National markets and coercive paternalism

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Editor's note: A few weeks ago, 12 states were barred from trading on India’s short-term electricity markets as a penalty for non-payment of dues to power generation companies. The defaulting states’ power distribution companies cumulatively owed Rs 5,000 crore, which had been pending for a while. The dues were paid, the bar was lifted and life seemingly moved on. But the stakes have been raised in a sector where financial brinkmanship between financially stretched states and a fiscally hawkish Centre has been a perennial struggle. The Centre has made it amply clear, through a series of actions, that it plans to address the broader financial problems of India’s power sector with a certain amount of heavy-handedness. On 3 June, it notified the Electricity (Late Payment Surcharge) Rules, 2022, which gave the Ministry of Power, through Power System Operation Corp., this specific power to disconnect states from the national markets. Whether it is trying to push through amendments to the Electricity Act, 2003, that centralize the selection of state power regulators (among other things) without deliberation in Parliament, to floating discussion papers from …