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July 2003 - March 2004 Index
Sounding a note of caution against “adverse effects” of the new Electricity Act, 2003, on the states as well as general consumers, the Rajasthan Chief Minister, Ashok Gehlot, has urged the Prime Minister, Atal Bihari Vajpayee, to convene a conference on Chief Ministers on the issue. In a letter addressed to Mr. Vajpayee, Mr. Gehlot has expressed doubts about the provisions of the new Act, saying they would have a critical bearing not only on the power sector but also on the entire economy of the States. “It is necessary that a conference of Chief Ministers be convened to deliberate extensively on the Act’s provisions” he said. The Electricity Act, 2003, has introduced far-reaching changes in the Power sector in the country by providing for private participation which in turn would do competition. Mr Gehlot pointed out that there were certain features of the Act, which, if not addressed, would have a critical bearing on the operations of the power sector utilities. “ As is widely acknowledged, time is not yet ripe to allow open access without surcharge, which is why the Act provides for levy of surcharge till such time as cross-subsidy inbuilt in tariff is eliminated,” Mr. Gehlot said and added that it was a matter of grave concern that the liberal definition of captive generating plant in the Act had virtually nullified the protection envisaged. The Chief Minister said it was widely known that the financial status of all State Governments was indeed precarious, which constrained their ability to increase financial support or subsidy to the power sector utilities for neutralizing the loss in revenue caused by subsidizing consumers. “Sharp tariff increase in agriculture and domestic sectors would, therefore, become inevitable, leading to resistance and popular backlash,” Mr. Gehlot Said. Also, the increase in tariff beyond a point had the risk of rendering agricultural operations unviable, leading to large-scale unemployment in rural areas. The problem would be even more acute in a State like Rajasthan where ground water was the predominant source of irrigation, accounting for more than one-third of the total power consumption. He pointed out that the sharp hike in tariff would neither be desirable nor feasible without increased subsidy support or substantially increased revenue flow. The State utilities might experience further deterioration in their financial health, leading to greater impairment of their operations, he observed. Another point worth nothing was that presently the State sector power utilities were the only source and were likely to remain so for many more years to come for serving the electricity needs of millions of consumers in the rural areas. “In case the financial base of these utilities is eroded due to the impact of some provisions of the new Act, these utilities would be severely constrained in their ability to serve rural consumers, “ Mr. Gehlot asserted. He suggested that in line with the intention of the law makers of grant open access in a gradual and phased manner, suitable amendments be incorporated in the Act. There were other issues relating to the independence of the State Electricity Regulatory Commissions, and the protection of State Reforms Act would also need to be given due consideration. Mr. Gehlot also drew the Prime Minister’s attention to the issue of time period during which cross subsidy needed to be eliminated. The Act has rightly visualised that the Regulatory Commission ........keeping in view the situation in the state ............would determine such a timeframe. There is now a reported move to prescribe a period of three to five years for elimination of cross-subsidy by amending the Act. Mr Gehlot said he was not averse to prescription of a time frame for elimination of cross-subsidy, but added that the timeframe should be more realistic. Courtesy: The Hindu, 26th August,2003 |
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