The main objective of the Electricity Act 2003 was to transform the power sector of India for the better. The act covers mainly the issues related to the generation, transmission, and distribution of electricity.
Before this Act, the Indian Electricity Act of 1910, Electricity Supply Act, 1948 and the Electricity Regulatory Commission Act, 1998 were the acts which guided the power sector in India. In various states, the State Electricity Board took care of the generation, distribution, and transmission of electricity. Later the cross-subsidies reached an unsustainable level, owing to the politico-economic conditions. So, to curb the state governments from determining the tariffs, the Electricity Regulatory Commission Act, 1998 was enacted by the government. To further benefit the power sector, the Electricity Act of 2003 was enacted to increase the involvement of private players and thus, bring in more healthy competition.
This Act attempts to reform the problems existent in the power sector and consolidates the laws related to the generation, transmission, distribution, trading, and use of electricity. No person can engage in these activities unless authorized to do so and has an issued license. The central government has the liberty to make the regional demarcation of the country and as it may deem fit for the efficiency and economy of the electricity. With responsibility for the coherent development of the network, the utility of transmission at both state and central levels would be a government company.
According to sections 7 and 8 of the Electricity Act 2003, except for a few hydroelectricity and nuclear projects over a specific size, this act entirely delicenses the generation of power. The generators can sell the electricity to any license, or even directly to the consumers, when the state regulatory commissions allow. The Act also provides compensation for the loss in the cross-subsidy revenue caused by the sale of electricity directly from the generator to the consumers. The distribution of electricity in the rural area is also licensed by the Act. Unbundling of State Electricity Boards is required by the state governments. However, as licensees of distribution and state transmission utilities. Stand-alone systems for distribution and generation of electricity is permitted in the rural areas. By this Act, it has been made mandatory to set up a State Electricity Regulatory Commission (SERC). To hear appeals against the CERC and SERC’s decisions, there is a provision for an appellate tribunal.
Permission for establishing, operating, and maintaining a generating station without permission from the authorities is allowed by the act as long as they comply with the technical standards enlisted in section 73, clause (b). One of the major issues in the power sector, which is very much in connection with the mindset of the people in our country, is the theft of electricity. So, to deal with this serious problem at hand, the provisions for the theft of electricity are made more stringent. It has also been made mandatory to meter the electricity supply.
Role of the CEA
The role played by CEA is limited. It is concerned only with policy recommendations, data management, dissemination of the power sector, monitoring electricity sector performance, advising the Ministry of power on technical issues, among a few other things.
Section 73 (b) of the Electricity Act, 2003, says that the preparations of technical standards for construction of electrical plants, electric lines, and connectivity to the grid, fall under the ambit of the CEA. Having said that, section 7 of this act says that a generating company may establish, operate and maintain a generating station if it complies with the technical standards only relating to connectivity to the grid, as is mentioned in the clause (b) of section 73.
What can be inferred from this is that it is not compulsory for generating stations to follow the technical standards, specified for the construction of electrical plants and electric lines in the CEA. In the same way, the transmission or distribution licensees don’t need to implement the standards for construction of electric lines, except for the Grid Code or Grid Standards for the operation and maintenance of transmission lines, which is specified under the CEA, under clause 73(d) of this Act. More often than not, these standards under the CEA are conservative, which in turn compromise optimum design features, cost, utility. In addition to that, they fail to give complete clarity, when it comes to the selection or subsystem capabilities of electrical plants and electric lines.
Left Parties’ Opposition
The Left Parties were strongly in opposition to the clauses related to competition in the electricity market, such as the unbundling of Electricity Boards and open access. In addition to that, they strongly objected to the elimination of cross-subsidies. In its very first tenure, the UPA government agreed for some of the amendments. Thereby, the clause regarding cross-subsidies was amended. The UPA government, in its second tenure, published a draft amendment of the Electricity Act, 2003. It was passed with the primary intention of the separation of the retail sale of electricity from the distribution business.
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