The Electricity Act 2003 provided the framework for the dismantling of the State Electricity Boards and the separation of generation, transmission and distribution into separate companies. Electricity generation was delicensed, while transmission and distribution remained licenced and regulated activities. Promoting competition, protecting consumer interests, and the supply of electricity to all were key objectives of the legislation.
Under the new regime, a competitive industry structure in generation has evolved. The share of private investment in the creation of new generating capacity has increased rapidly. Competitive procurement through long-term power purchase agreements (PPAs) grew and prices discovered through the market turned out to be lower than anticipated under the earlier cost-plus dispensation for determining tariffs. The impressive growth in renewable power is entirely the result of private investment. Tariff-based bids for the supply of electricity to distribution companies (Discoms) has been the key to the extraordinary success of the National Solar Mission. Further, India now has one of the cheapest rates for solar power supply in the world.
