Question

The power sector reforms were initiated around the early nineties, however the Indian Electricity Act 2003 accelerated the pace of reforms. Do you agree? If yes, justify with reference to the provisions in IEA 2003 and if No, explain why?

06 Dec 2017
Answer :
Word Count : 1081

India’s journey of power sector reforms began in the early nineties when it was realised that reforms are the best option to overcome the poor financial state and inefficient performance of state-run utilities. The first reform phase addressed was in power generation, liberalising private sector participation and facilitating investments including foreign ones. This was followed in the second phase by structural and governance reforms in the late nineties. During this phase, two important developments were the unbundling of utilities into GENCO, TRANSCO and DISCOM and establishment of independent regulatory commissions. The third phase of reforms saw the passing of the Electricity Act in 2003, a very critical milestone that had brought “open access” to the transmission and distribution networks, thus paving the way for power marketing. Latest amendments in 2007 to the Electricity Act 2003 further gave fillip to this effort.

DISTRIBUTION REFORMS

Though the pace of reforms was encouraging in the generation and transmission segments, distribution lagged behind, resulting in mounting technical and commercial losses to the utilities (DISCOMs) and dissatisfied consumers. Some of the challenges facing the distribution sector include: high Aggregate Technical and Commercial (AT&C) losses with a national average of around 34%; high theft (annual loss to the tune of around US$4 billion); populist government polices of giving highly subsidised or free power to certain consumer groups; wide gap between billing and collections; network reliability and power quality. To overcome these challenges and bring in world class infrastructure coupled with best practices and performance, the Government of India had embarked on a programme known as the Accelerated Power Distribution Reforms Programme (APDRP), initiated during 2002. In tune with the highly ambitious goals, APDRP attained a flag ship status in the entire distribution reforms during the 10th fiveyear plan of the country with committed funds and pioneering technological initiatives.

This programme has both investment and incentive components provided by the central government. Investment assistance was around 25% and incentive equivalent to

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