Cross subsidies, states’ opposition roadblocks in govt road map for delicensing power distribution

THE GOVERNMENT’S proposal to delicense power distribution is likely to face significant implementation hurdles due to issues around cross subsidies, allocation of network costs, and potential opposition from states, according to experts.

The Electricity (Amendment) Bill, 2021, which proposes delicensing power distribution to bring in competition and reduce losses in the sector is currently being reviewed by the Union Cabinet. The Bill, which was initially set to be introduced in the Monsoon session of Parliament, faced opposition from a number of states, including West Bengal and Kerala. “Issues such as allocation of costs of legacy PPAs (power purchase agreements), the methodology for cross subsidy and the allocation of network tariff costs will likely cause implementation challenges,” said Anish De, partner and national head-energy, natural resources and chemicals, KPMG in India.