Overview
The Electricity (Amendment) Bill, 2025 represents a significant step towards transforming India’s power system to meet the demands of a rapidly growing economy. It aims to establish a future-ready electricity sector that delivers reliable, affordable, and high-quality power to all consumers, including farmers, households, shops, and industries. The Bill shifts away from the traditional monopoly supply model and promotes a performance-driven approach, encouraging fair competition between public and private utilities to enhance consumer service. It emphasizes better utilization of the existing electricity network with transparency and accountability, ensuring citizens receive greater value for their investment.
Importantly, the reforms fully protect subsidized tariffs for farmers and low-income households. By fostering collaboration between the Centre and States, the Bill empowers states to play a significant role in shaping policies. More than just an update, this Bill serves as a blueprint for a modern, efficient, and resilient power sector, aligning with India’s developmental aspirations and supporting the vision of Viksit Bharat 2047, thereby bolstering India’s long-term economic growth.
The Need for Amendment
The Electricity (Amendment) Bill, 2025, was introduced to address deep-rooted inefficiencies, alleviate financial strain on the power sector, promote competition, and optimize network costs across India’s power distribution sector. Key issues that prompted the amendment include:
- Persistent financial losses in distribution companies (discoms) due to poor billing efficiency and high aggregate technical and commercial (AT&C) losses.
- Lack of competition in electricity supply, limiting service quality and innovation as consumers are often tied to a single discom.
- Cross-subsidisation distortions, where industrial users pay inflated tariffs to subsidize other categories, making Indian manufacturing less competitive.
The Bill aims to transform the existing market structure by rationalizing cross-subsidy, promoting cost-reflective tariffs, and enabling direct procurement of power by industrial users. It seeks to dismantle longstanding barriers to India’s manufacturing competitiveness, making industrial power more affordable, reliable, and responsive to market demands, while simultaneously protecting the subsidized tariff for farmers and other eligible consumers.
Key Provisions
Cost-Reflective Wheeling Charges
The Bill empowers State Electricity Regulatory Commissions (SERCs) to determine cost-reflective wheeling charges to ensure adequate network development by all distribution licensees, in accordance with the framework established by the SERCs. These regulated charges will be uniformly applicable to all users of the distribution network, whether public or private. This mechanism ensures that utilities have sufficient financial resources for staff salaries, routine maintenance, and future network development.
Inter-State Transmission System (ISTS) Model
India already operates a successful Inter-State Transmission System (ISTS) built on shared infrastructure. Both public and private Transmission Service Providers (TSPs), including Powergrid (a CPSU), compete to develop ISTS assets under the oversight of the Central Electricity Regulatory Commission (CERC). Monthly payments made by users are fairly redistributed among the TSPs. This model has helped reduce costs and construction time for ISTS projects while maintaining high reliability.
Core Pillars of the Bill
The Electricity (Amendment) Bill, 2025, sets the stage for a more efficient, environmentally and financially sustainable, transparent, and consumer-focused power sector. It blends structural reforms with regulatory clarity to modernize electricity distribution across India. By aligning policy with evolving needs, the Bill aims to deliver quality service, financial discipline, and sustainable growth.
The Bill promotes fair competition between government and private distribution companies in electricity supply, overseen by State Electricity Regulatory Commissions (SERCs). This approach is expected to enhance service quality, boost operational efficiency, and offer electricity supply to the industrial sector at a reasonable cost. By shifting from a monopoly-based supply to performance-driven delivery, it fosters a more accountable and consumer-oriented power sector, while protecting the interests of the farmers and other consumers.
Structural Reforms
- Facilitate regulated competition in electricity distribution, allowing multiple licensees to operate in the same area using shared and optimized infrastructure.
- Mandates Universal Service Obligation (USO) for all licensees, ensuring non-discriminatory access and supply to all consumers, while enabling SERCs to make Distribution licensees free from USO, in consultation with State Governments, for large consumers eligible for Open Access (more than 1 MW).
Tariff and Cross-Subsidy Rationalisation
- Promotes cost-reflective tariffs while protecting subsidised consumers (e.g., farmers, poor households) through transparent budgeted subsidies under Section 65.
- Seeks to rationalize cross-subsidies to make Indian industries more competitive.