“You can take the horse to the water, but you can’t make it drink.” That seems to be the story of the ongoing reforms in India’s electricity sector. The buck stops with the States as it is their responsibility to implement the proposals.

The Power Ministry at its end has been taking steps to make the functioning of the sector conducive for all stakeholders. To remove difficulties/challenges faced by various entities and to facilitate development of the power sector, the Centre has proposed to further ease processes to enhance the efficiency and transparency.

In end-June, the Ministry came out with draft amendment to the Electricity Rules, 2023. The stakeholders were requested to submit their comments by July 28.

The proposed move was largely based on industry demands and intended to ease the transmission of power for bulk consumers and rationalise the open access charges. It is expected to also help curb frivolous litigation by distribution companies, which is a positive move.

But, as is the case with most issues in the power sector the challenges lie in the implementation.

Key proposals

Let us look at some of the key changes proposed in the draft amendment:

(a) incorporating the provision for Bulk Consumer that no transmission license will be required for the dedicated transmission line to connect large consumer (like Green Hydrogen Producer) and Energy Storage System.

(b) incorporating the provision to discourage the huge gap between approved annual revenue requirement and estimated annual revenue from approved tariff.

(c) incorporating the provision to discourage frivolous litigations before APTEL and higher courts and make timely payments (this is in compliance with the Supreme Court order dated April 20, 2023).

Under Rule 22 of the proposed amendment, a generating company or a person setting up a captive power plant or an energy storage system (ESS) will no longer require a license to establish, operate or maintain a dedicated transmission line to connect to the grid. This will also apply to consumers with a load of not less than 25 MW in the case of an inter-State transmission or 10 MW in the case of a State transmission system. But, they have to be compliant with the rules.

There is also a proposal to do away with the transmission license for large consumers including green hydrogen producers and ESS connecting through dedicated transmission lines.

As regards Open Access, to bring more uniformity changes have been proposed pertaining to wheeling charges, charges for using a State Transmission Utilities network and additional surcharge. A cap on the additional surcharge for open access consumers has been proposed to make the charges more reasonable and affordable.

The rules also propose that the tariff should be cost reflective and there should not be any gap between the approved annual revenue requirement and estimated annual revenue except under natural calamity.

According to Ashok Khurana (Director General), Association of Power Producers, this proposal will ease the task of bulk consumers to produce and transmit power without any dependence on intermediary.

“Further it aims to curb frivolous litigations which Discoms indulge in to delay payment to meet their liquidity constraints. They do not realise that this imposes an avoidable burden on consumers as in majority of cases the ‘carrying charge’ payment for delay has been huge,” he said.

States’ responsibility

But then, why are the States not on board?

“Electricity” falls under the concurrent list of the Constitution. Therefore, while the Centre is responsible for overall development, the States are accountable for providing electricity.

Therefore, for the proposal to succeed the States have to be in sync with the changes being proposed by the Centre as the success of the reforms depends on how well it is implemented.

As one analyst pointed out,”many a times we come out with reports based on policy reforms and we find that what has been proposed and the ground reality are not same”.

These proposed changes also will be implemented by State Distribution Utilities. It is up to them whether they want to implement it or not. “Nobody can hold the States responsible for not implementing them,” said an industry observer.

According to industry observers, there are 17-odd States where open access will work. But, among these States where tariff is low, open access really doesn’t help. And in States where tariff is high, open access creates a level playing field. And here lies the challenge. Will these States allow it to happen? Even if they allow, they can still keep tariff high by tweaking the surcharges.

Some States like Rajasthan reportedly have made it difficult for the developers and consumers. According to analysts, commercial and industrial consumers in Rajasthan can significantly benefit from energy savings through open access electricity consumption, with captive and group captive projects yielding the highest returns.

However, in the State, Discoms consider only projects with 100 per cent equity invested as captive open access rather than those with 26 per cent from a single entity, posing a significant challenge for developers and consumers.

There is also a missing link in the draft — the shifting of transmission line to distribution line. Those having captive power generation facility may not face a challenge but for those who need to take it from transmission to distribution network, will have a problem.

Besides, the States can make it difficult to lay the networks — as many permissions are required to lay a distribution line.

This move is expected to encourage greater participation in open access and promote a more competitive and dynamic electricity market. But, the willingness of the States is the key for this reform to succeed. As an expert said, “you can give someone an opportunity but not force them to take it”.

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