Aatma Nirbhar Bharat: Reforms in power sector

Reading time: 8-10 minutes.

The Indian government announced a special economic package worth 20 lakh crore rupees which amounts to about 10% of the country’s GDP (Gross-Domestic-Product) in 2019-2020. The package includes measures which were earlier announced by the finance ministry and steps taken by the RBI. The package is focused mainly on the sectors of land, labour, liquidity and laws. The ‘Atmanirbhar Bharat package’ was explained by Finance Minister Nirmala Sitharaman in the course of five days following the PM’s announcement.

The Finance Minister’s explanation articulated the pillars of the scheme to be the Economy, Demand, Vibrant Demography, Infrastructure, Tech-driven system and also introduced reforms in various sectors such as agriculture, tax system, simplification of laws, human resource and the financial system in order to promote business, attract investment and further strengthen the resolve for ‘Make In India’.

What are the reforms introduced?

The package is divided into five tranches; the first tranche focuses on MSMEs (Micro, Small and Medium Enterprises), NBFCs (Non-Banking Financial Company), salaried workers and contractors which has a budget outlay of 5.94 lakh crores. The second tranche focuses on migrant workers, extension of credit facilities to urban housing, street vendors and interest-subvention for small businesses, this has a budget outlay of 3.1 lakh crore; the third tranche focuses to strengthen Infrastructure logistics, capacity building, governance and administrative reforms for the agriculture sector, fisheries and the food processing sector, this has a budget outlay of 1.5 lakh crores; the fourth and fifth tranches collectively have a budget outlay of 48,100 crore, and focuses on the coal, mineral, defence, civil aviation, power distribution companies, atomic energy, measures for providing employment, support to businesses and increase ease of doing business and also reforms in the education and health sectors.

The scheme also revised the definition of MSME which had been pending for long, now the micro enterprises are defined as businesses having investment of less than 1 crore and a turnover of lesser than 5 crores, similarly the small enterprises are businesses with an investment lesser than 10 crores and a turnover of lesser than 50 crores, and the medium enterprises are businesses with investment of less than 20 crores and a turnover of less than 100 crores.

The Atmanirbhar Bharat scheme introduces policy reforms to fast-track investment through the Empowered Group of Secretaries, Project Development Cell in each ministry to prepare investable projects and coordinate with investors and the government.

The scheme also introduces reforms that aim at upgradation of industrial infrastructure by challenge mode implementation for the industrial cluster through the upgrade of common infrastructure facilities and connectivity.

The government also seeks to introduce competition, transparency and private sector participation in the Coal sector as the government introduces Commercial mining in the sector. The government seeks to achieve this through revenue sharing mechanism instead of the regime of fixed rupee per ton and the liberalization of entry norms.

Relevant legal provisions and their basis:

The article 41 of the constitution of India specifies the government to take sufficient measures and effective provisions within the limits of its economic capacity and development for securing right to work, to education, and to public assistance in cases of unemployment, etc.

The article 43A of the Constitution states that the state shall take steps by suitable legislation or in any other way to secure the participation of workers in the management of undertakings, establishments or other organizations engaged in any industry.  

The section 35 of the Disaster Management Act, 2005 allows for the Central/Union Government to take measures it deems necessary or expedient for the purpose of the disaster management, in this case the economic downfall caused due to the corona virus (COVID-19) pandemic.

The ministries of the Departments under Government of India also has responsibilities under section 36 of the Disaster Management Act such as taking measures for prevention of disasters and respond effectively and promptly to any threatening disaster situation in this case the disaster of going into recession. 

The whole plan/scheme can be considered as following section 37 of the disaster management act, 2005, as the government has prepared a disaster management plan specifying the measures to be taken by it for the prevention and mitigation of disasters, its roles and responsibilities in relation to preparedness and capacity building to deal with the threatening disaster of being in recession once the pandemic can be said to have ended which would trigger a domino of loss of employment, opportunity, livelihood and competence.

The section 101 (a) of the Consumer Protection Act allows for the Central Government to make rules without prejudice to the generality of the foregoing power, such rules may provide for classes including public utility entities.  The section 106 of the Consumer protection act provides for the removal of difficulties that may arise in giving effect to the provisions of the Act, in this case reduce/eradicate the deficiency in service.

Objective of the Reforms:

As mentioned earlier, the package helps to indemnify the losses caused due to this pandemic. It mainly uses this long lockdown period to achieve economic self- reliance in the country. The intention involves mainly fiscal policy and the industries undertake certain relief measures to overcome the situation. The PM of India during his address to the nation concentrated on the promotion of local products and also to fill the critical economic gaps. The package also focuses on providing service to the agricultural sectors by issuing Kisan credit cards with concessional credit access to the farmers.

The scheme helps in the reduction of dependency level with the international trading sectors and increases the production and development within the Indian Economy. The target of the package is to provide utmost benefit to the cottage sectors, MSMEs, labourers, farmers and economically unstable people and also the industries. This package specifying fiscal policy includes the steps taken by the RBI and the actions of Central Bank. The country instead of borrowing money from other foreign sources, can park with the RBI for the enforcement of any particular schemes.

Relevance in law

The growing population in India led to consumption of more power in domestic households and industries. Earlier the laws relating to the power sector were governed by the Indian Electricity Act, 1910 and the Electricity (Supply) Act, 1948.  Later, the reforms in power sectors necessitate the Enactment of the Electricity Act, 2003 – A consolidated laws relating to generation, transmission, distribution, trading and use of electricity.  It also provided for promoting competition, rationalization of the tariffs to all areas, ensuring transparent policies regarding subsidies.

The tariff policy brought towards the power sector is in accordance with the Electricity Act, 2003 paved way to protect the consumer rights by penalising the DISCOMs.  Amendments relating to the Electricity Act were drafted in 2014 and 2018. The Electricity Amendment of 2014 Bill introduced a number of measures to promote the generation of renewable energy and also proposed an amendment in the role of distribution companies.  Finally this amendment led to an increase in the penalty rates for the non-compliance with any provisions relating to the act. However, these amendments were rejected on the ground as only few critical issues were targeted which led to the weakening of the commercial and investment activities.

The DISCOMs which utilised lesser power than provided and any the non- compliance with the provisions were penalised under Section 142 and 146 of the Act. Further for the promotion of Industries in this sector, recommending a progressive reduction in cross subsidies and grant of licenses and open access shall be presented to maintain an efficient and co-ordinated development of the economy (Section 42). Privatisation of the power sector to the Union Territories and recommendation of new tariff plans and National Electricity Policies by the Central Government are made in conformity with section 3 of the Act. Several contingencies were faced by the Distributed Companies (DISCOMs) and the Power Project Agreements (PPAs), where they were forced to pay money as fixed costs, when they do not use even a single unit of power.

This prompted to amend certain guidelines and provide clear definitions to certain vague terms in the Electricity Amendment Bill, 2020. Later the Electricity Amendment Bill of 2020 was introduced by Ministry of Power on 17th April 2020. It focuses on improving the enforcement of contracts by establishing the Electricity Contract Enforcement Authority (ECEA) to boost the enforceability of Power Purchase Agreements (PPA) and to make the laws more stringent for usage.

Critical analysis:

The economic crisis triggered by the Covid-19 pandemic is much like the 1991 economic crisis, which was a harbinger of a shift in paradigm via liberalization, privatization and globalization. If implemented properly the post Covid-19 era promises to usher unprecedented plethora of opportunities to industry, infrastructure, social and developmental infrastructure, etc.

Any stimulus package would fail to reflect the trickle-down effect, until it is backed by reforms in various sectors. The Atmanirbhar plan encompasses the unfinished agenda of holistic reforms which would include Civil services, Education, Skill, Labour, etc.

The package of 20 lakh crores comprises both fiscal and monetary measures, the monetary ones being in the nature of credit guarantees and liquidity infusions into banks and other financial institutions in the sector rather than the economy itself. The lockdown has initiated a lowering of aggregate demand and thus, fiscal stimulus is the need of the hour. The government also claims that the stimulus package is around 10% of India’s GDP. However, financing it would be difficult as the government is worried about containing the fiscal deficit. 

For financing the stimulus package, the country’s foreign reserves are supposed to be at an all-time high which could be strategically used to finance its needs. The rest of the amount may have to be raised through privatization, taxation, loans and international aid.

Conclusion:

The reforms to the tariff policy essentially promotes consumer rights by creating penalties for the DISCOMs for load-shedding or any other deficiencies in service hence, reducing burden on the consumers i.e. the customers. This makes leaps and bounds in the field of consumer rights as it reduces deficiency in service which would normally result in various consumer complaints and cases filed before the court.

The competitive selection of the transmission project developers and offering of incentives to DISCOMs such as reduction in cross subsidies to promote participation in the industry thus reducing barriers to the entry into the industry meaning increased entrants to the industry promoting competition in the industry leading to higher efficiency. Enhancing products such as smart prepaid meters and ensuring timely payment to generation companies to ensure long term sufficient and sustainability of the sector and avoid downfall of the sector’s returns.

The privatization of the power distribution services in the Union territories would certainly provide higher man power and lesser time taken for decisions to be made about essential instruments of business such as efficiency and quality of service. What does privatization in these sectors mean for the management of these sectors? It means the implied sharing of power between the private and the public sector where the public sector provides the facilities and the private sector manages the services. This sharing of power turns a new leaf in the division of power for the public and private sector by giving the private sector a higher role.

Authors: Abinaya Sankaran from School of Law, Sastra Deemed to be University, Thanjavur and Prajwal V and School of Law, Christ (Deemed to be University), Bengaluru.

Editor: Anmol Mathur from Symbiosis Law School, NOIDA.

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