No 13/AIPEF/Constitution Of High Power Committee 28-05-2014
Hon’ble Shri Narendra Modi Ji
Prime Minister
Govt Of India
New Delhi

Sub: High Power Committee required to review wrong energy policies of UPA Govt.

Respected Sir,

Your are kindly aware that due to wrong energy policies of UPA Govt., country could not achieve the target of "Power to All by 2012" Even today about 34.5 Cr peoples don't have the access to electricity which is the highest number of peoples without electricity anywhere in the world. ALL INDIA POWER ENGINEERS FEDERATION is the only federation of power engineers working in state power corporation/SEB's, CEA, DVC, BBMB and other power utilities.

2. AIPEF takes the opportunity to apprise you in brief regarding the crisis being faced by India Power sector threatening to undermine the economic survival of nation. This all has happened due to retrogressive power policies of crony capitalism and blind privatisation of UPA Govt. which is plugging the country into darkness.

3. AIPEF would like to submit as following few observations regarding power sector which needs urgent attention ---

A. GENERATION

1. The concept of achieving low tariffs through competitive bidding in Ultra Mega Power Projects(UMPP) has been completely defeated by the changes made in terms of reference after award of contract by giving various concessions to successful bidders.

2. Shortage of coal & import of coal in very large quantity (152 million tons in 2013, likely to go up to 185 million tons by the end of 12 th Plan).

3. Increase in prices of natural gas (to be $8.4 per mmbtu from $ 4.2 per mmbtu wef 01-04-2014) particularly in K G Basin.

4. Import of equipment. Besides cost,the imported equipments are under performing because of the reason they are not redesigned to meet local conditions.

5. Shutting down of public owned State Generating stations in order to transfer load to private power plants.

B. TRANSMISSION

While there are shortages of power in Southern states, state owned power plants in West & North are being shut down due to lack of load. This is inspite of the fact that physical infrastructure of power transmission exists to transfer power from one region to other.

C. DISTRIBUTION

1. Creation of multiple agencies , adding cost at every level which ultimately affects consumer.

2. Franchissees committing gross irregularities & breach in terms of contract.

3. Poor coordination between various agencies.

4. Private DISCOMS not being subject to any scrutiny (like CAG Audit, RTI ,Vigilance etc). These DISCOMS are adding cost by purchases at very high cost from their own sister concerns which is ultimately burdened on consumer.

5. Compromises in employee safety due to engaging untrained contract workers in regular nature of work & not going for regular recruitments .

D. FINANCIAL HEALTH OF POWER SECTOR

The very purpose of changing Electricity Act in 2003 was to reduce the losses in Power sector, improve the financial health of the sector & reduce the subsidy burden of Govt. Due to faulty policies as pointed out above the contrary has happened. The financial health of power sector has further deteriorated & Govt is now even subsidizing private DISCOMS. What is more serious is that due to continued wrong energy policies Banking sector may collapse under the burden of non-performing assets being generated by Power Sector.

E. REGULATORY MECHANISM

Autonomy & independence of Regulators has been completely eroded as it has been captured by vested interests due to intereference by state Govt’s even in tariff matters under the clause of public interest. Most of regulatory commissions are headed by retired bureaucrats who are enjoying all powers without any responsibility.

4. AIPEF requests you to kindly constitute a High Power Technical Committee of Experts headed by Prime Minister with representatives of AIPEF to review the overall situation and recommend corrective measures to make Indian Power Sector Vibrant so that goal of "Power to All at Affordable Rates" may be achieved in a time bound process. AIPEF also requests you to kinldy stop privatisation, franchisee, outsourcing in regular nature works which is being done as per UPA Govt. Policies.

Once again AIPEF extends it's whole hearted support to you and your Govt. in making India Self reliant in field of electricity & making INDIAN POWER SECTOR Vibrant.

Thanking you with regards.

Yours Faithfully

Shailendra Dubey

Chairman

CC.

1- Hon'ble Shri Piyush Goyal, State Power Minister (Independent Charge), GOI, New-Delhi.

2- Power Secretary, GOI, New-Delhi.

No 15/AIPEF/Proposed Ammendment in Electricity Act '03 30-05-2014

To,

Hon'ble Shri Narendra Modi Ji,

Prime Minister,

Govt. of India,

New-Delhi.

Sub:- Proposed Amendment in Electricity Act 2003-Regarding seperation of content & carriage in Distribution

Respected Sir,

It is noted that the Minisitry of Power has proposed certain amendments in Electricity Act '2003 and which was found published in the official website of the Ministry. At this juncture we wish to bring some facts for you kind attention and consideration before pushing the amendments.

2. Electricity Act 2003 was enacted in the parliament with the objectives of bridging the generation-supply gap, extending electricity, to all the households, improving quality and reducing price of electricity through competition, reducing AT&C losses, reducing the accumulated losses of SEBs etc. Now, after 11 years, it is disappointing to note that the state of affairs have only worsened. There are still more than 34 crore comon people without access to Electricity. The generation supply gap has increased. The distribution utilities are facing large scale financial losses mainly due to the unprecedented increase in power cost. Tariffs are rising making the power unaffordable to common man. Performance of power plants are deteriorating which can be seen from decreasing PLF. Fuel availability is becoming one of the major concern and about 20,000 MW capacity is kept idle due to shortage of fuel. AT&C losses are not reducing appreciably. The transmission system of the country was also very weak and vulnerable. The Grid failure and black out experienced during July-August 2012 was a clear example for the same.

3. On going through the state of affairs as pointed out above it is clear that the implementation of Electricity Act 2003 has not helped the sector to improve technically or financially. On the other side it had only helped the corporates to increase their profits. But it is unfortunate that the draft amendments are not addressing these issues and it is not clear how the changes proposed in the draft will help in tackling the issues mentioned above.

4. All will expect a thorough review of the present situation before attempting an amendment in any Act. But it is unfortunate that such a review had not taken place yet. Even a status report on the experience of the implementation of Electricity Act 2003 had not been placed before the public with the proposal of the amendment. Also there is no mention on the objective of the amendment. But on going through the draft it can be easily understood that the main objective of the amendment is to push the commercialisation of electricity, opening up the sector before the profit motive of international corporates.

5. One of the fundamental change in the proposal is to separate content and carriage in distribution. There will be one single distribution company which will be responsible for maintaining the distribution network i.e. the wires licensee and there will be several supply licensees. Multiple supply licensees at the same area of operation is aimed at retail competition thus to tide over the impractical proposal of multiple distribution licensees existing in Act 2003. Even though there is a dream of imporiving quality and reducing cost through market competition, the reality is different. The experience and effect of market power in a scarce market has not been considered in formulating the proposal. Also there is no successful example for these type of retail competitions even in developed countries inciuding USA.

6. As india is an energy starved nation, reducing price of power through competition is impractical. The multiple licensée system will help only "cherry picking" and the deterioration of the incumbent public sector licensee, which will be the only responsible for supplying electricity to the unprivileged common. As per the amendment anybody applying for a licensee has the right to get a license and there is every chance of non-serious players to come in as licensee and collect security deposits and fly away. The amendment is silent on the mechanism of setting off the power flow between supply licensees and distribution licensee. Since incumbent licensee has the responsibility of serving power to every consumer as a last resort it has to formulate its power purchase plans. But it will fall in trouble due to black box strategies of other licensees. Even though there is a provision for cross subsidy surcharge it is defined only for open access. Whether it is applicable for supply licensees is not known. Even if it is applicable to supply licensees as well, collecting the same from different supply licensees will be practically difficult and disputable. Ultimately the incumbent licensee will not be able to recover its loss of cross- subsidy. This is an extremely serious issue given the financial dependence of State distribution companies on the revenue from high end consumers. Eventually all these changes will lead the system to chaos and it will ultimately affect the social development of the nation.

7. The proposed amendment makes the Electricity and Tariff Policies adopted by the UPA government as mandatory in functions of State Electricity Regulatory commissions. This provision overrides the central-state relationship in a concurrent subject like electricity. In India, the situation in power sector, such as consumer mix, consumer spread, sources of generation, ownership pattern etc. are vastly different from states to states. The priorities and strategies of development of the states will be different and will also be having their own stake in deciding the structure of the sector, development strategies and Tariff design including decisions on subsidies and cross subsidies of Electricity. Hence making the policy decisions of Central Government as mandatory is against the federal set up of governance and is not proper.

8. The proposal sheds the powers of state government issuing policy directions to Regulatory commissions and generating companies as per section 108 and section 11 of the Act. These proposals are also against the federal system öf the nation. The changes in the constitution of committee entrusted to select the members of State Regulatory commission also takes away the powers with the State government. At present state govemment is having the privilege of nominating the judicial·member of the committee, but if the amendment is finalised this privilege will be transferred to the Chief justice of the High Court. Again the central government is grabbing such powers of the state by introducing a provision to suggest -two names to the commission from which the state have to accept one when there occures a delay in appointment of members of regulatory commission. All these provisions can be considered against the spirit of federal system of governance.

9. As per the amendment there is provision for franchising distribution as well as .supply of electricity. Past performance of several input based distribution franchisees suggests the need to bring its functioning and operation under regulatory scrutiny. Performance of the franchisees affects the licensee's financial health and hence the rest of its consumers. There are several cases of franchisees not properly paying their bills to the Discoms for sevéral months, thereby severely straining the Discoms working capital needs. In spite of repeated submissions highlighting these issues, State regulatory commissions still view the franchisee as a distribution sub-contractor. There are mounting agitations against the franchisee system pointing out these issues but the amendment proposes continuation of this system and extending the same in supply business also. The amendment allows any person with sufficient financial capability to apply for a supply license and then the only purpose of supply franchisee is to accomodate persons not ready to come under regulatory control. Any how the proposal will drive the system to anarchy only.

10. All India Power Engineers Federation find the proposal for amending the Act as a step worsening the situation. It is high time to reintroduce social control into the sector which was dismantled throught the enactment of Electricity Act 2003. The unbundling process helped only the private players to syphon out the revenue from the sector thus making the public utility bankrupt and it requires a reversal in the process urgently. We consider the right to energy as a human right and urge the new Government to review Electricity Act 2003 with such a perspective definitely as a first step the proposed amendments should be withdrawn at an earliest by new Govt.

Thanking you with regards.

Your's Faithfully

Shailendra Dubey

Chairman

CC.

1- Hon'ble Shri Piyush Goyal, State Power Minister (Independent Charge), GOI, New-Delhi.

2- Power Secretary, GOI, New-Delhi.