"Haryana Grants First Parallel Private Power Distribution Licence"
Discom
a distribution company that buys bulk electricity and supplies it to final consumers
Parallel licensing
allowing two or more companies to distribute electricity in the same geographical area
The Electricity Act, 2003 reorganised India's power sector. It separated generation, transmission and distribution into different functions. It created independent regulators. The Central Electricity Regulatory Commission works at the national level. The State Electricity Regulatory Commissions work in each state. These regulators fix tariffs without routine political interference. State governments kept only one power: they decide which consumers get subsidised power, such as farmers and households. They also pay for that subsidy. Distribution companies are called discoms. They sit at the last mile. They buy electricity in bulk and sell it to final consumers. Their financial health depends on tariffs that reflect real costs.
The Act's sixth proviso to Section 14 allows a regulator to grant a licence to a second distribution company. This second company can operate in an area already served by an existing one. The new entrant must meet prescribed conditions. This is called parallel licensing. It was tried nationally through the mid-1990s Mega Power Policy. Most states took the policy's incentives. But they did not actually allow private competition. Mumbai remains the only place where it has worked at scale. Tata Power, BEST and Adani Electricity compete in overlapping areas. They have done this for nearly two decades. Haryana's new licence to a private company is only the second real instance of this model in India.
The Haryana Electricity Regulatory Commission (HERC) has given a 25-year licence to a private firm. This firm will distribute power in Gurugram and Nuh. These districts are currently served by a state-owned discom. The firm must build its own distribution network. It cannot use the existing one. This mirrors how Tata Power and Adani Electricity each maintain separate wires in Mumbai.
Parallel licensing is meant to give consumers a choice of supplier. It should push incumbent discoms to improve service through competition. Multiple telecom operators compete for the same customers in a similar way. In theory, this should raise efficiency and customer service over time. In practice, it introduces a major cost problem. Both licensees must build and maintain separate wires, transformers and substations. They serve the same geography. This duplicates capital investment instead of sharing one network efficiently. Consumers are split between two companies. Each company must recover its network costs from a smaller customer base. This can push up the cost of delivering electricity for everyone.
A second structural problem makes this worse. Discom costs are mostly fixed, but discom revenue is mostly variable. A discom's expenses stay largely the same regardless of how much electricity is sold. …
Consider the following statements regarding electricity distribution in India:
1.The Electricity Act, 2003 permits more than one distribution licensee to operate in the same geographical area.
2.Mumbai has had multiple competing distribution licensees for nearly two decades.
3.The Appellate Tribunal for Electricity hears appeals against State Electricity Regulatory Commission orders.
How many of the above statements are correct?
The sixth proviso to which Section of the Electricity Act, 2003 empowers regulatory commissions to grant parallel distribution licences in the same area?
Match the following entities with their role in India's electricity distribution sector:
1.State Electricity Regulatory Commission
2.Appellate Tribunal for Electricity
3.Central Electricity Authority
4.Discom
A.Hears appeals against regulatory orders
B.Fixes tariffs and grants licences
C.Supplies electricity to final consumers
D.Compiles technical and financial data on the power sector
With reference to discom finances in India, which of the following is correct regarding the cost-revenue structure described by the Central Electricity Authority?
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