Analysis of Laws and Policy on Electricity Market in India

This article is written by Samridhi Sachdeva pursuing BBA LLB from Gitarattan International Business School, GGSIPU. This article lists the laws and the policies on which the electricity market in India works.

INTRODUCTION

Starting with the production and consumption of electricity, India is the third-largest producer as well as third-largest consumer of electricity in the world. In terms of generating electricity, India has a surplus capacity to generate power but still lacks adequate distribution infrastructure. During the last 15 years, the electricity market has grown sustainably, mainly after the establishment of the Electricity Act, 2003 and some other policies and missions that were formed by the Government of India. In 2016, the Government of India introduced ‘Power for All’ which was to be accomplished by 2018. It provided essential infrastructure to ensure uninterrupted supply of electricity to each and every house, industries and all the commercial establishments.

Also, an initiative ‘Saubhagya Scheme/ Pradhan Mantri Sahaj Bijli Har Ghar Yojna’ was notified by the government of India on October 11, 2017 to supply electricity to all households. Guidelines for this project were given on October 20, 2017 and this was to be achieved by March 2019.

According to the guidelines given by Central Electricity Regulatory Commission (CERC) and State Electricity Regulatory Commission (SERC), the government of India initiated National Tariff Policy and National Electricity Policy to develop a power system based on optimal utilisation of coal, natural gas and renewable sources of energy.

And as per the electricity laws, the Foreign investments on electricity are 100% permitted in all power sectors except atomic energy, through automatic route.

Electricity Act (2003)

The electricity act contains provisions and policies related to generation, transmission, distribution, trade and use of electricity in India. It also provides the framework of bodies which are to administer the Electricity Act. As electricity is a subject on the concurrent list, therefore, both the Parliament and the State legislatures can enact laws. The activities that are under the electricity act are:

Three licensed activities
1. Transmission
2. Trading
3. Distribution
De-licensed activities
Generation activity except for hydropower.

The main objectives listed in the Electricity Act are:

To promote competition.
To protect the interest of consumers.
To ensure the supply of electricity in all places with a rationalisation of tariffs.
To ensure transparent policies and promote efficiency.

Electricity is basically generated from fossil fuels, hydro energy, nuclear energy and renewable energy. The amount of each one of them is given below:

Fossil fuels- 63.9%
Hydro energy- 13%
Nuclear energy- 1.9%
Renewable energy sources- 21.2%

Major companies

The companies that follow the activities or provide different activities of electricity in different areas are listed below:

1.Generation: For a generation, companies that take front seat are Adani Power Limited, Reliance Power Limited, Tata Power Company Limited, NTPC Limited, NHPC Limited, JSW Energy Limited and Torrent Power Limited.

2. Transmission: For transmission of electricity, companies like Adani Transmission Limited, Power Grid Corporation of India Limited and Sterlite Power Transmission Limited hold their places.

3. Distribution: The companies taking a major place in the distribution of electricity are BSES Rajdhani Power Limited, Adani Electricity Mumbai Limited, CESC Limited and Tata Power Delhi Distribution Limited.

4. Trading: The major companies responsible for the trading of electricity are PTC India Limited, Manikaran Power Limited, National Energy Trading and Services Limited, NTPC Vidyut Vyapar Nigam Limited and Tata Power Trading Company Private Limited.

Pending Amendments in Electricity Act

There are certain amendments to electricity laws that are pending. They are as follows:

Separate licence for electricity supply by creating a separate category of supply licensee thereby unbundling the supply from the distribution of electricity.
Advising Coal thermal generating stations to set up stations for renewable energy.
Developing and promoting smart grid, installing smart meters and decentralised distributed generation.

Objectives of National Tariff Policy

The NTP was formed in January 2016 by the Government of India, in coordination with State and Central Electricity Authority. The objectives of NTP are:

Ensuring the availability of electricity at reasonable and competitive rates to all consumers.
Ensuring investments to the sector and maintaining the financial strength of this sector.
Promoting renewable sources to generate electricity.
Creating adequate capacity, including reserves in generation, transmission and distribution in advance and therefore creating adequate reliable electricity supply.

Functions of Central Electricity Regulatory Commission (CERC)

The functions performed by CERC are listed below:

Regulating the inter-state transmission of electricity.
Determining tariffs for inter-state transmission of electricity.
Regulating the tariffs of generating companies that are owned or controlled by the Government of India.
Regulating the tariffs of generating companies, other than those owned or controlled by the Government of India, if these companies enter into or have a scheme of generating or selling of electricity in more than one state.
Adjudicating disputes involving generating companies or transmission licensees in relation to any of the previous matters.
Issuing licences to electricity traders and transmission licensees.

Functions of State Electricity Regulatory Commission (SERC)

To regulate the purchase of electricity by distribution licensees.
Determining tariffs for generation, supply, transmission and wheeling of electricity within the state.
To facilitate the intra-state transmission of electricity and to issue licences to applicants for transmission licensees, distribution licensees and electricity traders within the State.
To adjudicate disputes between generating companies and licensees.
Specifying State grid codes consistent with the grid code specified by CERC.

Conclusion

The Electricity Act is the main provision regarding the laws and policies of electricity in India. The government has also taken up some initiatives and projects to provide electricity in all the households, industries and companies. Before the establishment of any of these, the supply of electricity was not adequate but with the formation of laws, policies and the initiatives by the Government of India, State and Central Electricity Authority, a maximum number of households have access to electricity in India. But the Electricity authority also needs to acknowledge the pending amendments to the electricity act to provide more and easy supply and generation of electricity.

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