PERSPECTIVE: CURRENT AFFAIRS 2022

Electricity (Amendment) Bill, 2022

Context → The Union Power Ministry introduced the Electricity (Amendment) Bill, 2022 in
Lok Sabha on August 8. The Bill amends the Electricity Act, 2003. Due to objections from
opposition parties, Samyukt Kisan Morcha (SKM) and trade unions, the bill was referred to
the parliamentary standing committee on energy for wider consultation with stakeholders.

Background →
⇒ Electricity is one of the most critical components of infrastructure which is essential
for sustained growth of the economy of the country.
⇒ While India has made significant improvements in the electricity generation and
transmission segments, the distribution segment is beset with problems of
operational inefficiencies, liquidity, and financial solvency. The distribution sector
continues to be the weakest link in India’s electricity value chain
⇒ The power sector has been reeling under the pressure due to the poor financial
health of power distribution companies (discoms), who together owe over Rs 1 lakh
crore to power generation companies, who in turn have mounting dues with Coal
India Ltd. The entire supply chain in the power sector has been stretched due to
payment related issues.
⇒ In March-April 2022, parts of India faced power outages and there was a sudden
spike in power demand due to heatwaves and pick up in demand from industry and
households as Covid related concerns eased, even as coal supply dwindled at power
plants as Coal India was not able to scale up production to match demand
⇒ It has become necessary to strengthen the regulatory mechanism, an adjudicatory
mechanism in the Electricity Act, 2003 and to bring administrative reforms through
improved corporate governance of distribution licensees
⇒ The amendments to the Electricity Act, 2003 are necessary in view of the importance
of green energy for our environment in the context of global climate change concerns
and our international commitments to increase the share of renewable energy
⇒ The continuing as well as new challenges of sustainability of the power sector,
contract enforcement, payment security mechanism, energy transition and the need
to provide choice (of multiple service providers) to consumers in order to promote
competition and the like, it has become necessary to make certain amendments in
the Electricity Act.
⇒ In this backdrop, the bill aims to streamline the payment framework, empower
regulators and encourage competition in the sector.

Salient Features of the Electricity (Amendment) Bill, 2022

⇒ The Bill seeks to amend Section 42 of the Electricity Act to facilitate non-
discriminatory open access to the distribution network of a distribution licensee. If it is
passed and becomes a law, it would, thus, provide customers the option to choose
their electricity supplier, just like one can choose their providers for telephone, mobile
and internet services. Thus, more than one power distributor can operate in an area
and they will be allowed to use the power distribution infrastructure of other suppliers.
This is aimed at boosting competition and giving more choice to the consumers.
⇒ The legislation also seeks to amend Section 14 of the Act to facilitate the usage of
distribution networks by all licensees under provisions of non-discriminatory open
access with the objective of enabling competition, enhancing the efficiency of
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distribution licensees for improving services and ensuring the sustainability of the
power sector. This provision would allow discoms (distribution companies) to use the
power distribution network of other licensees.
⇒ The bill seeks to amend Sec 62 to provide for “mandatory” fixing of minimum as well
as maximum tariff ceilings by the “appropriate commission” to avoid predatory pricing
by power distribution companies and to protect consumers.
⇒ If the regulator does not approve or reject the power distribution license application of
an entity within the prescribed period (90 days), the applicant will be deemed to have
been granted the license. This is aimed to reduce inordinate delays that plague the
system right now.
⇒ Formation Of Apex Body: It also called for the establishment of the National Load
Despatch Centre (NLDC), an apex body that will ensure the integrated operation of
the power system in the country. It would also monitor grid operations and ensure
security of the electricity grid and give directions as necessary to the Regional Load
Despatch Centre or the State Load Despatch Centre, accordingly, among other
things
⇒ Payment security: The Bill provides that electricity will not be scheduled or
despatched if adequate payment security is not provided by the discom. The central
government may prescribe rules regarding payment security.
⇒ Renewable purchase obligation: The Act empowers SERCs to specify renewable
purchase obligations (RPO) for discoms. RPO refers to the mandate to procure a
certain percentage of electricity from renewable sources. The Bill adds that RPO
should not be below a minimum percentage prescribed by the central government.
Failure to meet RPO will be punishable with a penalty between 25 paise and 50
paise per kilowatt of the shortfall.
⇒ Selection committee for SERCs: Under the Act, the Chairperson of the Central
Electricity Authority or the Chairperson of the CERC is one of the members of the
selection committee to recommend appointments to the SERCs. Under the Bill,
instead of this person, the central government will nominate a member to the
selection committee. The nominee should not be below the rank of Additional
Secretary to the central government.
⇒ Composition of Commissions and APTEL: The Bill increases the number of
members (including the chairperson) in SERCs from three to four. Further, at least
one member in both the CERC and SERCs must be from law background. Under
the Act, Appellate Tribunal for Electricity (APTEL) consists of a chairperson and three
other members. The Bill instead provides that the APTEL will have three or more
members, as may be prescribed by the central government.

Criticism of the Electricity (Amendment) Bill, 2022

⇒ All India Power Engineers Federation (AIPEF) → it will end all subsidies to power
consumers, which would affect commoners especially farmers and the downtrodden.
⇒ There is a provision in the Electricity (Amendment) Bill 2022 that licences will be
given to more than one distribution companies in the same area. New distribution
companies from the private sector will supply electricity using the public sector
network. It has been pointed out that maintaining the distribution network will be the
responsibility of government companies. In this way private companies will earn profit
by paying only some wheeling charges. As a result, government companies may
become financially insolvent.
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⇒ Multiple distribution licensees may lead to a situation similar to the telecom sector
where monopoly companies will destroy the public sector and smaller companies.
⇒ The provision to encourage competition may lead to more entities entering lucrative
and urban areas, while loss-making areas may continue to be underserved.
⇒ Some segments of employees of the power sector believe that this is an attempt to
privatize the distribution sector and will adversely affect the employees.
⇒ There are concerns that the amendments will give more power to the centre on
appointment and removal of members of regulatory bodies, thereby reducing the role
of the state.
⇒ If the center dictates the minimum level of Renewable Purchase Obligation for states,
the latter’s powers are reduced.

Way Forward
⇒ Being a subject of Concurrent List of Indian Constitution, recommendations from
states should be taken into consideration for effective implementation of the
provisions of the bill.
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Open Network For Digital Commerce (ONDC)

Context: US firm Microsoft has become the first big tech company to join the Open Network
for Digital Commerce (ONDC). Recently, government launched pilot phase of ONDC in five
cities.
An advisory council has been constituted to advise the Government on measures needed to
design and accelerate adoption of ONDC

Digital Commerce in India

⇒ India’s digital commerce industry has evolved and picked up significant momentum
during the past few years which was further accelerated by compulsions on account
of COVID-19
⇒ India has the third-largest online shopper base globally, with 14 crore e-retail
shoppers in 2020, only behind China and the US
⇒ However, the COVID-19 pandemic exposed the critical shortcomings of the Indian
digital commerce ecosystem when most parts of the retail chain were found to be
digitally absent and there was a complete breakdown of the supply chain. Around 1.2
crore Kiranas (hyperlocal neighborhood provision stores) account for 80% of the
retail sector in India, with 90% of them being unorganized, or self-organized and
most of them digitally excluded. As of September 2020, India is estimated to have
4.25 crore Micro, Small and Medium Enterprises (MSMEs) that have the potential to
flourish with innovative sales and marketing efforts but are not part of this digital
revolution. Even on the consumer side, only a small portion (~20%) of the internet
users in India are online shoppers
⇒ Limitations are further evident from the share of digital commerce in the overall retail
segment in India. The Gross Merchandising Value (GMV) for the digital commerce
retail market in India was ₹2.85 Lakh Crores (US$ 38 billion) in 20208, which is only
4.3% of the total retail GMV in India and well below the e-retail penetration in
countries like China (25%), South Korea (26%), and UK (23%)9. By 2026, digital
commerce in the retail sector in India is expected to grow to ₹15 Lakh Crores (US$
200 billion)

Bottlenecks of the existing digital commerce ecosystem

⇒ Digital Monopoly - The e-commerce market in India exhibits a clear pattern of
concentration, where few e-marketplace giants hold control over a large part of the
market, making them indispensable for sellers/business users seeking access to
such e-marketplaces’ sizeable online consumer bases. It limits the competition as
new platforms may not emerge as huge investment is required
⇒ Platform becomes supreme. The small and medium businesses lose the choice and
freedom of participation at their own will or terms. Issues such as anti-competitive
and unfair trade practices such as deep discounting, self-preferencing of private
labels owned by platform operators, and opacity regarding search rankings, reviews
and usage of data
⇒ Difficulty for sellers to migrate to new platform due to problem of portability of trust.
⇒ In the present digital marketplace model of commerce, if the sellers wish to be in
multiple platforms, they are required by the platforms to maintain separate
infrastructure and processes, adding to their cost which also limits participation. Each
platform will have its own terms & conditions that limit the flexibility of the sellers and
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with such limited flexibility, the extent and diversity of participation could be
constrained. Further, the buyer and seller need to be on the same platform to
discover each other. Such lacunae lead to limiting the choice & discoverability within
the fragmented collection of platforms.

Realizing the potential of digital space, the Government of India has launched the Open
Network For Digital Commerce (ONDC) as a prospective alternative to dominant global
giants (like Amazon and Walmart) in its fast-growing e-commerce market

Open Network for Digital Commerce (ONDC)

⇒ It is an initiative of Department of Promotion of industry and Trade (DPIIT)
⇒ It is aimed at promoting open networks for all aspects of exchange of goods and
services over digital or electronic networks
⇒ ONDC is to be based on open-sourced methodology, using open specifications and
open network protocols independent of any specific platform
⇒ It goes beyond the current platform centric model to open network based on open
protocol
⇒ It is a neutral platform that will set protocols for cataloging, vendor match, and price
discovery on an open source basis
⇒ ONDC is being set up with the following objectives:
→ Promote interoperability to create an open, inclusive, and competitive
marketplace
→ Be an enabler with minimal public digital infrastructure
→ Be scale efficient and build for population-scale adoption
→ Make digital commerce, small-business friendly
→ Pave the way to unlock innovation for reimagining digital commerce
→ Ensure rapid digitalization of MSMEs and consumers
⇒ ONDC is based on three foundational pillars
→ Open Network
i. Scaling and innovating on Open Protocolsthat have already been
tested and have established a proof-of-concept
ii. Using Open-Source APIs to spur community-based engagement for
iii. faster innovation and adoption
iv. A decentralized innovative model that encourages open collaboration
v. and interoperability
→ Public Digital Infrastructure
i. Low-cost digital infrastructure which is scale ready for billions
ii. A public good by design where buyers and sellers are mutually
discover- able for digital commerce transactions
→ Open Ecosystem
i. Integrated community of innovators that share knowledge to create
new resources and opportunities for the benefit of all.
ii. Voluntary adoption and community-led development, with ONDC
work- ing as an enabler

Significance of ONDC
⇒ Eliminating Platform Monopolies: paradigm shift from an operator-driven monolithic
platform-centric model, to a facilitator-driven, interoperable decentralized network.
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Further, it will limit opportunities for some selected sellers to receive preferential
treatment. It will also help to end predatory pricing, especially in high-margin, high-
value products. Will create a more competitive market.
⇒ Accessibility and inclusivity for sellers, especially small and medium enterprises, as
well as local business: ONDC would enable small businesses to use any ONDC-
compatible applications instead of being governed by specific platform-centric
policies. Enabling autonomy of buyers and sellers
⇒ Reduced operational costs to sellers: Rather than registering on different platform,
small businesses can use any ONDC-compatible applications
⇒ ONDC is expected to make e-Commerce more inclusive and accessible for
consumers: Consumers can potentially discover any seller, product or service by
using any compatible application or platform, thus increasing freedom of choice for
consumers. It will enable the consumers to match demand with the nearest available
supply. This would also give consumers the liberty to choose their preferred local
businesses.
⇒ Standardisation of Operations: ONDC standardises the protocols so sellers would not
have to follow separate lists of mandates from every platform they join. ONDC would
standardise operations such cataloguing, inventory management, order
management, and order fulfilment.
⇒ Improved efficiency in logistics: ONDC will be connecting logistics on the same
network so both sellers and buyers can keep track of the order and delivery
irrespective of the particular platform they are using

Challenges of ONDC
⇒ Likelihood of the successful onboarding of the existing digital commerce apps and
platforms on ONDC: Large e-commerce companies have protested because they
have already made substantial investments in R&D and the deployment of their own
processes and technologies
⇒ The local business will find it extremely challenging to compete with the discounts,
sale and other lucrative offers, being offered by prominent e-commerce players which
may result in local business being squeezed out of the network in the long run.
⇒ the technical capability of small and medium enterprises to be onboarded on the
digital network
⇒ Lack of clarity on Grievance Redressal responsibilities: Issues regarding liability on
the network in case consumer faced issues regarding transactions, delivery of
substandard products and service
⇒ Existing Data Privacy Concern remains: ONDC will manage vast quantities of highly
sensitive personal and commercial data, making data security an absolute necessity.

Way Forward
ONDC provides a technological platform to fulfil India’s aspirations to become a middle-
income economy that is digitally savvy and wired. It offers a vital global template for the
harnessing of technology for and as a public good at population scale in an inclusive and
equitable way.
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Cryptocurrency: Significance and challenges

Context: The Reserve Bank of India (RBI) has recommended to central government to ban
cryptocurrencies citing ‘destabilising effects’ for the country’s monetary and fiscal health

Cryptocurrency:
⇒ Virtual currencies: Virtual currency is a digitally tradable form of value, which can be
used as a medium of exchange or acts as a store of value or a unit of account. It
does not have the status of a legal tender. A legal tender is guaranteed by the
central government and all parties are legally bound to accept it as a mode of
payment.
⇒ Cryptocurrency is a specific type of virtual currency, which is decentralised and
protected by cryptographic encryption techniques. Decentralisation implies that there
is no central authority where records of transactions are maintained. Instead,
transaction data is recorded and shared across multiple distributor networks, through
independent computers. This technology is known as Distributed Ledger
Technology.
⇒ Examples of cryptocurrency → bitcoin, ethereum, ripple, litecoin etc
⇒ The genesis of cryptocurrency can be traced back to the Global Financial Crisis of
2008. The crisis highlighted the weaknesses of the monetary system and created
skepticism over central banks monopoly over issuance of currency. As a result,
cryptocurrency was envisaged as an idea to break this monopoly and empower all
sections of economic participants.

Significance:
⇒ Eliminating the middleman and thus Transaction costs of cryptocurrencies are much
lower than fees levied by most banks.
⇒ Reducing the need of huge paperwork needed in Mortgage loan application;
complying with KYC norms
⇒ Cross border fund transfer becomes cheaper and faster.
⇒ Financial Inclusion: Because users are able to send and receive bitcoins with only a
smartphone or computer, Bitcoin is theoretically available to populations of users
without access to traditional banking systems, credit cards, and other methods of
payment.

Challenges
⇒ Threat to financial stability of the country
a. There is no intrinsic value in cryptocurrency. There is no basis for valuation of
cryptocurrencies. Since valuation is largely based on beliefs, and not on
underlying value, it is bound to have a destabilizing effect on monetary
stability of a country through large-scale wealth loss to investors due to their
high volatile nature
b. The worry is that individuals may borrow either all their credit cards or as
personal loans and invest in cryptocurrencies. If they go down very sharply,
those banks will be faced with NPAs if they crash.
⇒ Dollarisation of economy: Rupee is supplanted in financial transaction as almost all
cryptocurrencies in India is dollar denominated and issued by foreign private entities
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⇒ It will seriously undermine the RBI's capacity to determine monetary policy and
regulate the monetary system of the country. With loss of traction for monetary
policy, the ability to control inflation would be materially weakened
⇒ If people start to hold at least a part of their deposits in cryptocurrencies
denominated in dollar, the banking system’s ability to mobilise deposits in Rupees,
and consequently, the ability to create credit, would diminished
⇒ Cryptocurrencies can be used anonymously to conduct transactions between
account holders worldwide. The fact that they are anonymous, decentralized systems
that operate purely virtually makes cryptocurrencies particularly attractive to
illegal/illegitimate transactions which have been largely filtered out of the formal
financial system. Total crimes using cryptocurrencies in 2021 was estimated to be
$14 billion (Wall Street Journal, January 06, 2022).
⇒ The socially wasteful energy use of crypto infrastructure has been a subject of
widespread discussion. About 900 new bitcoin a day require electricity worth $45m a
day. By some estimates electricity use of bitcoins equaled that of the entire country of
Switzerland, in 2019

Way Forward
⇒ Working towards global consensus on legal framework and regulations of
cryptocurrencies
⇒ Early introduction of CBDC
⇒ Maintaining international collaboration for financial stability