The paper comments upon the Draft Electricity Bill of 2001. Given than the reform of the power sector had made little headway, there is much concern that something needs to be done. Little progress has been made in the Bill, so that most of the comments made then remain valid. Essentially, the Bill is maimed because it is not clear enough, does not lay a path for reform and for the evolution of the sector, and in no way reduces the policy and regulatory uncertainties. While it attempts to bring about open access, that objective would not be realised since cross subsidies are loaded on to the transmission charge which has killed whatever little prospect there are for a market in power. The crucial role of transmission pricing is not recognised in the Bill and hence there is no specification regarding the mode of transmission pricing. The Bill also fails to recognize that cross-subsidies via differential prices will continue to keep open the "price-arbitrage" opportunity-the root of corruption and the source of all ills in the system- so that no real change would be possible. The Bill gives legal status to far too many "authorities" and bodies, some of them quite unnecessary and vestiges of the past. The coordination problems between these are likely to take the system (if ever what is envisaged materialises) far from the optimal. The special opportunity in inter-regional trade in power cannot be realised unless the law limits the barriers to interregional trade. Most importantly the Bill virtually rules out incentive regulation of the modern varieties such as price cap regulation. Through the sub-clauses it brings in cost plus regulation. Cost plus regulation has been particularly problematic in India, and can be expected to bring inefficiencies and cost padding, if not regulatory capture.

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