This content is from: Local Insights


On May 5 the Indian parliament passed The Electricity Bill, which was originally brought before the assembly in August 2001. The comprehensive Electricity Act aims at replacing three existing Acts governing the power sector: the 1910 Indian Electricity Act; the 1948 Electricity Supply Act; and the 1998 Electricity Regulatory Commissions Act.

The framework underling the new legislation is that the electricity system in India must be open to competition. Consequently, the need to encourage private investors is vital. The Act aims to permit free entry into generation subject to safety and environmental consideration. The new Act introduces the idea of trading in bulk electricity by extending the scope of captive generation, not only for use in the promoter's own plants but also for the use of a group of industries. It also opens all aspects of generation and supply in the rural sector to unrestricted private investment. Numerous incentives have also been offered under the Accelerated Power Development and Reforms Programme to promoteoverall development and increase productivity.

An inherent disadvantage in the power sector is that the demand far outweighs supply. It has therefore become essential to increase the number of transmission lines without which any benefits derived from greater power generation will be negated. The Act permits multiple licenses in transmission and distribution and for the first time allows distribution companies to set up parallel lines within one zone. Consumers will benefit from the freedom that these parallel lines will afford them to select their distributor based on their respective performance.

Although the State Electricity Boards (SEBs) will lose their monopoly to buy power, they will continue to own and operate large segments of transmission networks in their jurisdictions. Consumers should benefit as the SEBs improve the service they provide in the face of competition from private companies.

This Act is expected to bring in a new era of healthy competition and accelerate the development of power sector in India.

Shardul Thacker

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