To meet the country’s growing energy needs, rapid
technological changes, and the need to strengthen consumer rights, reforms in
India’s electricity sector have long been considered essential. In this
context, the Ministry of Power has recently released the draft Electricity
(Amendment) Bill, 2025. The proposed amendment seeks to make the existing
Electricity Act, 2003 more modern, transparent, and competitive.
Key Features of the Bill
¨
Healthy Competition:The
Bill shifts from a monopoly-based electricity supply system to a
performance-driven model.It allows both public and private utilities to
operate, fostering efficiency and better service delivery.
¨
Protecting Vulnerable Consumers:Subsidised
tariffs for farmers and low-income households are safeguarded.State Governments
may continue to provide these subsidies under Section 65 of the Act.This
ensures affordable access to electricity while maintaining fair pricing
practices.
¨
Strengthening Regulatory
Powers:State Electricity Regulatory Commissions (SERCs) are empowered to
determine cost-reflective wheeling charges.This supports financial stability
for distribution licensees and encourages efficient network use.
¨
Rationalising Tariffs and
Cross-Subsidies:The Bill promotes cost-reflective tariffs and rationalisation
of cross-subsidies.This helps optimise network utilisation and makes industrial
power more affordable.
¨
Enhancing Transmission
Infrastructure:It strengthens the Inter-State Transmission System (ISTS) by
enabling competition among Transmission Service Providers.Oversight by the
Central Electricity Regulatory Commission (CERC) ensures transparent and
efficient operations.
Pros of the Bill
¨
Competitive Market: The
Bill actively promotes competition by breaking distribution monopolies and
enabling multiple players to operate in the same area, thereby enhancing
consumer choice, service quality, and overall efficiency.
¨
Protection for Vulnerable
Groups: The Bill ensures equitable access by firmly safeguarding subsidised
tariffs for farmers and low-income households.
¨
Financial Stability: The
Bill strengthens the financial health of discoms by promoting cost-reflective
tariffs and rationalising cross-subsidies, which also facilitates fresh
investments.
¨
Stronger Regulation: The
Bill enhances regulatory accountability by empowering SERCs to set wheeling
charges and revise tariffs proactively.
¨
Efficient Infrastructure
Use: The Bill boosts network efficiency by allowing shared use of distribution
infrastructure, which reduces duplication, lowers costs, and improves overall
utilisation.
Cons of the Bill
¨
Implementation Hurdles:
The transition to a competitive market will face resistance from state
utilities as they will seek to protect their revenue streams and market share.
¨
Cross-Subsidy Transition
Risks: The rationalisation of cross-subsidies will impact affordability for
certain consumer groups if the transition is not phased gradually.
¨
Regulatory Overlaps: The
expanded functions of SERCs and the Electricity Council will lead to
coordination challenges and potential procedural delays.
¨
Infrastructure Gaps: The
requirement to upgrade networks for competition and shared usage will place
significant investment and execution pressures on states, especially those with
limited capacity.
