New power distribution bill lacks the power to bring change

The model state electricity distribution management responsibility Bill looks good on paper but lacks in teeth

Pictorially, the idea of a model State Electricity Distribution Management Bill, 2013 can be described as a bulb being lit up on the head of the power ministry, except that the bulb itself is a fused one. In drafting the bill the ministry has repackaged a number of older norms, added a few and has presented it as a new Bill.

The bill essentially is a guideline which the state electricity boards are supposed to adhere to. As in earlier cases the bill looks good on paper. The problem lies in the implementation, because the authority responsible for it has a misconceived political interest in deviating from it.

The core of the problem in the power sector is in distribution. Once this is addressed, the entire sector will be a financially viable one. But the money involved in keeping the sector in a poor state and political brownie points to be scored by keeping tariff rates low have virtually destroyed the sector.

The bill addresses almost all the issues ailing the sector. It aims to make the state governments accountable to ensure financial and operational turnaround and long term stability. It offers to set benchmarks and performance indicators for the distribution companies in their climb to financial and operational recovery. Importantly, it puts the onus on state government by asking it to submit the electricity distribution management statement and measures taken in each financial year during the budget session.

All this seems great, but what if state governments do not follow it, as in the present scenario. The bill has no teeth to penalise the state governments who do not stick to it. Most of the points in the bill are already in place for the distribution companies to follow, but none of them are sticking to it. And as they are not penalised for the wrongdoings problems keep on mounting.

The last four-five years has seen the biggest deterioration in health of the power sector distribution companies. A one point solution to the problem of distribution companies and the power sector at large is to make every recipient of electrical power pay the actual amount he is supposed to that would provide a decent return to the power generating and distributing companies.

Our lop-sided power tariff structure where the bulk consumer – industries – subsidises housing and agriculture consumer is the primary cause of the problems. A slowdown in industrial activity has further aggravated the situation. Distribution and generating companies will only make money if everyone pays for it. Unfortunately the bill does not address this issue.

The bill has been based on the lines of Fiscal Responsibility and Budget Management (FRBM) Act. Finance Minister has for long walked away from the path of FRBM while distributing freebies in the hope of garnering votes. He gets away with it as there is no mechanism to penalise him for not toeing the line. Similar will be the fate of this power bill, which circumvents the core problem and leaves it in the hands of politicians. Unless the sector has a mechanism of keeping decision making power away from the politician, such bills have little value than the paper they are printed on.