This article on “ELECTRICITY LAWS IN INDIA: ALL YOU NEED TO KNOW” was written by Shivani Chaudhary, an intern at Legal Upanishad.
All facets of human existence necessitate the use of electricity. It is a requirement for human survival. It’s a vital piece of infrastructure for the country’s economy and social progress. The growth of India as a whole depends on the rural areas receiving reliable energy services at affordable prices. Indian business needs access to cheap, reliable power if it is to compete on the global stage and realise their enormous employment potential. The expansion of our economy can be directly attributed to the services sector. Sustained expansion in this sector depends heavily on the reliability of the electrical supply.
In the Seventh Schedule of the Indian Constitution, topics for which the Parliament and the state legislatures can create laws are divided into three categories: the Union List, the State List, and the Concurrent List. Parliament has jurisdiction over matters on the Union List, while state legislatures have authority over matters on the State List. However, when it comes to matters on the Concurrent List, both sets of legislatures have equal authority to enact laws. But if there is a conflict between a law passed by a state legislature and a law passed by Parliament on the same subject under the Concurrent List, the Parliament law takes precedence. The Concurrent List includes electricity as a topic.
There have always been laws in place in India that are applicable to the power sector. In 1910, the first electricity laws were passed, but it wasn’t until 2003 that the Electricity Act became the fundamental statute governing the power industry. With the passage of the Electricity Act in 2003, archaic statutes were repealed, and new electricity laws were enacted to meet the evolving needs of society. This section provides a synopsis of the major statutes affecting the power industry, both historical and contemporary:
Indian Electricity Act, 1910
The Indian Electricity Act, 1910 was the primary piece of legislation governing electricity generation, transmission, and distribution in India. A licence to provide energy in a specific area was the subject of this law. Furthermore, the government has sanctioned the supply of energy by non-licensees in some cases. Furthermore, Section 37 of the Indian Electricity Act of 1910 called for the creation of the Indian Electricity Rules of 1956 to control the distribution, transmission, production, and consumption of electricity.
These regulations were crucial safety measures for the entire electrical system, from the ground up, including the installation, construction, transmission, maintenance, generation, distribution, and consumption of electricity.
The Electricity Supply Act, of 1948
The Electricity (Supply) Act, of 1948 was enacted for the express purpose of streamlining the generation and distribution of electricity and laying the groundwork for significant electrical advancements. For technical planning and development, the most important thing this Act did was create the Central Electricity Authority (CEA). Additionally, State Electricity Boards (SEBs) were established and charged with providing electricity to residents of that state.
The Electricity Regulatory Commissions Act,1998
All issues related to electricity regulation, including tariff rationalisation, subsidy transparency, policy efficiency, and policy sustainability, are addressed by this Act.
The Electricity Act, 2003
Emerging power sector reforms in various states in India over time prompted a desire for more progressive electricity laws. After years of State Electricity Boards (SEBs) performing below par (they were established under the Indian Electricity Act of 1910 and the Electricity (Supply) Act of 1948), it became clear that a comprehensive piece of legislation was needed to guide the country’s electricity system forward. The Electricity Act of 2003 was passed by the federal government to address this very problem. Important provisions of the Act of 2003 include:
- Since their restructuring, the State Electricity Boards have become autonomous bodies with authority over electricity generation, transmission, and distribution.
- Captive electricity generation was encouraged, and power trading and de-licensing were recognised as distinct activities.
- This Act established the norm of providing open access without bias. In the context of the electricity industry, “open access” means that the distribution and transmission networks are made available to all market participants.
- This Act not only established the Central Electricity Regulatory Commission (CERC) and the State Electricity Regulatory Commissions (SERCs), but it also created the Appellate Tribunal for Electricity, a supreme tribunal with jurisdiction over appeals from the decisions of the SERCs and the CERC (CERC).
- It was also established that the Central Electricity Authority (CEA) serves as a technical advisory body to the Government of India and electricity regulatory commissions.
Supporting initiatives that use renewable energy sources is another focus of this Act.
The Electricity (Amendment) Bill, 2014
The Electricity (Amendment) Bill, 2014 was presented to the Lok Sabha by the Ministry of Power on December 19. It was the intent of this Bill to revise certain sections of the Electricity Act of 2003. A few of the more notable proposed changes in this bill are as follows:
- An increase in renewable energy momentum was required to promote renewable energy generation in India and increase the number of renewable energy-based thermal power stations to the point where they account for no less than 10% of the country’s total thermal power installed capacity.
- Allowing open access was also a requirement of the Bill from 2014. There was a time when the distribution company’s distribution system served only the last-mile connectives in terms of service and power delivery. The Bill proposed allowing the customer to pick his own provider as a means of putting an end to this practice. Further, a distribution area should be open to business from more than one supplier.
- For the most part, the State Electricity Regulation Commission’s final retail tariff should serve as the ceiling, with multiple providers free to offer rates below that. The demand for this move came from those who want to see more competition in the retail supply industry, but it was met with pushback from those who fear it will lead to job losses in the distribution sector.
- As its most notable change, the 2014 Bill proposed a new penalty clause. If you break any rule in the Electricity Act of 1910, you had to pay Rs. 1 lakh. The proposed increase in fine from Rs. 50,000 to Rs. 1,000,000 reads as follows. It was proposed that operators in the renewable energy sector be subject to a penalty of Rs. 10 lakhs.
- The Standing Committee on Energy also suggested several changes to the 2014 Bill, such as requiring licensees with more than one supply source to classify their customers differently according to factors like whether or not they receive government subsidies or suffer technical or commercial losses.
The Draft Electricity (Amendment) bill,2018
The 2018 Bill intended to promote renewable energy as a means of generation and thus amend the provisions related to it. In the 2018 Bill, two new concepts—the Renewable Purchase Obligation (RPO) and the Renewable Generation Obligation (RGO)—were introduced. There must be penalties in place for generators and suppliers who do not meet the RPOs, as stipulated by the demand. The RGO quantity will be notified by the government, and thermal generating stations using coal or lignite will be required to produce or sell that amount of power.
The proposal simply called for a reduction in the tariff and the guarantee that it would be gone within three years. The Appropriate Commission was tasked with preventing the cross-subsidization of tariffs to consumers in the distribution area by more than 20% and establishing a path for reducing the cross-subsidization of tariffs and the category of consumers. A 6% annualised cut in cross-subsidy was mandated by the 2018 Bill.
All long-term, medium-term, and short-term sales and purchases of electricity are now required to be made through Power Purchase Agreements in a form approved by the Central Electricity Authority, per the 2018 Bill. The 2018 Bill proposes a maximum penalty of INR 1 crore for violations of obligations provided for in the power purchase agreement. Electricity can be bought and sold by customers with a connected load of 1 MW or more. This type of customer has the legal right to buy electricity from an open-access provider under the terms of their contracts.
The Electricity Amendment Bill, 2021
The Electricity (Amendment) Bill, 2021 is the most up-to-date electricity-related bill, and it was introduced in the current monsoon session.
This Bill primarily addresses the following concerns:
Electricity distribution should be de-licensed so that customers can choose which firm serves their area. The proposals also call for the introduction of Direct Benefit Transfer (DBT) of power subsidies to guarantee that eligible individuals receive subsidies and to increase transparency and accountability. According to government plans, the Bill will outline the responsibilities and protections of electricity users.
As an added bonus for the government’s Aatmanirbhar Bharat initiative, the Bill proposes indigenization to lower power costs, particularly for industrial customers and producers.
A universal service obligation fund should be established by the government agency to make up for cross-subsidy shortfalls. If the supply is handled by pre-paid meters, however, no such deposits would be necessary.
In order to ensure that this vital area of power is subject to the authority of both the federal government and individual states, the Constitution of India places electricity on the Concurrent list. A former minister of commerce and industry, consumer affairs, food, public distribution, and textiles, Mr. Piyush Goyal, once said, “Electricity can transform people’s lives, not just economically but also socially.” Indeed, electricity is not only an economic factor but also a social factor whose presence greatly alters one’s life.
For this reason, the government of India established the Electricity Act, of 2003 and established various commissions to enforce the Act’s provisions. The Electricity Act of 2003 governs all aspects of electricity markets, including production, distribution, transmission, and trading. In addition, various Bills have been introduced to amend the 2003 Act in order to improve and simplify its provisions.
- Pallavi Bedi and Rohit Rajagopal, Electricity regulation in India: overview, Thomson Reuters Practical Law, 16 September 2013, available at: https://uk.practicallaw.thomsonreuters.com/6-525-5272?transitionType=Default&contextData=(sc.Default)&firstPage=true
- Trilegal, Electricity Regulation in India, Lexology, available at: https://www.lexology.com/library/detail.aspx?g=72d8a27b-af85-4a0e-ab46-dc4928a6d4f9.
- Piyush Joshi, RV Anuradha, and Sumiti Yadava, Energy Laws in India, Mondaq, 21 January 2020, available at: https://www.mondaq.com/india/oil-gas-electricity/885580/energy-laws-in-india