Power reform: Be ready for shocks

[dropcap]T[/dropcap]he deregulation in the retailing of fuel prices has been an unmitigated disaster for the public, while windfall gains accrued to the oil companies. A similar threat now looms for the consumers of electricity, particularly domestic users, as the Modi government pushes ahead with plans to amend the Electricity Act. A bill to amend the law, introduced in Lok Sabha in 2014, has gone through examination by the Standing Committee on Energy and consultations with state governments and may be introduced in the winter session of Parliament. The Centre’s stated objective behind the move is to give consumers a wider choice by promoting competition in the power distribution sector and allow them to buy electricity from a firm of their choice. But the rationalisation associated with the restructuring is expected to lead to a steep hike in electricity tariffs.

Aam Aadmi Party’s Delhi chief minister Arvind Kejriwal has raised a scare about the Centre’s move, which he sees as an effort to push its agenda of privatising the electricity sector. The changes, according to him, will concentrate all powers in the electricity sector in the hands of central government to the exclusion of state governments and will lead to three to five times hike in electricity tariffs. Kejriwal has a reason to be particularly upset as cheap electricity has been one of the hallmarks of his government. In Delhi, power consumption up to 200 units is currently charged Rs1 per unit, while those using up to 400 units pay only Rs2.50. This could uniformly go up to Rs7.5 per unit under the new system, which will break the back of ordinary people.

Kejriwal has sought to rub it in to the Modi government by writing to all the chief ministers of BJP and NDA-ruled states asking them to meet Prime Minister Modi and apprise him about the ‘dangers’ of the proposed amendments. He has also teased them by saying he is aware it would be difficult for them to raise it with the PM. He had earlier written to all non-BJP chief ministers, bringing the issue to their attention. The Delhi chief minister now plans to travel to these states to meet them in person and discuss the possibility of evolving a strategy.

A most disturbing aspect of the proposed system is that it will end all cross-subsidies in power tariffs and make them uniform for all types of consumers, irrespective of their capacity to pay. Currently, domestic consumers pay less while industrial units and similar establishments are charged at a higher rate. But unfortunately, when it comes to payments, there is no level playing field as the big players often get away running up huge arrears, while domestic consumers have their connection cut at the very first default.