Generation Without a Licence, and the Licence for Everything Else

In one line

Anybody may generate; nobody may transmit, distribute or trade without a licence; and the one generating station that still needs clearance is the hydro station, because it is a dam.

Section 7, the shortest liberalisation in Indian law

Section 7 is one sentence. Any generating company may establish, operate and maintain a generating station without obtaining a licence under this Act if it complies with the technical standards relating to connectivity with the grid referred to in clause (b) of section 73.

Three things follow.

The only condition is technical. Not need, not capacity, not fuel, not location under this Act: connectivity standards. Everything else that constrains a power station comes from other law, and this book has spent three modules on that other law.

A generating company is defined widely. Section 2(28) makes it any company or body corporate or association or body of individuals, whether incorporated or not, or artificial juridical person, which owns or operates or maintains a generating station.

And delicensing is not deregulation. The station still needs land, environmental clearance, forest approval where the site is forest, consent to establish and operate under the pollution statutes, water, coal or gas, and a connection agreement. Section 7 removed one permission and left the rest.

Section 8: hydro is different, and the reason is the river

Section 8(1) begins notwithstanding anything contained in section 7. A generating company intending to set up a hydro-generating station must prepare and submit to the Authority for its concurrence a scheme estimated to involve capital expenditure exceeding the sum the Central Government fixes by notification.

Section 8(2) tells the Authority what to have particular regard to before concurring. Read it as a resource management provision, because it is one.

Clause (a): whether the proposed river-works will prejudice the prospects for the best ultimate development of the river or its tributaries for power generation, consistent with the requirements of drinking water, irrigation, navigation, flood-control, or other public purposes; and for that purpose the Authority must satisfy itself, after consultation with the State Government, the Central Government, or such other agencies as it deems appropriate, that an adequate study has been made of the optimum location of dams and other river-works.

Clause (b): whether the scheme meets the norms regarding dam design and safety.

Section 8(3) requires that where a multi-purpose scheme for the development of any river in any region is in operation, the State Government and the generating company co-ordinate their activities with those responsible for that scheme so far as they are inter-related.

This is the multiple-use principle from the water module, written into an electricity statute. The Authority is not asked whether the power is needed. It is asked whether this use of the river forecloses the best ultimate development of it, judged against drinking water, irrigation, navigation and flood control. Section 8(2)(a) is the single best example in Module IV of a statute treating a resource as having competing uses that must be ranked.