Electricity

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Electricity

The Electricity (supply) Act, 1948 allowed the creation of State Electricity Boards (SEBs). The SEBs was responsible for the generation, transmission and distribution of power within the state periphery. Central Electricity Authority (CEA) was established to oversee the planning and development of power sector and guide SEBs.

In 1975, amendments were made to enable central government to set up and maintain power plants. Thus was formed the National Thermal Power Corporation (NTPC) which is the biggest power generation company in India till date. Private sector investment was opened for power generation sector as late as in 1991.

Five Regional Electricity Boards (REBs) were formed by the Government of India with the concurrence of State Governments with a view to ensure integrated grid operation and regional cooperation on power in 1964. Creation of Central Generating Companies for development of super thermal power stations at coal pit heads and large hydroelectric stations led to the creation of NTPC, NHPC, NPC, NLC & NEEPCO in 1976.

The Act of 1948 amended to pave the way for the formation of private Generating companies. CEA empowered to fix the norms for determining the tariff of all generating companies. RBI allowed 100% foreign investment in power sector without any export obligations in 1991.

Electricity Regulatory Commission Act 1998 enacted paving the way for the formation of Central Electricity Regulatory Commission (CERC) and State Electricity Regulatory Commissions (SERC). Regulatory power of the State governments transferred to SERC. Consequently, Tariff regulatory function of CEA transferred to CERC.

The Act amended in 1998 to provide for of Central Transmission Utility (CTU) and State Transmission Utilities (STU).

Electricity Regulatory Commission Act, 1998 was to provide for the establishment of a Central Electricity Regulatory Commission and State Electricity Regulatory Commissions, rationalization of electricity tariff, transparent policies regarding subsidies, promotion of efficient and environmentally benign policies and matters connected therewith or incidental thereto.

In 1998 transmission of power was opened for private investment and regulatory commissions were set up at Central and State level to frame the policies and ensure their implementation in their areas of jurisdiction. Central regulatory commissions were established for inter-state matters and state commissions for intra-state matters.

The Electricity Act 2003 repealed all previous acts and brought a paradigm shift in Indian power market. No license was required for setting up generation capacity. Distribution was made license free for notified rural areas. Development of power market was envisioned. Trading of electricity was recognised as a distinct activity. Open access was granted for bulk producers and consumers. It was amended further in 2007 to bring in modifications.

Power policy approach

The development of Power Sector is the key to the economic development. The power Sector has been receiving adequate priority ever since the process of planned development began in 1950. The power sector had been getting 18-20% of the total Public Sector outlay in initial plan periods.

Remarkable growth and progress have led to extensive use of electricity in all the sectors of economy in the successive five years plans. Over the years (since 1950) the installed capacity of Power Plants (Utilities) has increased to 89090 MW in 1998, from a meagre 1713 MW in 1950, registering a 5200% increase in 48 years. Similarly, the electricity generation increased from about 5.1 billion units to 420 Billion units – an 82 fold increase. The per capita consumption of electricity in the country also increased from 15 kWh in 1950 to about 338 kWh in 1997-98, which is about 23 times. In the field of Rural Electrification and pump set energisation, the country has made a tremendous progress. About 85% of the villages have been electrified except far-flung areas in North Eastern states, where it is difficult to extend the grid supply.

In order to optimally utilise the dispersed sources for power generation it was decided right at the beginning of the 1960’s that the country would be divided into 5 regions and the planning process would aim at achieving regional self sufficiency. The planning was so far based on a Region as a unit for planning and accordingly the power systems have been developed and operated on regional basis. Today, strong integrated grids exist in all the five regions of the country and the energy resources developed are widely utilised within the regional grids. Presently, the Eastern & North-Eastern Regions are operating in parallel. With the proposed inter-regional links being developed it is envisaged that it would be possible for power to flow anywhere in the country with the concept of National Grid becoming a reality during 12th Plan Period.

The Orissa Government was the first to introduce major reforms in power sector through enactment of Orissa Reforms Act, 1995. Under this Act, Orissa Generating Company, Orissa Grid Company and Orissa Electricity Regulatory Commission have been formed. Similarly, the Haryana Government has also initiated reform programme by unbundling the State Electricity Board into separate companies and Haryana Electricity Regulatory Commission has already been constituted.

With a view to improve the functioning of State Electricity Boards, the Government promulgated the State Electricity Regulatory Commission Act for establishment of Central Electricity Regulatory Commission at the national level and State Electricity Regulatory Commission in the States for rationalisation of tariff and the matters related thereto. Subsequent to the enactment of ERC Act, 1998 more and more States are coming up with an action plan to undertake the reform programmes.

In this respect, Governments of Uttar Pradesh, Rajasthan, Madhya Pradesh, Goa, Karnataka and Maharashtra have referred their proposals for setting up independent regulatory mechanism in their States.

The Electricity (Amendment) Act 1998 was passed with a view to make transmission as a separate activity for inviting greater participation in investment from public and private sectors. The participation by private sector in the area of transmission is proposed to be limited to construction and maintenance of transmission lines for operation under the supervision and control of Central Transmission Utility (CTU)/State Transmission Utility (STU).

In view of the urgent need to reduce transmission and distribution losses and to ensure availability of reliable power supply to the consumers reforms in the distribution sectors are also been considered by establishing distribution companies in different regions of the State. The entry of private investors will be encouraged wherever feasible and it is proposed to carry out these reforms in a phased manner. The Governments of Orissa and Haryana have already initiated reforms in the distribution sector by setting up distribution companies for each zone within their States.

With these efforts, it is expected that the performance of power sector will improve because of rationalisation of tariff structures of SEBs and adequate investment for transmission and distribution sector.

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