The Electricity Bill 2003 – From Crisis To Disaster

THE Electricity Bill 2003 was passed by the Lok Sabha on April 9 after being tabled in its current forum on April 6, thus ensuring no debate in the country. While all the old ills of this legislation which has been on the anvil for the last 3 years remain, some more new ones have been added ensuring that the electricity sector faces a disaster in the near future. As the Congress and the BJP have similar views on the legislation, only cosmetic changes can be expected from the Rajya Sabha. Before we look at the underlying “vision” of this piece of legislation and its implications for the country, particularly the rural sector, let us briefly examine some clauses of the Bill which can only have come from minds of persons who look upon all consumers as potential criminals.


This Bill, by virtue of clause 126-6, and clause 135, allows an officer of the government or a private “licensee” to break open any premises, seize any material or equipment, take away accounts and documents on not only suspicion of theft of electricity but also its “unauthorised use” and “likely to be used unauthorisedly”. In other words, a private licensee has more powers under this Act than the police, and the tax authorities. And to cap this draconian power against consumers, they are completely indemnified against any action. The POTA mindset continues with government. Even the need of the private licensee is seen to override any right of the individual.

This may be contrasted with the provision of penalties for the licensee. The licensee, can cause havoc in the system by not acceding to the directions of Load Despatch Centres. The maximum penalty for this is Rs 15 lakh for inter state lincesees, and Rs 5 lakh for the state licensees. The consumers obviously do not count in this Bill. For the consumer, if any demand is made on him through a bill, he has to pay the amount immediately before he/she can appeal. And if he/she does not, even his/her property can be sold as electricity dues are now to be treated as revenue defaults.


Let us now take up the underlying assumptions of the Bill and its distinct difference with Electricity Act of 1948, which was piloted in the constituent Assembly by Dr Ambedkar. In the earlier Act, it was recognised that Electricity was a vital necessity for agriculture, industry and domestic consumption and should be provided at the lowest possible cost. It should not be used for profiteering. It was also recognised that it would not be possible to extend rural electrification through existing private utilities and therefore put the task of rural electrification on the state leading to the formation of the State Electricity Boards. The current Bill proposes that electricity should be regarded purely as a commercial, market driven activity with regulators ensuring removal of cross subsidies and creating the market. For rural electrification, it is no longer anybody’s baby. To add a sop for the rural sector, it has been delicensed for NGO’s, co-operatives, Panchayats etc. They can now become self-reliant while the government looks after Reliance.

The key to the Act, and this is where the BJP and the Congress are singing the same tune is “open access”, that is the generators should have the right to supply electricity to any bulk consumer or distributing company using the transmission system. Thus, the generating sector, the transmission system and the distribution areas are to be seperated. The costs are supposed to come down as the generators “compete”, while the  transmission companies get “wheeling” charges and the distribution companies make profit by selling the generators’ power to the consumer.

Again, I am not going to discuss the myth about competition bringing down prices. Apart from this not happening any where reforms have been tried, the central argument that no competition can take place if there is a scarcity has yet to be answered by the proponents of competition. The key issue I will address here is under this open access, who looks after the integrity and balance of the electrical system? The Bill is totally silent on this question.


The problem with this open access model, is that it demands a built in surplus capacity of transmitting electricity. If we only have as much capacity as is currently being used, then all supplies will have to be done through existing transmission lines, prohibiting alternate sources of supply. However, as the SEBs have no money to expand their system, therefore open access is to force them to go to private licensees for transmission as well. And this brings us to the central problem of the new Bill.

In any electrical system, the generation of electricity has to match the consumption, without which voltage and frequency can rise or fall damaging equipment, not only of the consumers but of the electrical system as well. Wherever reforms are being thought of, the electrical system’s integrity is being maintained by the Transmission System being kept under one entity who the works with the Regulator and Load Despatch Centres to maintain the system. In this Bill, anybody can become a transmission licensee, thus fragmenting the electrical system. In such a fragmented system there is no way for the transmission to take place as contracted. And in the absence of at least an integrated Transmission System – State Gridcos or Regional Gridcos – the electrical system will be open to anarchy. The Bill then has a situation in which either there will be no open access as there is limited transmission capacity or will see a fragmental transmission system that cannot maintain system stability.

The other problem of the Bill is that it provides a definition of captive generator that allows anybody to set up a plant anywhere, supply to anybody in the system and be treated preferentially from generators. Given that the SEBs and the distribution companies are losing their best paying customers, this step makes them completely unviable. Giving incentives to captive generators to sell to the grid is one issue, allowing them “open access” to sell anywhere will only accentuate the current crisis of the system.


The last part is that the rural sector does not figure in the Bill anywhere except as a responsibility of the rural people themselves. I can understand that co-operatives, Panchayats, etc, take responsibility of distribution in rural areas through rural utilities. The question is who will take electricity upto the substation and the HT transformer? At what price will they get electricity? And if they are not electrified, who invests in the generating facilities?

It is clear that no private utility/licensee will do rural electrification. They did not do so earlier in the US, nor have they done so in Orissa now. The electrical lines and equipment that were damaged in the Orissa Cyclone have yet not been repaired in rural areas. In the US only after Roosevelt and the New Deal came into being in 1935, was rural electrification taken up in the US, something the private utilities had not done. The Bill 2003 has no place for the rural sector reserving electricity now only for the rich. The Bill 2003 differs from the 1948 Act that it sees electricity sector as another one for making profits. Unfortunately for those who expect to benefit from the Bill, it does not even have a coherent understanding of the sector. Unlike  Ambedkar who matched his vision with meticulous craftsmanship, the Bill’s shallow vision is matched only by its shoddy drafting. This Bill only will accelerate the downward trajectory of the power sector, which is already in a crisis.