Energy Laws in India – Hunky Dory or Humpty Dumpty?
October 6, 2021
India has been a constant supplier of energy resources in the contemporary scenario. Still, the sector is shadowed in the absence of proper regulations to recognize the rights of government, public and private stakeholders. The Electricity Act, 2003 is the mother legislation regulating the energy sector in India. With the advent of renewable energy sources, the regulations seem loosened, sticking to the conventional forms of energy. Power is one of the inevitable infrastructures of all nations. India is the second populated, has a huge need for a power supply. To meet its need, India has a diverse energy source, from conventional coal, natural gas, oil, and hydro energy to solar and wind energy. In a study conducted by the World Bank, India was ranked 26th in electricity accessibility in 2017.
Sustainable Developmental Goals – The Harbinger of Clean and Renewable Energy
Goal 7 of the United Nations SDGs emphasized the importance of ensuring affordable, reliable, sustainable, and modern energy to all and abandoning the conventional energy sources by the year 2030. India being a signatory, has taken positive steps to attain this goal. The then Secretary-General of the United Nations, Ban Ki-moon, has said, “Energy is the golden thread that connects economic growth, social equity, and environmental sustainability. With access to energy, people can study, go to university, get a job, start a business – and reach their full potential.”
India is estimated as a key stakeholder in the global energy drive, about one-quarter of the total. However, as of the 2016 study of the United Nations, more than 207 million people in India do not have access to electricity. The figures might be depressing, but they have not gained much impetus in these past few years. The government’s National Solar Mission is playing an important role in the work towards renewable energy, and interventions in rural electrification and new ultra-mega power projects are moving India towards achieving universal energy access. India, under this project, has taken steps to secure equal access to sustainable energy services and enhanced international cooperation to pave this path. It has also acceded to expand infrastructure and technology to supply modern services. It also concentrates on reducing the transmission and distribution losses by effective channels.
Legislative Mechanism in the arena of Energy Laws
The energy sector in India does not have comprehensive legislation to define all different kinds of energy generation. The Electricity Act, 2003, incorporates the generation, transmission, distribution, and trading of electricity, including the tariff collection. The 2003 Act provides the electricity regulatory commissions at the central and state level to hear disputes and Appellate Tribunal for Electricity (APTEL) as the highest authority under the Act from where the second appeal lies to the Supreme Court.
Supreme Court in 2019 has cleared its stance with regard to appellate jurisdiction only in the rarest cases when there is a question of law present. However, a legal lacuna is found in the renewable sector, particularly pertaining to wind, solar sources, and natural gas. In the absence of a proper legislative rein over the natural gas sector, the executive branch of central government without a specific statute directly deals with the matters. The age-old pieces of law like the Oilfields (Regulation and Development) Act, 1948 and the Petroleum Act, 1934 make an abstract framework for these sources of energy. Liquefied petroleum gas is a conundrum of legal issues as it is unregulated in the present scenario and can be undertaken under the open general license regime.
The import of LNG and licensing is a dead-end in the Indian economy. No rules and guidelines are notified until a date inconsistent with other forms of energy. India also has a 100% automated route for the conventional and renewable power sector in Foreign Direct Investment. FDI in power exchanges under the central regulatory Commission (power market) regulations, 2010 is further restricted to 49% under the automatic route. In the natural gas and LNG sector, Indian consumption has shown a swift shift towards medium and short contracts rather than longer contracts. The year 2018- 2019 marked a glamourous position of India in its potential for distributed LNG projects.
The National Electricity Policy 2005 has pioneered a change in this loose energy sector to manage the energy resources. The NEP, 2005 paved the road for an institutional arrangement to achieve the objectives of inclusion through equitable distribution and accessibility of electricity, economic growth through the supply of quality power at a reasonable price, and private sector participation in ramping up capacity and efficiency. The present National Electricity Policy 2021 is a reflection of implementing the 2005 policy on the road to sustainability. The Samadhan Scheme and Shakthi scheme are reutterances of governments’ pathway in developing the energy sector.
The Electricity Act
Electricity Act, 2003 brought in revolutionary changes in the energy sector. One of the biggest reforms was the generation of power without licensing. Before this act came into force, there was no permission to generate power without licensing. It was mandatory to take a techno-economic clearance from the central electricity authority for the same. However, with the advent of the new law, Section 9 license was not mandatory and made transparent. Thus, it enhanced the role of private stakeholders in energy generation, transmission, and distribution. For the latter two activities, private parties need to take a license.
In India, about 40% of energy generation is contributed by the private sector. Another key attribute of EA 2003 is unbundling the state and center government’s role in energy generation, transmission, and distribution. Each state has its own model of regulations, as the act does not specify any particular unbundling track. The ministry has also taken steps to rationalize electricity charges after the implementation of the Electricity Act, 2003. The concept of power trading and open access in transmission and distribution was introduced in the Electricity Act 2003. Further, the 2014 amendments pointed to renewable energy in tune with SDGs.
The Conflict Conundrum
Electricity transmission and distribution are exempted from the purview of Goods and Services Tax.
State-wise registration by the power supply plants as electricity is a matter taken up in states, and each state government has its own regulations.
The taxability of renewable energy has been a grey area in the energy sector. Though electricity is an exempt supply under Goods and Service Tax, lawmakers differed in considering renewable sources outside the scope of GST.
Conflicts with Competition Law as Electricity Act provides a wide right to private parties to generate electricity and make them available to the public at the cheapest rate.
Non-metering of electricity in remote areas of the country.
Land related and environmental issues pertaining to power supply plant building
Challenging financial environment and policy paralysis in India
The slow pace of development in the energy sector with the added competition from private parties.
As a nation, we witness a conflicting scenario in the energy sector. On the one hand, we have been the third-largest producer of electricity worldwide but yet face the scarcity of electricity at various parts of the country and clinging to the conventional energy sources. Comprehensive legislation in the energy sector is the need of the hour, and government should have a superior authority in the energy sector. The monopoly right of the state has diluted and remained as an exemption only in atomic energy, but this dilution cannot be granted too far. Lack of coal supply, the inability of promoters to infuse the equity, and inordinate delays in regulatory orders and receivables from distribution companies deteriorated the energy sector.
The positive aspect, though, is that the tide seems to be slowly changing for the better. The power developers are starting to look beyond the perils, with the focus is shifting away from contracts with government-owned utilities to serving direct consumers. The government’s proposal to amend the Electricity Act, 2003, is still on paper but not in good momentum.
India has focused on renewable energy, the introduction of smart grids, more empowerment of state governments to divide the distribution and supply business, and reduction of cross-subsidy charges will provide a great impetus to this sector. The Indian Government’s plan to shift towards electric mobility by 2030 also adds to that hope. If sustainability is the end, then to achieve it, renewable resources are the means. Comprehensive participation is adequate to cope with the current plethora of laws.
Editor’s Note The author of this article talks about the Indian Energy laws. It talks about the sustainable development goals with particular reference to the position of India in it along with the current legislations present in the arena of energy law. The author also talks about the Electricity Act and its conflict. Finally, the author concludes that to achieve the sustainability goals, renewable sources are the means.