1. States Raising Concerns on Electricity Amendment Bill, 2021
Syllabus: Mains – GS Paper II – Polity & Governance
Sub Theme: Electricity Amendment Bill, 2021 | De-licensing power distribution | UPSC
Union Government has introduced Electricity Amendment Bill, 2021, which seeks to de-license power distribution and also provides for other amendments in the Electricity Act, 2003. However, members from the opposition and state governments have raised objections to certain amendments proposed in the Draft Amendment Bill.
Reasons to Amend Electricity Act, 2003
- Mounting Losses for State DISCOMs – Distribution of electricity across the country by distribution companies (which are mostly state owned) has remained one of the key areas of concern due to their mounting losses. At the end of June 2021, the DISCOMs owed over Rs. 90,000 crores to power producers. Thirty-six out of 56 DISCOMs reported aggregate losses of around Rs. 32,900 crores as on March 31, 2020.
- Limitation of UDAY Scheme – The government has brought out a number of schemes to restructure the outstanding debts of DISCOMs while incentivizing them to reduce losses. However, such schemes have only brought short term financial space for DISCOMs which have tended to continue to accumulate losses and debts post restructuring schemes such as the UDAY scheme launched by the government in 2015.
|Union Government launched Ujjwal DISCOM Assurance Yojana (UDAY) which was approved by Union Cabinet on 5th November, 2015. The scheme envisages:
• Financial Turnaround
• Operational improvement
• Reduction of cost of generation of power
• Development of Renewable Energy
• Energy efficiency & conservation
- Lack of Infrastructure Upgradation – Mounting losses for DISCOMs has not allowed them the window for more investment to upgrade distribution infrastructure. This results in non-installation of power meters at many places resulting in electricity theft.
- DISCOMS trapped in Vicious Cycle of Debt Repayment – Any infrastructural investment needs to be done at the cost of high market borrowing and this results in DISCOMS getting trapped in the vicious cycle of debt non repayment, resulting in increasing arrears to be paid.
Impact of Subsidies on Power Sector
- Political Populism in power sector – eg: providing free electricity to farmers, households • Results in Higher Tariffs for Industries through cross subsidy
- Affects Manufacturing Sector – Higher Electricity Tariffs
- Lowers Profit for DISCOMs – non-payment of electricity bills
- Higher Aggregate Technical and Commercial Losses – Overall Results in poor infrastructural maintenance • Leads to Higher NPAs for DISCOMs
- Delay in Payment to Power Generating Companies
All these Concerns are addressed in the Electricity Amendment Bill, 2021
- The amendments seek to de-license power distribution, allowing private sector players to enter the sector and compete with state-owned power distribution companies (DISCOMs).
- Increase investment by private players
- Increase Competition in the market
- Improve service delivery, efficiency and quality of electricity distribution
- Adds flexibility and allows choice to consumers
- Lead to Price Stabilization for electricity rates
- The Bill proposes: Direct Benefit Transfer of subsidies, Reduction of Cross Subsidies, Role for distribution sub-licensees with regulators’ nod And Adoption of a national Renewable Energy Policy
- The Bill provides for the constitution of the Electricity Contract Enforcement Authority (ECEA) to adjudicate upon contract-related disputes in the electricity sector.
- The Bill also proposes that a selection committee will be constituted to select the chairperson and members of the Appellate Tribunal (APTEL), the central and state regulatory commissions (CERC, SERCs) and the ECEA.
Grounds on which Concerns are Raised
- Private players can pick and choose their area to distribute power thereby providing power only to commercial and industrial consumers leaving aside rural and poor areas.
- Such cherry picking of remunerative areas by the private players will leave it to the State DISCOMs to serve social sector obligations and rural areas.
- This will further increase losses for State DISCOMs.
- The objective of providing choices to the consumers would “end up in profiteering” by new service providers through tariff hikes.
- Higher penalties for failure to meet Renewable energy Purchase Obligations (RPOs). RPO is the obligation mandated by State Electricity Regulatory Commission to purchase minimum level of renewable energy out of the total consumption by the Obligated Entity.
- Purchase Obligations cannot be segregated for hydropower as it is based on seasonal monsoons.
According to minutes of a meeting held between the Power Ministry and state governments, Union Power Minister R K Singh has assured states that the minimum area to be covered by private sector competitors would be defined in a manner to include an urban rural mix, a universal service obligation and elements of cross-subsidy in the ceiling tariff.
2. Are Oil Bonds to be Blamed for High Oil Prices?
UPSC Syllabus: Mains: GS-III: Economy
Sub Theme: Oil bonds | UPSC
The Indian Economy is facing higher rate of Inflation both in terms of WPI as well as CPI. One of the main reasons for the higher inflation has been attributed to higher taxes on Petrol and Diesel. Accordingly, several economists have recommended that the Government should reduce the taxes on petroleum products to bring down rate of inflation. However, the Government has argued that it needs to mobilize tax revenue on the petroleum products to pay for the oil bonds which were issued by the earlier UPA government. The Government argues this debt obligation on the repayment of oil bonds prevents it from reducing the tax rates on petrol and diesel.
Administered Price Mechanism under UPA Government
- When the UPA government was in power, it followed the Administered Price Mechanism (APM) for petrol and diesel. Under this mechanism, the prices of petrol and diesel were not linked to the market. Rather, the Government used to provide subsidy on petrol and diesel.
- Hence, the Oil marketing companies (OMCs) were required to sell petrol and diesel in the domestic market below the price at which they might have imported it from other countries. This loss incurred by the Oil marketing companies was referred to as under-recoveries. The under-recoveries were supposed to be compensated by the Government by transferring the subsidy amount directly to the OMCs.
- The transfer of huge subsidy amount to the OMCs on an annual basis would have led to increase in fiscal deficit of the Government.
- Hence, to keep fiscal deficit under control, the UPA Government issued oil bonds worth Rs 1.4 lakh crores between 2005-2010.
Features of Oil Bonds:
- Long term special G-Secs with maturity period ranging from 15-20 years.
- Non-SLR Status (Oil Bonds cannot be considered as G-Secs for the calculation of SLR)
- Rate of Interest on Oil Bonds (6.5%-8.3%) marginally higher than normal G-Secs.
- Not considered to be part of Fiscal deficit. But the outstanding liabilities on the Oil Bonds form part of Public Debt.
- In the year 2010, the petrol prices were deregulated by the UPA Government. (Later, the NDA Government deregulated the diesel prices in 2014.) Since 2010, the practice of issuing oil Bonds has been put to an end. • But now, the problem has arisen over the debt obligation and interest payments on the oil bonds. As of 31st March 2021, there was Rs 1.30 lakh crore in outstanding principal and Rs 37,000 crore in interest yet to be repaid on these oil bonds.
|Government’s argument||Counter Argument|
|• The Central taxes comes to be around Rs 32.9||• Revenue earned through higher taxes >>> Debt|
Date: 22-Aug-2021 DNS Notes – Revision
|per litre of petrol and Rs 31.8 per litre of
• So, out of every Rs 100 which you spend on 1 litre of petrol, Rs 32 goes to centre in the form of taxes.
• Need to maintain higher tax rates on petrol and diesel to pay for the oil bonds.
|obligations on oil bonds.
• For example, in 2020-21, the Centre’s tax revenue on petrol and diesel is estimated to be at Rs 3.7 lakh crores in comparison to debt
obligation of Rs 1.3 lakh crores on oil bonds. • So, the government’s argument that it needs to impose higher taxes due to oil bonds does not seem valid.
3. Airports Economic Regulatory Authority of India (Amendment) Bill, 2021
UPSC Syllabus: Mains: GS-III: Economy
Sub Theme: Airports Economic Regulatory Authority of India (Amendment) Bill, 2021 | UPSC
The Airports Economic Regulatory Authority of India (Amendment) Bill, 2021 was introduced in Lok and it seeks to amend the Airports Economic Regulatory Authority of India Act, 2008. The 2008 Act established the Airport Economic Regulatory Authority (AERA). AERA regulates tariffs and other charges (such as airport development fees) for aeronautical services rendered at major airports in India. The 2008 Act provides for the establishment of an Airports Economic Regulatory Authority to regulate tariff and other charges for the aeronautical services rendered at airports and to monitor performance standards of airports.
The Amendment changes the definition if “Major Airport” – Major Airport means any airport which has, or is designated to have, annual passenger throughput in excess of 2 [three and a half million] or any other airport or a group of airport as the Central Government may, by notification, specify as such.
Objective of the Amendment
- The airports, where currently the traffic potential is low and loss making are not expected to attract reasonable competitive bids.
- Developing more number of airports through public-private partnership mode would expand air connectivity to relatively remote and far-flung areas.
- This approach would develop not only the high traffic volume profitable airports but also the low traffic volume non-profitable airports.
- Therefore, the Government has decided to club or pair airports having profitable and non-profitable airports which could be offered in public-private partnership mode as a package to the prospective bidders.
How will the Amendment Help?
- The Airports Authority of India (AAI) awarded six airports — Lucknow, Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram and Guwahati for operations, management and development in public-private partnership mode in February 2019.
- Later that year, the AAI Board, in its 190th meeting held on September 5, approved leasing of another six airports Bhubaneswar, Varanasi, Amritsar, Raipur, Indore and Tiruchi for undertaking operations, management and development in public-private partnership mode.
- The Ministry of Civil Aviation plans to club each of these airports with nearby smaller airports for joint development.
- The move follows Finance Minister Nirmala Sitharaman’s Budget Speech this year, in which she said the government planned to monetise airports in tier-2 and tier-3 cities.
- Lack of clarity regarding the criterion for clubbing airports together.
- Government will also have to ensure that a monopoly situation is not created in the airport operating business while awarding a group of airports to the same entity.
- Growth of smaller airports will also depend on growth prospects, economic activity or tourist attractions for the non-profitable airports.
4. Survival Skills of the Swamp Deer (Magazine)
UPSC Syllabus: Mains: GS-III: Environment & Ecology
Sub Theme: Swamp Deer | UPSC
- Kanha National Park is nestled in the Maikal range of Satpuras in Madhya Pradesh, the heart of India that forms the central Indian highlands.
- It is one of the Tiger Reserves of India and the largest national park of the state of Madhya Pradesh. • This vivacious land has been the source of inspiration for Rudyard Kipling, a famous writer for his outstanding creation- “The Jungle Book”.
- The Kanha National Park is the ideal home for wide ranges of wild creatures; right from the mighty tigers to the most populated Barasingha, Indian leopard, sloth bear, dhole and the countless species of plants, birds, reptiles and insects. It is also the first tiger reserve in India to officially introduce a mascot, Bhoorsingh the Barasingha.
- The Swamp deer or Barasingha were once abundant throughout the tall wet grasslands of the North Indian Terai region, the Brahamaputra flood plains, and the Central Indian grasslands bordering sal (Shorea robusta) forests. • Currently, the swamp deer populations are confined to the States of Uttarakhand, Uttar Pradesh (duvauceli), Assam (ranjitsinhii) and Madhya Pradesh (branderi) in India. At present, the population estimates for the northwestern subspecies of swamp deer in India is about 1800-2400 individuals; for the northeastern subspecies is about 400- 500 individuals; and the central subspecies is about 300 – 350 individuals.
- Kanha Tiger Reserve has Hard-ground Barasingha species. The Swamp deer has declined over the years, as a result of loss of habitat and biotic pressures over much of its former range.
- The Swamp deer habitats are threatened due to change in river dynamics and human developmental activities, increase in siltation, weed invasion, and reduced flow of water during critical periods of summer. • Swamp deer is also threatened due to poaching for its meat, particularly the populations that occur outside PAs. o IUCN – VULNERABLE
o WILDLIFE PROTECTION ACT, 1972 – SCHEDULE – I