Government considering to delicense power distribution sector
The government plans to introduce and pass the New Electricity Amendment Bill with proposed changes during the monsoon session of Parliament.
The government proposes to delicense the power distribution sector to allow competition in the last-mile supply of electricity to consumers, as part of a major reform initiative, reported IANS.
The New Electricity Amendment Bill, which the government plans to introduce and pass during this monsoon session of Parliament, will contain the proposed changes. Electricity Act, 2003, which delicensed power generation, will be replaced by this bill.
It has been reported that the draft bill no longer contains the word ‘distribution licensee’. This will allow existing distribution entities to maintain their status quo, along with permission to other parties to enter a distribution area, capable of managing the infrastructure.
The Finance Minister in her Budget 2021-22 address stated that the government will put into place a framework that enables consumers to choose among distributors.
The proposed delicensing will facilitate infrastructure sharing by the existing players. As a result, existing players will be able to monetize assets while new players will be able to strengthen infrastructure and start supplying electricity on demand. By allowing multiple distributors to operate in an area, consumers will have the option of selecting a supplier based on competitive rates and guaranteed supplies.
Delicensing allows multiple companies to compete to supply electricity to a distribution area. The states could invite bids based on their own rules, guided by models developed by the Centre.
The distribution permit would only be granted if a player was able to present a plan to provide last-mile connectivity and support infrastructure.
The Ministry of Power previously proposed separating carriage from content in the distribution sector to break the monopoly of the discoms.
Under this proposal, while the carriage of electricity would have remained with existing distribution companies, content or actual supply of electricity to customers would have been left open to competition, allowing customers to select their electric supplier.
However, the proposal was shelved due to a lack of requisite support from the states.
