Central cabinet have just approved Amendment to electricity Act, 2003 which aims to allow competition in power distribution. Right now power market for end consumer is a monopoly in which state Govt decides who will provide electricity in which areas. Everybody knows that such a monopolized market can not be efficient market. current amendment to the electricity act envisioned more than one power supplier competing against each others to provide better services. This is to be done by separating infrastructure owner from the power distributor. So Power lines and poles will be owned by a separate company which will charge the distributor for its infrastructure. I had proposed a similar arrangement earlier for water in Delhi. this kind of arrangement will allow 2-3 players targeting same set of consumers for supplying electricity. They will have differential services and prices. Customer will be free to choose the service provider and will probably make rational decision based on service quality and tariff.
This will be one of the bigger reform measure by Modi Govt. This will not only improve the services for customers but will go long way to improve condition of State discoms as they will now have to compete in market and competing in the market will not be possible unless they cut down power theft (euphemistically called as T&D losses) Probably state Govt. will shun the practice of providing power for free or at subsidy to politically powerful lobbies like farmers etc.
If everything goes according to plan this act will pay way for better electricity conditions in India and will act as strong foundation for “Make In India”.
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