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Draft Electricity (Amendment) Bill 2025 Seeks Cost-Reflective Tariffs and Structural Power Sector Reforms

The Draft Electricity (Amendment) Bill, 2025 aims to strengthen India’s power sector framework in line with the country’s vision of Viksit Bharat by 2047, Union Minister for Power and Housing and Urban Affairs Manohar Lal said during a meeting of the Parliamentary Consultative Committee.

The minister stated that the Bill proposes mandatory cost-reflective tariffs and seeks to empower electricity regulatory commissions to act suo motu in cases where utilities delay tariff filings. He clarified that state governments may continue providing subsidies to priority consumer groups such as domestic and agricultural consumers, ensuring that such consumers are not burdened by tariff increases while maintaining financial discipline in the sector.

The Bill also focuses on enhancing the competitiveness of Indian industry by addressing distortions arising from cross-subsidies and surcharges. According to the minister, rationalizing electricity costs will support the growth of industries, including micro, small, and medium enterprises (MSMEs), enable job creation, and improve global competitiveness.

Under the proposed amendments, State Electricity Regulatory Commissions (SERCs), in consultation with state governments, may exempt distribution companies (DISCOMs) from the obligation to supply electricity to large consumers. These consumers would be allowed to procure power from alternative sources at competitive rates after providing reasonable notice. The move is expected to reduce fixed cost burdens on DISCOMs, thereby benefiting smaller consumers.

The Bill also proposes introducing a minimum obligation for the use of non-fossil electricity, emphasizing collective responsibility in advancing clean energy adoption. To ensure the availability of cost-competitive renewable power, the Bill allows capacity additions through market-based mechanisms alongside DISCOM-led procurement, which could help reduce financial pressure on utilities.

In addition, the draft legislation includes provisions aimed at improving ease of living and ease of doing business, such as enhanced consumer services, reduced compliance burdens, and stronger regulatory governance. The Bill proposes expanding the strength of the Appellate Tribunal for Electricity (APTEL) to manage increasing caseloads.

Key operational reforms outlined in the Bill include incorporating Right-of-Way provisions directly into the Act and enabling distribution network sharing to avoid infrastructure duplication. The minister stated that such measures would benefit consumers and clarified that concerns related to privatization, higher costs, or adverse impacts on employees are unfounded. He assured that appropriate regulatory and policy safeguards would be implemented to protect all stakeholders.

The Bill also proposes the establishment of an Electricity Council to promote cooperative federalism and build national consensus on power sector reforms. The minister further noted that the government is committed to ensuring fair compensation to farmers for land used in laying electricity infrastructure, adding that guidelines linking compensation to market rates have already been issued by the Ministry of Power.