State electricity boards holding Railways to ransom
Though state electricity regulatory commissions (SERCs) were set up in each state to help fix the ailing sector by enforcing higher governance standards, bringing in competition and ensuring correct tariffs were charged, as their history shows, they have done precious little. As a result, not only have losses of state electricity boards (SEBs) ballooned—necessitating a bailout package with increasing regularity—the tariffs charged for paying customers have sky-rocketed. The fact that increasing electricity outages coexist with high levels of unutilised capacity—as reflected in power minister Piyush Goyal’s daily tweets—is symptomatic of the mess. While Goyal is trying to address the issue of high ATC losses by strengthening both transmission and distribution lines, the SERCs’ refusal to bring in competition through ‘open access’ has only made things worse—while the Electricity Act of 2003 had mandated this within a period of five years for large consumers (those with a sanctioned load of more than 1 MW), there are very few, if any, instances, of this. Since paying customers are the ones that move away with ‘open access’, the Electricity Act brought in the concept of an ‘open access surcharge’ to compensate the SEB for losing a good customer while allowing it to continue to service low-paying customers—over a period of time, to increase competition, the surcharge was to be reduced. What happened, however, was that when customers wanted open access, either the surcharge was so high that it made no sense to shift or they were told there was no capacity in the system to carry electricity to them from a different supplier.
In the case of the Railways, what is happening is worse. With a total fuel bill of R26,000 crore, of which R12,000 crore is for electricity, the Railways is very keen to buy electricity from suppliers who can sell at a lower price. Right now, the national carrier is paying around R2,500 crore by way of ‘open access surcharge’ to various SEBs. Under the Railways Act, however, the Railways is allowed to distribute and supply electricity and so, it argued it did not have to pay the surcharge—in an appeal to the Central Electricity Regulatory Commission (CERC), the Railways even cited a Supreme Court judgment which upheld this. In November 2015, CERC ruled that Railways was a deemed licensee under the Electricity Act—as such, it did not need to pay the surcharge. A few months later, in January 2016, when the power ministry notified its tariff policy, this clearly said the Railways would be exempt from the surcharge as it was a deemed licensee and was buying the electricity for its own consumption. Yet, as FE reported on Monday, SEBs such as those in Uttar Pradesh, Chhattisgarh, West Bengal and Odisha continue to levy a surcharge on the Railways and are delaying giving it a no-objection certificate (NoC) to allow it a waiver from this payment. Why an NoC should even be required, though, is not clear since once CERC and the tariff order has said the Railways is a deemed licensee, the SERCs just need to enforce the order. At some point, if the SERCs don’t enforce the law, the Railways will have no option but to go in appeal to the Aptel and, if need be, the Supreme Court.