In a significant move aimed at overhauling India's power distribution landscape, the Union government has proposed key amendments to the Electricity Act, 2003. The changes would allow multiple distribution companies (discoms) to supply electricity to consumers using a shared network infrastructure, a shift from the current system that mandates separate lines for each licensee.
Driving Efficiency and Consumer Choice
Minister of State for Power, Shripad Naik, informed the Lok Sabha about the proposal on Thursday. The draft amendments, which have been shared with states and stakeholders for consultation, are designed with multiple objectives. The primary goals are to reduce costly duplication of power lines and substations, lower overall distribution costs, enhance operational efficiency, and finally, introduce competition in the sector by giving consumers the freedom to choose their electricity supplier.
Currently, the Electricity Act permits multiple distribution licensees in a single area to foster competition. However, the rule requiring them to build and maintain independent networks has led to redundant infrastructure and avoidable expenses, ultimately reflected in costs. Mumbai remains the only city where this model of consumer choice exists, with multiple discoms operating in parts of the metropolis.
Key Features of the Proposed Reform
The proposed legal changes will formally authorize the sharing of distribution networks. They will also mandate non-discriminatory open access to these shared grids for all licensed suppliers. These companies will pay a regulated wheeling charge for using the common infrastructure. Minister Naik emphasized that this proposal does not impose any additional financial burden on the government.
A crucial aspect of the reform is the protection of consumer interests. State governments will retain the flexibility to provide direct subsidies to specific consumer categories, such as domestic and agricultural users. This ensures that vulnerable groups are not unfairly burdened by the new competitive framework and that social welfare objectives continue to be met.
Parallel Funding for Distribution Sector Improvement
In a related reply in Parliament, Naik provided an update on the Revamped Distribution Sector Scheme (RDSS). He stated that the Centre has so far released approximately Rs 37,000 crore to states under the scheme. This amount constitutes about 38% of the total sanctioned gross budgetary support earmarked for the financial years 2023-24, 2024-25, and 2025-26.
The RDSS aims to improve the quality and reliability of power supply by creating a financially sustainable and operationally efficient distribution sector. The release of funds is tied to performance. Discoms must achieve predefined milestones and fulfill other requirements as per the fund release guidelines to be eligible. The minister explained that a result evaluation framework, based on customised action plans for each state and discom, has been developed to assess them for fund disbursal. He added that no claims from any state regarding distribution infrastructure works are currently pending with the ministry for approval.
This twin approach—introducing competition through shared infrastructure while simultaneously strengthening discoms through conditional financial support—signals a comprehensive strategy to address long-standing challenges in India's power distribution sector.
