scheme by December 2018. Besides that, industrial growth would create more demand for power consumption,” Singh said.

The minister was of the view that per capita electricity consumption in the country is poised to rise. It is now 1,075 kWh per year in India compared to 5,000-6,000 kWh per year in Europe and around 11,000 kWh per year in the United States.

“We will go to the cabinet with a proposal to make 24×7 power obligatory from March 2019. Load shedding would not be allowed except in cases of an act of god or technical faults. There would be a penalty for violators. This will not have any impact on the tariff,” the minister said.

The power ministry has identified some states where leakages or losses account for more than 21 percent and it has written a letter to them calling for a reduction in these losses.

Aggregate technical and commercial (AT&C) losses should not be more than 5 to 7 percent, otherwise these can be construed as power theft, Singh said.

In order to deal with this issue, the government is promoting pre-paid and smart meters. The minister further said that the power ministry has asked states to reduce their AT&C losses below 15 percent by 2019.

So far, 27 states and four union territories have joined the UDAY program.

The proposals made by the Minister are bold and ambitious, if implemented the changes could wake up a complacent sector that does not like change. It is unclear if these changes mean that power generation will be open to private players across the country.

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