Why detaching power tariff from politics is an uphill task for states

Illustration by Binay Sinha
Could states finally be learning to detach power tariff from politics? 

There are two sets of competing data to pick on here. At least nine states do not have the full complement of three members in their electricity regulatory commissions. The task has got complicated as a Supreme Court order of April this year made it mandatory for each state commission to have at least one member with a judicial background in the three-member bodies.

The other data is that two of the poll-bound states, Chhattisgarh and Rajasthan have appointed a judicial member in the regulator. The third, Telangana, appointed a non-IAS energy sector expert as chairman. Are there incipient signs that the stranglehold on these bodies by the IAS officers and through them the political masters beginning to happen? The problem afflicts the Central Electricity Regulatory Commission too.

 
However, this may need raising the age of retirement for the members from the current 62 years, as Andhra Pradesh has secured through a presidential waiver.

In every state, the price at which electricity is sold by generation companies to farms, households or industry has to be approved by the regulatory commissions.

These commissions are three-member bodies, including the chairman and hold their posts for five years or 62 years, whichever is earlier. While the 30 state electricity regulatory commissions are supposed to make a balanced view of the stakeholders before approving the rates, political considerations mean most decide only with the approval of the state political executive.

This is the reason why most commissions take years to approve the rates. The rates for 2018-19 have not been decided for any state so far and delays often stretch to three years or more.

 
As the table shows, there are nine states where the posts of at least one member is vacant. According to the Supreme Court order, these posts have to be filled by a member who has “requisite qualifications to have been appointed as a judge of the high court or a district judge.” Till such a member is appointed, the commission, despite being a quasi judicial body, cannot sit in judgment on matters of adjudication. This means that if the regulator passes a tariff order which a generation company appeals against, the order cannot be heard by those commissions where there is no judicial member.

Of course, the debarment is prospective but since most orders are contested, those will remain dead letter till a judicial member is appointed.

 
It is not given though that the appointment of a judicial member would improve the quality of functioning of the regulator. Usha Ramachandra, professor and energy area chairperson at Administrative Staff College of India, says most of the work done by a regulator is built around economics and engineering.

 
She says there is a larger problem here. “A person who relinquishes the post of a judge in a high court or even district court is unlikely to accept a position under an IAS officer in the commission.” As the table shows, there are 12 state commissions headed by an IAS or state service officer but none have a judicial member except Chhattisgarh. Rajasthan and Delhi have got around it by appointing the judicial member as chairman. The only state which has brought in a member judicial as just a member is Chhattisgarh, which has appointed an advocate.

Incidentally, in earlier rulings, more than one state high court had insisted that the presiding officer of the commission be a retired judge. The Supreme Court has made it more flexible.

But this has set off other unintended consequences. In Andhra Pradesh, chairman of the state electricity regulatory commission Justice Bhavani Prasad obtained a presidential waiver to raise his retirement age to 70. Ramachandra agrees that to draw more judges to sit in the commissions, other states would demand similar waiver. Judges don’t necessarily offer better understanding of the sector, but it could trend, in the near future.

As Navroz Dubash, professor at Centre for Policy Research and coordinator of the Initiative on Climate, Energy, and Environment notes in his book Mapping Power, “The useful framework to understand India’s power sector is rooted in the political economy analysis of the sector.” 

Politics has determined who is appointed to the commissions, as his book shows. Some of that may have begun to change.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel