PowerMin unveils model Bill on distribution responsibility

Aims to ensure financial and operational turn around and long term sustainability of distribution licensee

Amid rising losses, the union power ministry has formulated a model state electricity distribution management responsibility Bill, 2013, on the lines of the Fiscal Responsibility and Budget Management (FRBM) Act.

The Bill aims to provide for responsibilities of the state government to ensure a financial and operational turn around and long term sustainability of the state-owned distribution licensee. This is to enable adequate electricity supply to consumers through financial restructuring.

The model Bill envisages the state government to submit the electricity distribution management statement on the measures taken in relation to distribution, in each financial year during the budget session to the legislature. A slew of measures would be in the areas of long term planning, consumer protection, regulatory compliance, corporate governance and financial restructuring.

Further, the state government would lay down key performance indicators with regard to payment of dues by government departments and institutions, distribution loss cut trajectory, provisioning of subsidy, energy accounting and auditing, improvement in collection efficiency, recovery of past receivables.

Moreover, the Bill ensures 100 per cent metering and consumer indexing to be achieved within three years and the establishment of special courts for settling theft cases within a year if not set up. The distribution licensee would have to increase collection efficiency at 1.5 per cent a year if it is between 95 per cent to 99 per cent, at 3 per cent if between 90 per cent and 95 per cent and at 5 per cent if between 80 per cent and 90 per cent.

Former union power secretary R V Shahi was sceptical as he observed that state governments in general did not seem to be serious about distribution reforms. “In the last five years, the situation has in fact worsened. Commitments made by states in their agreement with the union power ministry have not been implemented. Unless the distribution is privatised or at least franchised, the objective of the model Bill would not materialise,” Shahi said.

According to the model Bill, the state government would make a financial restructuring plan (FRP) or other such schemes a part of the state budget statements for effective monitoring of its impact on the state finances. Besides, the state government would ensure that the distribution licensee does not resort to short term loans for funding operational losses except as provided in the FRP.

Ajoy Mehta, managing director, Maharashtra State Electricity Distribution Company opined that the model Bill was a laudable initiative by the union power ministry. “Power touches  everything including agriculture, industry, investment competitiveness. It is imperative for all to act responsibly towards this sector,” he said.

Jayant Deo, founder member, Maharashtra Electricity Regulatory Commission described the model Bill as a primer for running state-owned distribution companies. “There is no teeth to the proposed Bill as penalties to the state are limited to denial of unallocated quota power,” he said.