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The elections for the next Vice-President of India are underway today. The current Vice President Dr. Hamid Ansari will complete his second five-year term on August 10, which is in a few days. While the BJP-led NDA’s candidate is Mr. Venkaiah Naidu, Dr. Gopalkrishna Gandhi is the joint candidate fronted by 18 opposition parties led by the INC. In this post, we take a closer look at the constitutional mandate and role of the Vice-President of India and how the elections for the post will play out today.
Constitutional mandate as Vice President
The Vice-President is the second-highest constitutional office in India. He acts as the President in the absence of the incumbent President, and is the ex officio Chairman of Rajya Sabha. As an indication of his bipartisanship and apolitical character, the Vice-President does not hold membership of any political party or any other office of profit. Further, given his constitutional stature, the statements given by the Vice President assume national significance. The outgoing Vice President’s statements on issues like press freedom and welfare of minority communities led to several media debates and attracted widespread attention.
Vice-President’s role as Chairman of the Rajya Sabha
As Chairman of Rajya Sabha, the Vice President is the final authority on the interpretation of the Constitution and the Rules of Procedure for all house-related matters. His rulings constitute binding precedent. He also determines whether a Rajya Sabha member stands to be disqualified on grounds of defection. Such powers make him an important stakeholder in the functioning of our parliamentary democracy.
The Vice President is also vested with powers to improve the functioning of the Upper House. There have been several instances where the current Vice President has used his powers to address issues ranging from improving the productivity of question hour, reducing prolonged disruptions, maintaining decorum in the House, to facilitating discussion on issues of national importance.
Addressing disruptions: In March 2010, the Vice President ordered seven MPs to be evicted from the House for causing disruptions during the discussion and passage of the Women’s Reservation Bill. More recently, in December 2015, the Vice President called for an all-party meeting during the last leg of the then ongoing Winter Session to discuss the matter of continuous disruptions in the House. The remaining three days of the session after the all-party meet recorded 79% productivity, while the House had recorded overall productivity of 51% that session.
Functioning of Question Hour: In another instance, in November 2014, the Vice President issued a direction to conduct question hour from 12 noon to 1 pm instead of the originally allocated first hour of the day. This was seen as an attempt to address the issue of low productivity of question hour mostly due to disruptions at the start of the day. However, question hour productivity has not shown any significant improvement yet, with continuing disruptions.
Parliamentary Privilege: Parliamentary privilege refers to rights and immunity enjoyed by Parliament and MPs, which may be necessary to effectively discharge their constitutional functions. When disregarded, the offence is called a breach of privilege and is punishable under law. The Chairman is the guardian of these privileges and can also issue warrants to execute the orders of the House, where necessary. In 1967, one person was held to be in contempt of Rajya Sabha for throwing leaflets from the visitors’ gallery of the House. The then Vice President, in accordance with the resolution of the House, had sentenced the person to simple imprisonment, till the conclusion of that session.
The Chairman’s consent is required to raise a question of breach of privilege. He also has the discretion whether to refer it to the Privileges Committee, and whether to accept the committee’s recommendations. In October 2015, the current Vice President had referred the matter of a member’s controversial “terrorists in Parliament” remark to the Privileges Committee upon receiving complaints from several opposition MPs.
Role in Parliamentary Committees and other institutions
Parliamentary committees review proposed laws, oversee activities of the executive, and scrutinise government’s expenditure. The Vice President nominates members to various Parliamentary Committees, appoints their Chairmen and issues directions to them. The Vice President also nominates members of the Rajya Sabha on various bodies such as the Haj Committee, the Institute of Constitutional and Parliamentary Studies, Courts of several universities such as JNU, etc. He is also on the three-member Committee which nominates the Chairman of the Press Council of India.
So, how is the Vice President elected?
Unlike Presidential elections, MLAs do not have a vote in these elections. Dr. B R Ambedkar had explained why during the constituent assembly debates: “The President is the Head of the State and his powers extend both to the administration by the centre as well as of the states… But when we come to the Vice-President, his normal functions are merely to preside over the Council of States. It is only on a rare occasion, and that too for a temporary period, that he may be called upon to assume the duties of a President”.
Therefore, the Electoral College for the Vice- Presidential elections consists of all 790 MPs. The elections are conducted using the system of single transferable voting that results in (approximately) proportional representation. The voting is done through secret ballot implying that parties cannot issue whips to their MPs and anti-defection laws do not apply.
Each voter has one vote with the same value of 1. Every voter can mark as many preferences, as there are candidates contesting the election. It is necessary for at least the first preference to be marked. A candidate needs to win a required number of votes (or the quota) to be elected. If no one achieves the required quota after the first round of counting the first preference votes, the candidate with the lowest votes is eliminated. His votes are then transferred to the second preference mentioned (if any) on the votes he received. If no one achieves the required quota again, the process is repeated till either:
The upcoming Vice Presidential elections
Let us now determine the quota required for victory in today’s election. The total value of votes of the electoral college is divided by two, and one is added (to ensure a majority) to the quotient to determine the quota. Hence, the quota is calculated as:
Quota = 790/2 + 1 = 395 + 1= 396
The candidate who gets 396 votes will win the election. If no candidate gets to this mark, the second and further preferences may be counted until the mark is reached or all candidates, but one, are eliminated.
We know the number of seats held by each party in Parliament. Let us assume that all MPs vote along their party line. The position of the NDA and UPA is depicted in the figure below at the two ends of the chart. All other major parties and independents are marked in the middle.
We observe that, while the BJP falls short of the quota by 58 votes, the shortfall can be overcome if NDA allies TDP, Shiv Sena, Shiromani Akali Dal, LJP and PDP support its candidate.
With the voting taking place this morning, the outcome and results will become clear by later today. It is hoped that the new Vice President will uphold the twin constitutional mandates as the second highest constitutional functionary and the Chairman of Rajya Sabha, just as his distinguished predecessors have done.
Last week, the Power Finance Corporation reported that state-owned power distribution companies across the country made financial losses amounting to Rs 68,832 crore in 2022-23. This is four times higher than the losses witnessed in 2021-22, and roughly equivalent to the annual budget of a state like Uttarakhand. This blog examines some of the causes and implications of such losses.
Overview of financial losses
For several years now, electricity distribution companies (discoms), which are mostly state-owned, have witnessed steep financial losses. Between 2017-18 and 2022-23, losses accumulated to over three lakh crore rupees. In 2021-22, discom witnessed substantial reduction in their losses, primarily because states released 1.54 lakh rupees in subsidies to clear pending dues. State governments provide discoms with subsidies, so that domestic and agricultural consumers receive affordable power. These payments are typically delayed which creates cash flow constraints, and leads to an accumulation of debt. In addition, costs incurred by discoms in 2021-22 remained unchanged.
Note: Data from 2020-21 onwards does not include Odisha, and Dadra & Nagar Haveli and Daman and Diu since their distribution function was privatised in 2020-21. Data for Ladakh is available from 2021-22 onwards. Data for Jammu and Kashmir is not available. The Delhi Municipal Council Distribution Utility has been included from 2020-21 onwards.
Sources: Power Finance Corporation reports for various years; PRS.
As of 2022-23, losses have increased again to reach Rs 68,832 crore. This increase has been driven by rising costs. At a per unit level, the cost of supplying one kilowatt of electricity rose from 7.6 rupees in 2021-22, to 8.6 rupees in 2022-23 (See Table 1).
Table 1: Financial details of state-owned power distribution companies
Details |
2019-20 |
2020-21 |
2021-22 |
2022-23 |
Average cost of supplying power (ACS) |
7.4 |
7.7 |
7.6 |
8.6 |
Average revenue realised (ARR) |
6.8 |
7.1 |
7.3 |
7.8 |
Per unit loss (ACS-ARR) |
0.6 |
0.6 |
0.3 |
0.7 |
Total losses (in Rs crore) |
-60,231 |
-76,899 |
-16,579 |
-68,832 |
Note: Data from 2020-21 onwards does not include Odisha, and Dadra & Nagar Haveli and Daman and Diu since their distribution function was privatised in 2020-21. Data for Ladakh is available from 2021-22 onwards. Data for Jammu and Kashmir is not available. The Delhi Municipal Council Distribution Utility has been included from 2020-21 onwards.
Sources: Power Finance Corporation reports for various years; PRS.
Purchase of electricity from generation companies (gencos) forms about 70% of a discom’s total costs, and coal is the primary source for generating electricity. The following chain of events took place in 2022-23: (i) consumer demand for electricity rose by 10% over the previous year, as compared to a 6% year-on-year increase in the past 10 years, (ii) coal had to be imported to meet the increased demand, and (iii) global coal prices were elevated.
Coal imported at elevated prices to keep up with rising electricity demand
In 2022-23, demand for electricity increased by 10% over 2021-22. Between 2008-09 and 2018-19, demand increased at an annual growth rate (CAGR) of 6%. Electricity demand grew as the economy grew (at 7%), and largely came from domestic and agricultural consumers. These consumer categories account for 54% of the total electricity sales, and their demand rose by 7%.
Sources: Central Electricity Regulatory Commission; PRS.
Electricity cannot be stored at scale, which means that generation must be scheduled depending on anticipated demand. The Central Electricity Authority anticipates annual demand for each year. It estimated that demand in 2022-23 would be at 1,505 billion units. However, the actual demand was higher than anticipated in the first few months of 2022-23 (See Figure 3).
To meet this demand, electricity generation had to be ramped up. Coal stocks had already depleted from 29 million tonnes in June 2021 to eight million tonnes in September 2021, on account of high demand in 2021-22. To ensure uninterrupted supply of power, the Ministry of Power directed gencos to import coal. The Ministry noted that without imports, widespread power cuts and blackouts would have occurred.
Sources: Load Generation Balance Report 2022 and 2023, Central Electricity Authority; PRS.
Coal imports rose by about 27 million tonnes in 2022-23. While this constituted only 5% of the overall coal used in the sector, the price at which it was imported significantly impacted the sector. In 2021-22, India imported coal at an average price of Rs 8,300 per tonne. This rose to Rs 12,500 per tonne in 2022-23, a 51% increase. Coal was primarily imported from Indonesia, and prices shot up due to the Russia-Ukraine war, and demand surge by countries like India and China.
Sources: Ministry of Power; Ministry of Statistics and Programme Implementation; PRS.
Coal import situation going forward
In January 2023, the Ministry of Power advised gencos to import 6% of the required coal, to ensure sufficient stock until September 2023. It noted that due to floods and variable rainfall in various parts of the country, hydro generation capacity reduced by about 14%. This put additional burden on coal based thermal generation in 2023-24. Following this, in October 2023, the Ministry directed all gencos to continue using at least 6% imported coal until March 2024.
Sources: Ministry of Coal; PRS.
Structural issues in the power sector and its impact on state finances
Discoms witness persistent financial losses due to certain structural issues. Their costs are typically high because of old contracts with generation companies (gencos). Power purchase costs in these contracts do not account for production efficiencies over the years, and costs remain unchanged. Tariffs are only revised every few years, to ensure that consumers are protected from supply chain shocks. As a result, costs are carried forward for a few years. In addition, discoms sell electricity to certain consumers such as agricultural and residential consumers, below cost. This is supposed to primarily be recovered through subsidy grants provided by state governments. However, states often delay subsidy payments leading to cash flow issues, and accumulation of debt. In addition, tariff recovery from the power sold is not optimal.
Losses reported in the generation sector have also increased. In 2022-23, state-owned gencos reported losses worth Rs 7,175 crore, as compared to the Rs 4,245 crore in 2021-22. Rajasthan accounted for 87% of these, at Rs 6,278 crore. Note that under the Late Payment Surcharge Rules, 2022, discoms are required to make upfront payments to gencos.
Risk to state finances
Persistent financial losses, high debt and guarantees extended by states continue to pose a risk to state finances. These are contingent liabilities for state governments, i.e., in the event a discom is unable to repay its debt, the state would have to take it over.
Several such schemes have been introduced in the past to bail discoms out (See Table 2). As of 2022-23, discoms have an outstanding debt worth Rs 6.61 lakh crore, 2.4% of the national GDP. Debt is significantly high in states such as Tamil Nadu (6% of GSDP), Rajasthan (6% of GSDP), and Uttar Pradesh (3% of GSDP). Previous Finance Commissions have recognised that strengthening discom finances is key in minimising the risk to state finances.
Table 2: Key government schemes for the turnaround of the distribution sector over the years
Year |
Scheme |
Details |
2002 |
Bailout Package |
States take over the debt of state electricity boards worth Rs 35,000 crore, 50% waiver of interest payable by state electricity boards to central PSUs |
2012 |
Financial Restructuring Package |
States take over 50% of the outstanding short-term liabilities worth Rs 56,908 crore |
2015 |
Ujwal Discom Assurance Yojana (UDAY) |
States take over 75% of the debt of discoms worth Rs 2.3 lakh crore and also provide grants for any future losses |
2020 |
Liquidity Infusion Scheme |
Discoms get loans worth Rs 1.35 lakh crore from Power Finance Corporation and REC Limited to settle outstanding dues of generators, state governments provide guarantee |
2022 |
Revamped Distribution Sector Scheme |
Central government to provide result-linked financial assistance worth Rs 97,631 crore for strengthening of supply infrastructure |
Sources: NITI Aayog, Press Releases of the Ministry of Power; PRS.
For more details on the impact of discom finances on state finances, see here. For more details on structural issues in the power distribution sector, see here.
ANNEXURE
Table 3: Cost and revenue structure of discoms on energy sold basis (in Rs per kw)
Details |
2019-20 |
2020-21 |
2021-22 |
2022-23 |
Average cost of supplying power (ACS) |
7.4 |
7.7 |
7.6 |
8.6 |
of which |
||||
Cost of procuring power |
5.8 |
5.9 |
5.8 |
6.6 |
Average revenue realised (ARR) |
6.8 |
7.1 |
7.3 |
7.8 |
of which |
||||
Revenue from sale of power |
5.0 |
4.9 |
5.1 |
5.5 |
Tariff subsidy |
1.3 |
1.4 |
1.4 |
1.5 |
Regulatory income and revenue grant under UDAY |
0.3 |
0.1 |
0.0 |
0.2 |
Per unit loss |
0.6 |
0.6 |
0.3 |
0.7 |
Total financial losses |
-60,231 |
-76,899 |
-16,579 |
-68,832 |
Sources: Power Finance Corporation reports for various years; PRS.
Table 4: State-wise profit/loss of power distribution companies (in Rs crore)
State/UT |
2017-18 |
2018-19 |
2019-20 |
2020-21 |
2021-22 |
2022-23 |
Andaman and Nicobar Islands |
-605 |
-645 |
-678 |
-757 |
-86 |
-76 |
Andhra Pradesh |
-546 |
-16,831 |
1,103 |
-6,894 |
-2,595 |
1,211 |
Arunachal Pradesh |
-429 |
-420 |
NA |
NA |
NA |
NA |
Assam |
-259 |
311 |
1,141 |
-107 |
357 |
-800 |
Bihar |
-1,872 |
-1,845 |
-2,913 |
-2,966 |
-2,546 |
-10 |
Chandigarh |
321 |
131 |
59 |
79 |
-101 |
NA |
Chhattisgarh |
-739 |
-814 |
-571 |
-713 |
-807 |
-1,015 |
Dadra & Nagar Haveli and Daman & Diu |
312 |
-149 |
-125 |
NA |
NA |
NA |
Delhi |
NA |
NA |
NA |
98 |
57 |
-141 |
Goa |
26 |
-121 |
-276 |
78 |
117 |
69 |
Gujarat |
426 |
184 |
314 |
429 |
371 |
147 |
Haryana |
412 |
281 |
331 |
637 |
849 |
975 |
Himachal Pradesh |
-44 |
132 |
43 |
-153 |
-141 |
-1,340 |
Jharkhand |
-212 |
-730 |
-1,111 |
-2,556 |
-1,721 |
-3,545 |
Karnataka |
-2,439 |
-4,889 |
-2,501 |
-5,382 |
4,719 |
-2,414 |
Kerala |
-784 |
-135 |
-270 |
-483 |
98 |
-1,022 |
Ladakh |
NA |
NA |
NA |
NA |
-11 |
-57 |
Lakshadweep |
-98 |
-120 |
-115 |
-117 |
NA |
NA |
Madhya Pradesh |
-5,802 |
-9,713 |
-5,034 |
-9,884 |
-2,354 |
1,842 |
Maharashtra |
-3,927 |
2,549 |
-5,011 |
-7,129 |
-1,147 |
-19,846 |
Manipur |
-8 |
-42 |
-15 |
-15 |
-22 |
-146 |
Meghalaya |
-287 |
-202 |
-443 |
-101 |
-157 |
-193 |
Mizoram |
87 |
-260 |
-291 |
-115 |
-59 |
-158 |
Nagaland |
-62 |
-94 |
-477 |
-17 |
24 |
33 |
Puducherry |
5 |
-39 |
-306 |
-23 |
84 |
-131 |
Punjab |
-2,760 |
363 |
-975 |
49 |
1,680 |
-1,375 |
Rajasthan |
-11,314 |
-12,524 |
-12,277 |
-5,994 |
2,374 |
-2,024 |
Sikkim |
-29 |
-3 |
-179 |
-34 |
NA |
71 |
Tamil Nadu |
-12,541 |
-17,186 |
-16,528 |
-13,066 |
-9,130 |
-9,192 |
Telangana |
-6,697 |
-9,525 |
-6,966 |
-6,686 |
-831 |
-11,103 |
Tripura |
28 |
38 |
-104 |
-4 |
-127 |
-193 |
Uttar Pradesh |
-5,269 |
-5,902 |
-3,866 |
-10,660 |
-6,498 |
-15,512 |
Uttarakhand |
-229 |
-808 |
-323 |
-152 |
-21 |
-1,224 |
West Bengal |
-871 |
-1,171 |
-1,867 |
-4,261 |
1,045 |
-1,663 |
State Sector |
-56,206 |
-80,179 |
-60,231 |
-76,899 |
-16,579 |
-68,832 |
Dadra & Nagar Haveli and Daman & Diu |
NA |
NA |
NA |
242 |
148 |
104 |
Delhi |
109 |
657 |
-975 |
1,876 |
521 |
-76 |
Gujarat |
574 |
307 |
612 |
655 |
522 |
627 |
Odisha |
NA |
NA |
-842 |
-853 |
940 |
746 |
Maharashtra |
NA |
590 |
1,696 |
-375 |
360 |
42 |
Uttar Pradesh |
182 |
126 |
172 |
333 |
256 |
212 |
West Bengal |
658 |
377 |
379 |
398 |
66 |
-12 |
Private Sector |
1,523 |
2,057 |
1,042 |
2,276 |
2,813 |
1,643 |
All-India |
-54,683 |
-78,122 |
-59,189 |
-77,896 |
-13,766 |
-67,189 |
Note: Minus sign (-) indicates loss; Dadra & Nagar Haveli and Daman & Diu discom was privatised on April 1, 2022; New Delhi Municipal Council Distribution utility has been added from 2020-21 onwards.
Sources: Power Finance Corporation reports for various years; PRS.