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The government proposes to delicense the power distribution sector allowing competition in the supply of last mile electricity connectivity to consumers.

Official sources said that the Power Ministry would soon move a draft bill proposing amendments in the Electricity Act that would remove the wording 'distribution licensee'. What this will do is to maintain status quo of existing distribution entities but will now allow entry of other participants in a distribution area if it is able to manage infrastructure for supplying electricity to consumers.

In her Budget 2021-22 speech, Finance Minister Nirmala Sitharaman had said that a framework will be put in place to give consumers alternatives to choose from among more than one distribution company. She had said that there is a need to provide choice to consumers by promoting competition and breaking monopolies existing in power distribution sector.

As per the plan, the delicensing will provide for infrastructure sharing by existing players. This will give an option to monetise assets by existing players while allowing new players to strengthen infrastructure and start supplying electricity to consumers on demand.

The changes will allow operation of more than one distributor in a supply area giving option to consumers to choose electricity supplier based on competitive tariff and assured supplies.

With regard to initiation of direct benefit transfer (DBT) scheme in the power sector, sources said that the reform measure could be undertaken at the state level while the Electricity Act will wait for competition to settle into the distribution sector first before proposing the changes.