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Government Proposes Cost-Reflective Power Tariffs in Draft Electricity Amendment Bill

The Ministry of Power has proposed a draft amendment to the Electricity Act, 2003, aiming to make distribution companies (DISCOMs) financially viable by mandating cost-reflective electricity tariffs. Stakeholders can submit objections or suggestions on the draft amendments until November 10, 2025.

According to the draft Electricity (Amendment) Bill, 2025, DISCOMs are facing cumulative losses exceeding ?6.9 trillion, despite multiple reforms. The move aligns with a Supreme Court directive asking DISCOMs to implement cost-reflective tariffs to ensure the sector’s financial sustainability. In August 2025, the Court also ordered states to clear pending dues of approximately ?1.74 trillion within four years..

The proposed amendment empowers State Electricity Regulatory Commissions (SERCs) to revise tariffs suo motu, reducing delays and enabling implementation from April 1 each financial year. It also exempts DISCOMs from universal service obligations for consumers with open access exceeding 1 MW and allows SERCs to designate a DISCOM to supply power at a premium if other arrangements fail, reducing surcharges on industrial and commercial users..

The Bill encourages market-driven instruments by the Central Electricity Regulatory Commission (CERC) to attract investment, foster competition, and accelerate renewable energy capacity addition. It also includes Renewable Energy Consumption Obligations (RCO), imposing a penalty of ?0.35–0.45/kWh on non-compliant consumers..

Other proposals include:.

• A uniform service standard for all electricity consumers nationwide.

• Limiting unauthorized electricity use assessments to one year.

• Exempting industries from cross-subsidy for five years.

• Streamlining right-of-way for electric lines and fair land compensation.

• Strengthening cybersecurity for integrated power systems.

• Expanding the Appellate Tribunal for Electricity (APTEL) from three to seven members to tackle rising case backlogs.

The draft also proposes the formation of an Electricity Council, chaired by the Union Power Minister, to advise central and state governments, coordinate reforms, and promote consensus on sector policies. This amendment aims to enhance financial stability, improve operational efficiency, and drive India’s clean energy transition..