With just a week left for the UPA Government to hang up its boots at the Centre, the Power Ministry has finalised a Cabinet Note for amending the Electricity Act 2003, which is mainly aimed at segregating carriage and content in power distribution which in the long run will bring the tariffs down. A move likely to bring relief to the power bills of the common man in the long run.
In separate carriage and content model, one company would own the network while electricity would be supplied by different entities. Similar business models are already in place in some countries, including the United Kingdom. According to sources, the Power Ministry has already finalised the Note after seeking comments from the related stakeholders, though it will require the approval of the freshly appointed Union Cabinet under the new dispensation which would assume power at the Centre after May 16.
Under the amendment, the ministry has suggested multiplicity of retail licensees wherein the electricity supply network would be owned by a single entity but the power generated through it would be purchased by multiple agencies.Sources pointed out that this model is termed as competition in retail and is mainly meant to scale down power tariffs for the common consumer in the long run.
Once there are multiple players in the form of discoms or distribution companies, there obviously will be greater competition among them for selling power at competitive rates. This sense of competition among them would give the state governments greater options to buy power from, which in turn will percolated down to power tariffs being scaled down.
Though at the same time, sources said that there would be a ceiling under which the prices would have to remain. Currently there are 80 discoms in the country and once the decision is cleared by Cabinet, it is likely to increase the number of such entities by several folds. Consultations with state governments, sources said, had also been undertaken before finalising the Cabinet Note.
The states are learnt to have given their go ahead to the proposal mainly on the basis of the fact that they too are burdened by the discoms. Industry watchers said that states try to control discoms in order to regulate tariffs but often fail to do so. Therefore once the proposal comes through, states are hoping that they would be able to exercise greater say in the matter.
Apart from this, the Power Ministry, according to sources, has also suggested amendment in Section 11 of the Electricity Act, which is aimed at preventing its alleged misuse by state governments and also to prohibit the sale of surplus power from generating units to entities outside a state.