Overview of Indian Power sector
– Institutional, legal and policy
framework
Prayas - EGI Skill-share workshop for Tajikistan and
Kyrgyzstan Delegates
November 16-18, 2010, Pune, India
Prayas Energy Group
www.prayaspune.org/peg, energy@prayaspune.org
Reform Status
Implemented
Partially Implemented
Reg.Commn,
Unbundling (most
states)
Not Implemented
Full Cost
Recovery
Distbn-Privatisation
(Orissa (99),Delhi (02),
Urban Franchisee - Bhivandi(07), Nagpur (08),
MP, Agra-Kanpur (09), Gujarat, Rajasthan (in progress)
Slow increase in private gen & distrbn,
Technocratisation of decision making,
Commercial/Efficiency focus,
Evolving Electricity market - Trading, Power exchange
Prayas - EGI workshop Pune 2010
2
Schematic of institutional
and policy structure
P
U
Executive
Policies
MoP
Regulations
&
Orders
Tariff
B
L
E.
CERC
Capacity Addition
I
Legislature
Act
SERCs
C
Consumer Service
Prayas - EGI workshop Pune 2010
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Institutional framework -1
Central
Government
State Government
Ministry of Power, Ministry
-Ministry of Energy, State
of New & Renewable
Renewable Energy Agency
Energy
-Corporations: Generation,
- Planning Commission,
Transmission, Distribution
Central Electricity Authority, -State Load Dispatch Centre
Bureau of Energy Efficiency -State Regulatory
-Corporations: Generation,
Commission
Transmission, Trading,
Financing, Manufacturing
-National and Regional Load
Dispatch
-Appellate Tribunal for
Electricity and Central
Electricity Regulatory
Commission
-
Private sector –
Indian and
International
Generation, Transmission,
Distribution, Trading,
Financing, Manufacturing,
Services
Prayas - EGI workshop Pune 2010
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Institutional framework -2
Ministry of
Power
Central
Electricity
Authority
Legal provisions (Electricity Act 2003), Policy directions such as
National Electricity and Tariff Policy, Guidelines for competitive
bidding, etc
National Electricity plan, monitoring of projects, maintaining data
and statistics, demand forecast, feasibility analysis of Hydro
projects, etc
Generation
company
Subject to provisions of act, can generate power based on contracts
or independently. Needs to abide by Load Dispatch directions for
scheduling its generation
Transmission
Company
Builds and operates the transmission network and infrastructure
Distribution
company
Load Dispatch
Regulatory
Commission
Distributes electricity to consumers, in charge of maintaining and
building distribution network, metering, billing and collection from
consumers
Statutory autonomous body entrusted with scheduling and
accounting of power at state level. Responsible for maintaining grid
stability and discipline
Regulates all players in the sector, decides tariff, approves capital
expenditure, monitors supply and service quality and ensure
implementation of various provisions of Electricity Act 2003
Prayas - EGI workshop Pune 2010
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Institutional Framework -3
Generation: Public,
Private
Regulator
Distribution: Public,
Private, Bulk consumers
Transmission:
Public, Private
Power Flow
Market
Money Flow
Regulation
Prayas - EGI workshop Pune 2010
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Legal & Policy Framework:
Electricity Act 2003


A Central Act
Old national Acts repealed



Indian electricity Act 1910
Electricity (supply) Act 1948
Electricity Regulatory Commissions Act 1998
State reform Act provisions to be valid
provided they are not inconsistent with the
Electricity Act 2003
 Hence, the entire Indian electricity sector will
be governed by the Electricity Act 2003

Prayas - EGI workshop Pune 2010
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Electricity Act 2003

Emphasis on






Breaking monopoly of State Electricity
Boards and promoting competition /
trading
Creating economic imperative for
fundamental changes
Attracting new investment
Reduction of cross-subsidy
Competition for increasing efficiency
(mostly in generation)
Defines institutional and policy
workshop
Pune 2010 country
frameworkPrayas
for- EGIthe
whole
8
8
Electricity Act 2003 - Key
provisions



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De-license Generation
Open Access in Transmission, Distribution
Promote trading and markets
De-license rural distribution
Establishes norms for transparency and public
participation
Re-defined role and mandate of State
Governments, Regulators and Licensees
Establishment of Consumer Grievance
Redressal Forums
Prayas - EGI workshop Pune 2010
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National Polices & Programs




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National Electricity Policy - February 2005
Tariff Policy- Jan 06 (Amendment – Mar
2008)
National Rural Electrification Policy - Aug
2006
National Electricity Plan - Aug 2007
National Programs


Rural Electrification: RGGVY Apr 2005
Urban Distribution: R-APDRP July 2008
Prayas - EGI workshop Pune 2010
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National Electricity Policy -1

Emphasises the electricity – development link:
“Electricity is an essential requirement for all facets of our life. It has been
recognized as a basic human need. It is a critical infrastructure on which the
socio-economic development of the country depends”

Issues addressed:

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



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
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Rural Electrification
Generation , Transmission, Distribution
Recovery of Cost of services & Targeted Subsidies.
Technology Development and Research and Development (R&D)
Competition aimed at Consumer Benefits
Financing Power Sector Programmes Including Private Sector Participation.
Energy Conservation , Environmental Issues
Training and Human Resource Development
Cogeneration and Non-Conventional Energy Sources
Protection of Consumer interests and Quality Standards
Prayas - EGI workshop Pune 2010
11
National Electricity Policy -2

Generation



Power-Demand to be fully met by 2012
A part of new generating capacity (say 15%) may
be sold outside long term Power Purchase
Agreements (PPAs)
Transmission & Distribution



Development of National Grid
National and State level Open access to be
facilitated
Demand side management
Prayas - EGI workshop Pune 2010
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National Electricity Policy - 3

Consumers




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Access to electricity for all households by 2010
Per capita availability of electricity to be increased
to over 1000 units by 2012
Minimum lifeline consumption of 1
unit/household/day as a merit good by year 2012
Cross subsidies to be reduced gradually
Provision of support to lifeline consumers
(households below poverty line having
consumption of 30 units per month) with tariff
being at least 50% of average cost of supply.
Grievance Forum and Ombudsman to be set up
Government and RCs to facilitate capacity building
of consumer groups.
Prayas - EGI workshop Pune 2010
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Tariff Policy -1

Objectives




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Ensure availability of electricity to consumers at reasonable
and competitive rates
Ensure financial viability of the sector and attract
investments;
Promote transparency, consistency and predictability in
regulatory approaches across jurisdictions and minimise
perceptions of regulatory risks;
Promote competition, efficiency in operations and
improvement in quality of supply
Covers



General approach to tariff
Generation, Transmission, Distribution Tariff
Trade margin
Prayas - EGI workshop Pune 2010
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Tariff Policy -2



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Power purchase by DISCOMS to be based on
competitive bidding (exception for public sector)
Cross subsidy surcharge is to be paid by open access
consumers. This is calculated as the difference
between the consumer tariff and the cost of supply
Poor consumers (consuming say less than 30
units/month) will get support through cross subsidy.
Their tariff will be at least 50% the average cost of
supply. SERCs will notify a roadmap to reduce cross
subsidy so that by 2011, tariffs would be within +/20% the average cost of supply
Amendment (Mar 08) on Hydro tariff (transparent
bidding, long term PPA for 60%, R&R, development
fund etc
Prayas - EGI workshop Pune 2010
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National Rural Electrification
Policy-1

Goals




Provision of access to electricity to all households
by year 2009
Quality and reliable power supply at reasonable
rates
Minimum lifeline consumption of 1 unit per
household per day as a merit good by year 2012.
Covers

Approach to rural electrification; RGGVY program;
Definition of electrified village; Involvement of
local community; Financial assistance, Standalone systems, Bulk power purchase &
management of rural distribution
Prayas - EGI workshop Pune 2010
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National Rural Electrification
Policy -2




Grid and off grid solutions for Household
electrification and economic activities
Rural Electrification Corporation to be the
nodal agency, Central support to States for
RE
States to prepare RE Plan, set up District
Committees, notify rural areas . SERCs to
monitor
Franchisees for rural distribution
Prayas - EGI workshop Pune 2010
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National Programs

Rural Electrification: Rajiv Gandhi Grameen Vidyutikaran Yojana
(RGGVY) 2005



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Village (1,25,000) and rural household (78 million) electrification
Central government to provide financial and implementation
support to States
Guarantee by States for minimum 6-8 hours of power supply
Decentralised Distributed Generation (DDG) to supplement grid
power
US$ 12,500 m outlay
Urban Distribution: Re-structured Accelerated Power
Development and Reforms Programme (R-APDRP) 2008



Focus on base line data creation and distribution loss reduction
(urban)
US$ 2500 m for base line data and IT applications
US$ 10,000 m for distribution strengthening
Prayas - EGI workshop Pune 2010
18
Schematic of institutional
and policy structure
TAP
P
U
Executive
Policies
MoP
Regulations
&
Orders
Tariff
B
L
CERC
E.
Capacity Addition
I
Legislature
Act
SERCs
C
Consumer Service
TAP
Prayas - EGI workshop Pune 2010
19
Players and Interactions
Consumers/Public
Contract
Utility
Regulatory
Commissions
Political
Voice
Authority
/ policy
Government
/ Policy makers
Prayas - EGI workshop Pune 2010
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Discussion




Multiple institutions, with different roles and
mandates
Evolving legal and policy framework
Different drivers and different interests
influencing processes and decisions
Challenges of Civil Society Groups to find
their feet and push for public interest

At different levels, different times, with different
actors
Prayas - EGI workshop Pune 2010
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