The Shunglu committee on the financial health of state power distribution companies has slammed state governments for eroding independence of electricity regulatory commissions.
In its draft report, it has recommended implementation of wide-ranging reforms to strengthen the regulatory bodies including giving them more financial autonomy.
State governments should not have a major say in filling key vacancies in the commissions so as to protect their independence.
The panel, which made a presentation on the draft report to the Planning Commission on July 25, has found that states are misusing key provisions of the Electricity Act 2003 to influence determination of tariffs, which is meant to be the regulator's call. This is despite higher courts repeatedly clarifying that the states' interpretation is contrary to the basic objective of the Act.
Not only that, states are also using budgetary support as a lever to make regulator fall in line.
The committee has studied functioning of electricity regulatory commissions in 15 states including Maharashtra, Andhra Pradesh,Uttar Pradesh, Haryana, Punjab, Gujarat and Rajasthan, which together account for 91% of assets and liabilities of state power discoms. It is expected to finalize its report by September.
The committee has also found that several states have misused the lax eligibility criteria and the loose selection procedure to fill top vacancies like chairman and members in regulatory commissions with compliant officials.
The committee feels that there is a need for wide-ranging measures like delegation of financial autonomy to ensure functional independence of regulators. It has also suggested tightening eligibility criteria and selection procedure to prevent state governments from filling key vacancies in regulatory commissions with officials of compromised integrity.
The committee has recommended that any individual who has worked with a state government, either directly or indirectly, during preceding five years should be disqualified for appointment as a regulator.
Further, chairman and member of the regulatory commissions should be barred from taking post in any government department of the same state for five years.
It has also suggested bringing on the selection panel independent authorities like sitting judge of the concerned High court, chairperson of the central electricity regulatory commission, chairman of public service commission of another state on the selection panel to improve fairness in the selection process.
To prevent further misuse of the public interest provisions of the act by states, the committee has recommended that the central government seek legal opinion on interpretation of section 108 and the same should be included in the national tariff policy. The Centre can also use the opportunity of Annual Plan discussions with state governments to review functioning of state regulatory system and states' commitment and action.
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