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Draft Power Bill 2000 to wind up SEBs - Views on News from Equitymaster
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  • Feb 25, 2000

    Draft Power Bill 2000 to wind up SEBs

    The draft power bill 2000 proposed by the Power ministry will make its compulsory for states to wind up their electricity boards in their existing form within six months of this bill getting passed. This bill would replace all existing legislations in the power industry.

    The states would have to split up their SEBs (State Electricity Boards) into three separate corporations. Also the existing licensees BSES, CESC and Tata Electric Companies would be allowed to operate under the old law for a period of one year after which they would operate under the new laws laid down. Another feature of the draft is that the Central and State regulatory commissions would be supreme authorities. This would reduce the Central Electricity Authority's functions as the power to grant authorisation would largely lie with the Central and State commissions. The Central commission would be responsible for framing overall guidelines relating to tariffs and also regulate inter-state tariffs while the State commissions would be responsible for the intra-state tariffs. The state commissions would be the agency to give permission to entities for generation as well as supply of electricity in the state.

    The draft also proposes a cess of 2 paise per unit of electricity generated by any entity which would go into a central pool. These funds would be used for the development of non-fossil fuel based sources of power generation.

    States that have been proactive towards unbundling of their SEBs and have taken measures to divide these functions into separate corporations are UP and Orissa. Other state governments who are finalising plans of splitting the functions of SEBs are Gujarat and Maharashtra. On the licensee front no clear details have been spelled out for the new regulations as reported in the newspapers. However the power licensees feel that the government should introduce the licensee concept for cities and towns, just as is being practised in Mumbai by TEC/BSES. In the case of the IPP (Independent power producers) the returns could be higher for a company but it has to face the financial risk of the SEB as power produced by them has to be supplied to the SEB. In the case of licensee there is no such requirement of supplying to the SEB. An area is earmarked for the licensee and they can directly distribute power to the end user in this area. Supplying power to SEB is perceived to be risky as most of these are in poor financial condition.

    Though power reforms are moving slowly, atleast the power ministry efforts are towards privatisation. Earlier the industry suffered from delays in projects, corruption and many bureaucratic hitches This bill when passed would make norms in the power sector much more attractive for private participation. This would increase the interest levels of foreign and private power companies towards the power sector.



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