Chapter 5 : Conclusion and Suggestions

Since 1990s various reforms have been done to increase the private participation has been
started to increase the competition. The energy sector in India has also gone through
significant changes, however due to complexity of the sector and lacunas in existing and
enabling legislative framework it is not able to cater the need of its population. Therefore
detailed discussion on the issues of competition and regulation of this key sector of
economy is need of hour. In India, where there is the politically sensitivity, so it may
take some time to grow for effective policies in the in energy sector. As in India the
demand for electricity is increasing day by day which requires huge investment also
demands better coordination between national grid and state electricity boards. Further
tariff structure in electricity sector has to grow in such a manner so that it may fulfill the
coming new challenges in the energy sector. Today‘s requirement is the to take a
paradigm shift from supply dominated approach to overall energy efficiency approach
which is needed to fulfill the energy demand. Hence in this regard Energy Conservation
Act is milestone which deals with conservation of energy as it is necessary that each
one of us is committed to use the energy in efficient way and not to waste it in the areas
related to industrial, agricultural , commercial or household433.

Competition in energy sector has huge potential if employed in an adequate and

controlled manner. Although the Indian electricity laws appears to have considered the
need importance of competition and market based structure. Though it has envisioned
provisions related to competition in all segments of the electricity value chain but
competition has not prospered very much anywhere except generation. Even competition
in the generation segment is half-hearted.

With regard to electricity sector legislative modifications has proposed major change
however substantial progress will take time to ensure the competition in energy sector.
Hence need is felt to develop and bring some legislative modification to increase
efficiency. It is significant that in the whole energy sector detailed view of competition
is yet to develop.

433
S L Rao Legal Summit: Issues in the Power & Energy Sectors ―The Power Sector And Competition
Law‖ (Indian Power Producers Association November 7, 8, 2008)

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Presently energy sector in India rotates around coal hence diversification of energy
sector is necessary to increase its industrial and economic growth and look after the
need of environmental consequences so it is essential that India should reduce its
dependence on fossil fuels and it should start its inclination towards non conventional
source of India as it emit less green house gases in comparison to conventional source of
energy . It is pertinent to note that India should start use of sustainable energy which
neither hampers its economic growth nor effect the environment . So India has to
frequently negotiate between reducing its carbon emission and sustained economic
growth. As a result, nuclear energy proves to be a feasible alternative as it has a grown
nuclear industry and India has developed nuclear technology over the years .Therefore
nuclear energy is a sustainable source of energy if it used in proper way and would
considerably reduce total carbon emissions in India 434.

Out of all energy sources available in the energy sector, nuclear energy having its
importance to meet the challenges of 21st century. As it is known that Nuclear energy
is very eco-efficient of all energy sources as it generate less pollution. It is significant
in generation of electricity after coal, hydro and thermal power and also increase the
development of the country. Over last 30 years in India the demand for electricity has
grown an average of 4 percent per annum and it is going to be high in years to come. It is
required to develop more nuclear power plants and to increase competition because cheap
and clean energy will help economic growth of the nation.

Presentably to fulfill its demand in energy sector India is deeply relying on electricity,
petroleum and oil .Although initial costs for setting up nuclear power plants is higher but
in long run output is cheaper. Hence nuclear energy in India is very significant in order
to secure economic development of country. As it known that energy services are very
important to raise the standard of human being .Therefore for fulfilling this objective

434
IDSA Task Force Report ,Development of Nuclear Energy Sector in India(2010) aviable at
https://idsa.in/system/files/book/book_NuclearEnergyIndia.pdf(last visited on Dec 2017)

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importance of nuclear energy cannot be forgotten .In the globalised international relations
nuclear energy is viable option for India to mitigate its energy deficiency435.

In previous chapters, discussion has been done on structure, legislative framework ,

international attempts to foster the energy efficiency in and various issues that obstruct
the competition in coal , electricity, oil and gas and renewable energy sector etc. It has
been observed competition is gaining its importance in almost all fields of infrastructure
which in return enhances the efficiency hence competition in energy sector will increase
efficiency which will solve the problem of shortage of energy supply. It will also fulfill
the growing investment demand as a result it will improve the quality of service as well.
As it is clear needs of one energy subsector depends on another energy subsector
therefore competition in one subsector will increase the efficiency and competition in
other energy subsector.

Presently there is important need of reforms in coal sector of India along with reforms
in other subsector of energy sector as it clear from discussion in previous chapters that
there are several problem in coal sector in the form of allocation of coal block , exclusive
minning inadequate data, in coal exploration bar on private sector participation, lack of
access to available data on extractable coal reserves, long delays in allotment of surface
rights and prefrontal treatment enjoyed by CIL .Hence these issues are contributing to
some of the noteworthy barriers for private players to entry into the coal exploration,
reconnaissance and mining .Though objective of nationalization was to increase the
productivity and stop unscientific mining, bring about better working conditions of
workers but it appears that purpose of nationalization could not fully achieved because of
consistent shortage of coal and worsening the quality of thermal coal 436.

Because increasing demand for coal and dependence on coal for power generation, the
sustained cooperative effort among government, coal miners and service providers are
needed to provide modern and sufficient infrastructure. The expansion of coal mines is

435
Varinder Kour and Shaheen Showkat Dar , ―Significance of Energy Security in 21st century with
reference to Nuclear Energy Scenario of India‖ IOSR-JHSS ,48(2013)
436
Supra note 11

184
required to lessen the dependence on imported coal and improve the domestic supply
and development.

Further in relation to transportation also there are freight rates which are set by
railways which another public sector monopoly and it also effect the major input for
energy production. Which in turn having implication on the competitiveness in energy
sector in India. At present, Ministry of Coal is not engaged in the price setting of coal as
prices of coal are being fixed by CIL hence in price negotiations the coal consumers do
not participate .Further there is not detailed law that govern the licensing and
operational setups of coal mining trading companies. Therefore there is need for setting
437
of independent regulator in coal sector in this regard . It becomes very important to
restructure the sector by abolishing the current policy biases that work against concept
of competition in the sector and there is need for strengthening regulatory and
enforcement mechanisms so that demand of coal in the country are met without
hindering environment and social sustainability. Hence in this way governance of the
438
coal sector becomes crucial

Although the government has started its effort to bring reforms in mineral sector.
MMDR Bill, 2011 which is having provision to address the major issues which are in the
form of concession systems in transparent form, sustainable development and to control
illegal mining by repealing MMDR, 1957. Further this is in consonance with National
Mineral Policy 2008 which provides for speedy application processing for award of
mineral concessions with rider of prior approval of central government required only in
case of coal and atomic minerals.

Though in petroleum sector there is some competition. It is amply clear that regulation
and governance play a crucial role in determining the trajectory of development in any
sector. On the whole, the oil and gas sector in India has evolved and performed well in
certain segments, especially the midstream refineries segment where participation and the

437
Supra note 13 , p 12
438
Supra note 148

185
level of competition have increased and the level of technology used in the sector has
also improved significantly.

With the growing economy the demand of energy is also increases hence dependence on
sources of energy also increases simultaneously. Therefore oil and gas sector cannot be
remained untouched .As it contributes to the economic development of the country. So
government has taken various initiatives to regulate this sector and reforms have also
been done to increase its productivity. But there are certain lacunas which are still
existing in energy sector that contributes to limit the competition in the market. One of
the major problem in oil and gas sector there is absence of independent regulator in
upstream segment and the regulatory body Director General of Hydrocarbons does not
have any legislative recognition hence decision given by it only advisory and
government is not obliged to follow them .So efforts should be done make it strengthen.
As a result of the same production activities , exploration and regulatory uncertainty
hampers the competition and acts as a barrier to new entrants. Oil and gas sector should
provide level playing field to all players to increase the competition. New investment in
any sector depends on the policy and institutional arrangements, it has to ensure fair
conditions are provided to the all players. Though policies in oil and gas sector have
come up with purpose of increasing the competition in this sector however the intensity
of competition changes in segments . There are some lacunas which still exists in this
sector which hinders the competition. Issues related to pricing of petroleum products has
also created a barricade in retail marketing segment. In this regard some reforms have
been done but these measures needs to reach at best results and efficiency .As we know
that fear about global warming has brought the consideration towards the requirement to
improve energy efficiency as a means of reducing fossil fuel use and carbon emissions.
As a result enhancing energy efficiency is very significant for developing countries,
such as China and India, whose dependence on energy intensive technologies to attain
economic growth is leading to rise in contribution to global carbon439

439
Madhu Khanna and David Zilberman ,Barriers to Energy-Efficiency in Electricity Generation in India,
The Energy Journal, Vol. 20, No. 1 (1999), at p 25

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The government of India is required to take sustained effort to enhance more competition
in the electricity sector . For this purpose it is necessary to implement provisions of
Electricity Act of 2003, the NEP and the National Tariff Policy which are aiming for
improving the competition and ultimately resulting into welfare of consumers . There is
lot of misinterpretation of such provisions by concerned departments which should be
avoided.

Though the concept of open access is must as per the electricity Act 2003 but various
government seeks the opinion of various authorities which as a consequence of that
creates ambiguity .Because of this reason it has hindered the open access while
developed countries like US and UK are implementing it very progressively . Section 11
of the Electricity Act 2003 should be properly implemented for the interest of the
consumer. Although the concept open access has been provided for by law yet a
conducive environment is yet to be created for consumers to choose their suppliers and
charges in relation to open access are extremely unappealing. The government of the
states are not doing the favorable treatment to open access customers of other states
towards the supply of power by denying open access to transmission lines by generators
of other states.

Although the Electricity Act was passed with the aim to promote competition yet
several issues that obstruct the progress. As it discussed in the previous chapter that the
electricity sector can be divided into four segments such as generation, transmission,
distribution and retail supply. The transmission and generation segment have
competition comparatively while on the other hand and retail supply distribution are
potentially have dominance . It provides major test for efficient competitive market .
The around 89% of total generation capacity owned by government while reaming is
hold by the private players . In early nineties power generation was liberalized, and
private investment was allowed but their share in generation capacity is very less as
insufficient supply of fuel also hinders the entry of private players hence restricting the
competition.

187
By the end of 2005-06 the center and state contributed to 87% of total generation
capacity. As return are not secured in electricity sector as non payment of dues etc,
which restricts the participation of private players in generation segment as well as if
continue to sell to State electricity board no financial institution would be happy to
lend the debt. While NTPC which is public sector undertaking enjoy the benefit of state
fund if the state is not able to pay dues.

The National Tariff Policy provides competitive bidding route in generation segment for
private generators, but it provided exception to PSU from same for 5 years which
ultimately hampers the interest of private players to compete.As worldwide the power
sector has gone thorough noteworthy changes paving the way for formation of a market
in the field of power and induction of competition in wholesale and retail trading of
power after recognizing the need of competition. Although the restructuring of power
sector has been done after reforms have been started but still dominance in supply sector
also persist though few has been privatized. As currently consumers are not having any
choice of supplier and they buy power from single monopoly utilities without. Due to
lack of competition the consumer are not getting quality power at reasonable rates as
there are single supplier in that particular area.

As renewable energy is suitable sources of energy but at present policies and

infrastructure are fit for fossil fuel resources not for renewable energy and system hence
it is required that more clear policies on renewable energy is develop. In India there
shortage of power supply to all and to bridge the chasm between demand and supply we
should generate more power. In India we are having huge resources of renewable energy
though its potential differs according to its sources which are existing in the form of
wind , bio , solar , hydro etc.

Because of inefficiency in renewable energy sector progress is not up to need of today‘s

demand though various policies and financing scheme have been started for promotion
of renewable energy there are various factor which are responsible for the same one of
them is lack of competition.

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Hence following suggestion which can improve the present situation and provide solution
to existing problem, are given below:

5.1 Suggestions In Coal Sector

It is harsh reality about reform in this sector that there is problem of not passing of
modification which are aiming towards liberalizing the coal sector for private player
participation. Hence in this regard following initiatives are required to be incorporated
to enhance competition and productivity in the coal sector in India440. Because of lack of
political will majority of the recommendations have not been implemented. It is observed
that various anti-competitive practices are exercised in the coal sector which is in turn
having adverse effect on economy . Though some efforts to reform the sector have
already been taken so there is a desire carry forward the same. Hence it is required that
following legislative and non legislative modifications are to be done-
 Institutions which are engaged in Coal mine and its development should be
provided level playing field to enhance competition among them.
 The suggestions and avenues which are permitted under existing legislation in
Coal Mines (Nationalisation) Amendment Bill, 2000,need to be resorted to so as
to increase the number of players in the sector which includes as following441:
 With regard to small end users group captive mines must be allowed
 These captive blocks which are allotted must be for certain period of time
and a penalty is to be imposed or the allotment should be stands cancelled if
it exceeds the time
 incidental coal surpluses must be allowed to sell by captive users;
 Industries in regard to captive user should be increased ;
 If in whose favour allotment has been done, is not taken important steps to bring
the allotted mines to production and then legal measures should be taken to
cancel the licenses issued earlier.
 In pursuance of the legislative framework provision must be amended to extend
the vesting of the land acquired to private players as well.

440
Supra note 11
441
Coal Mines (Nationalisation) Amendment Bill, 2000

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 To grant coal blocks impartially and transparently on the basis of auctions. As
we know that the pro-competitive implementation of the provision would also
depend of the scheme of auction, so it is also to be taken in to consideration by
the Ministry.
 All the data relevant to coal sector to be kept in the public domain and only such
data which is relevant for the work of CIL must be retained .
 The private sector must be invited participate in exploration and mine
development at their risk partly shared with the government on the lines of New
Exploration Licensing Policy followed in the oil sector. At present detailed coal
exploration is done exclusively by CMPDIL which is a subsidiary of CIL hence
CMPDIL must be made an autonomous organisation.
 Initiatives must be taken to ensure that CIL does not exploit its dominant position
in the coal sector hence role of competition advocacy to be increased.
 Prices of the coal is to be done on the basis of competitive bidding and freight
rates of railways for transport of coal need to be rationalised. Further alternative
modes with regard to movement of coal can be promoted such as coastal shipping,
river canal movement, movement of coal slurry through pipeline etc.
 There has to be setting up of coastal power plants coal through appropriate policy
initiatives and rail linkages to it need to be developed as necessary infrastructure
facility
 There is a need for a new and comprehensive governance structure for the coal
sector including a regulatory authority which can determine the price also.
 A clear policy needs to be adopted with procedural rules that incorporate strict
time lines for clearances which can provide an appropriate balance between
environment protection and energy security.
 The procedures regarding coal mining through captive mining need to accelerate
the allotment of the captive coal blocks in a transparent and effective manner.
 There should be restructuring the coal sector by inducting various players so it
can facilitate competition and reduce the dominance of one market player.
 There is need the independent regulator in coal sector. Hence there should be
independent regulator

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  Establishment of a single window clearance for coal mines.
 As at present only government can go for commercial sale therefore it is essential
to allow private players in this field
 It is also mandated that to revise procedure and eliminate various discriminatory
provisions which are there in existing legislative framework against the private
players442.
 It should also address the issue regarding securing of private investment in
coal sector.

Hence model law should contain following things-

It is essential that that law should define the reform objectives and make sure that
policies are in consonance with said objectives .Hence model law to be drafted by
keeping in mind the following things as given below:
 There should be provision regarding increasing numbers of players so that it can
efficiently work for competition.

 There should be sections regarding periodically keeping a close track on the

licenses issued for captive mining

 There should be provision regarding independent regulator

 In order to increase coal production various provision as discussed in previous

chapter which are discriminatory towards the private players should be removed
in model law.

 There should be provision in relation to securing private investment in the form

of coal block banking mechanism.

5.2 Suggestions in Oil and Gas sector

 Reforms are needs to aimed towards the deregulation of the prices and efficient
system in oil and gas sector

442
Supra note 13

191
  There seems to less coordination among between central and state government in
upstream , midstream and downstream , at present it has become necessary for
better growth .
 So equitable sharing of resources and transparent policies is need of hour.
Therefore state would play significant role in Public distribution scheme in
relation to kerosene and LPG More than that there is lack of public participation
in the decision making at the local levels. Hence this gap in relation to
communication between the operating companies and local communities affect
their opinion regarding the sector.443.
Hence Model Law should take following steps:
 Provisions should be there in model which contains provisions regarding
private participation
 There should be provisions regarding independent regulator
 There should be some incentives for secure investment for private players to
enhance their participation

5.3 Suggestions in Nuclear Energy Sector

The nuclear energy is crucial which has the ties with link with social , economic and
environmental development as the energy use will continue to grow, its health and
environmental impact will have to be controlled , alleviated or mitigated in order to
achieve sustainable development goal . The main challenge of sustainable
development in energy sector is to extend the benefits of energy services to the India
and to future generations, without undermining the essential life support system or the
carrying capacity of the environment . Hence following things are to be taken into
consideration while framing the model law -
 There should be provision in relation to increasing numbers of players so that it
can efficiently work for competition.

 There should be some mechanism thorough which fair prices can be determined.

443
Supra note 171

192
5.4 Suggestions in Renewable Energy Sector
 In renewable energy sector the procurement mechanisms require to be executed in
a such a way that ensures that resources are linked for use which make certain
that grid are stable.
 Procedure for fair price discovery requires to be established.
 To ensure grid stability , the LDC should be made accountable for procuring
ancillary services
 In renewable energy sector the procurement process should be similar to the usual
competitive bidding process as used by discoms for procuring energy.
 If there is proper execution of enforcement mechanisms to oversee its
compliance then only it can function efficiently hence for that matter nodal
agencies should do reporting of RPO to regulatory commissions
 As it is known that The Load Dispatch Centres are the major agencies in the
states for managing renewable and planning thereof . Hence It is necessary to
improve their technical capabilities in terms of setting up
 Further the financial budget allocation for MNRE has to be increased so
according may contribute to renewable energy
 There is need to clear the ambiguity which are existing in the renewable energy
sector and it should provide more transparancy444
 With regard to open access the regulators impose a pre fixed cess on such sales to
compensate the utilities for the loss of high-value customers , the cess is waived
off or is kept low to permit competition in some of state . For companies in
renewable energy sector , these markets offer an opportunity for sale at a higher
margin, and the end user gains from negotiated lower energy prices445.
The model law in renewable energy sector should take into consideration following
steps -
 There should be independent regulator for renewable energy sector
 Regulator should be given the responsibility of price regulation

444
Supra note 69
445
Renewable energy‘s transformation of the Indian electricity landscape available at
https://www.pwc.in/assets/pdfs/publications/2015/renewable-energys-transformation.pdf (last visited on
Jan.2018)

193
  Regulator should be made accountable to the parliament
 Regulator should be given responsibility to take care of interest of all stake
holders which includes private players as well and balance the conflicting
interest of all stakeholder

5.5 Suggestions in Electricity Sector

 There is requirement to apply uniform rules and regulations in electricity sector ,
to ensure effective competition amongst the players.
 The under section 11 of Electricity Act, respective state government should use
the discretion in a judicious manner and not to impede the inter-state trading of
electricity. Central Electricity Regulatory Commission should use its powers to
rationalize open Access charges.
 It should devise the method for on-line information on transmission capacities
available in transmission corridors, so that both generators and consumers can
avail open access in a non-discriminatory transparent manner.
 As it is clear that generation segment cannot work efficiently and competitively
except in coal sector there is competition or there is stability in price and
procurement policy. Therefore the competitive bidding guidelines should be
drafted according to the fuel policy changes and also international price variations
volatility .As a result of that risk can be lesser there .
 There should be some provision regarding tariff fixation and the state government
should adopt a approach of arms length to tariff setting process.
Hence model law should adopt following provisions –
 The provision regarding the tariffs structure should be transparent and it should
indicate the several factor which amount to the electricity charge;
 The insertion of provision regarding that which allows States cooperation to
allow inter-state trading of electricity
 Tariff to be rationalized
 Here is need in the electricity value chain for useful unbundling and complete
ownership separation of competitive and monopolistic segments

194
 There should be some provisions for increasing mulitiple retail supplier and there
is need for recognizing the retail activity as separate segment and there should
some provision regarding separate licensing in retail sector so that it can increase
its efficiency.



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