New Delhi: The Ministry of Power has circulated the draft Electricity (Amendment) Bill, 2025, proposing the most extensive changes to the Electricity Act, 2003 since its enactment. The draft, accompanied by an explanatory note, was released for public comments until 8 November 2025 and addresses long-standing issues of financial losses in distribution companies, absence of retail competition, and distorted cross-subsidies that have raised power costs for industry.
The proposed amendments introduce regulated competition in retail supply, mandate cost-reflective tariffs, phase out cross-subsidies for manufacturing, railways and metro systems within five years, and strengthen regulatory and governance frameworks while fully protecting subsidised categories such as farmers and low-income households.
Key Structural Reforms
The Bill allows multiple distribution licensees to operate in the same area using shared distribution infrastructure, ending the existing single-licensee monopoly model. All licensees will remain bound by the Universal Service Obligation (USO), ensuring non-discriminatory supply to every consumer. However, State Electricity Regulatory Commissions (SERCs), in consultation with state governments, may exempt licensees from the USO for consumers with contracted demand above 1 MW who are eligible for open access.
A “Supplier of Last Resort” mechanism will be established to guarantee continuity of supply in case any licensee defaults or exits.
The shared-network approach is intended to avoid duplication of wires, poles and transformers, optimize costs, and enable faster expansion of distribution infrastructure.
Tariff and Cross-Subsidy Rationalisation
The draft mandates cost-reflective tariffs determined on the basis of actual category-wise cost of supply. All subsidies for protected categories will be provided through transparent budgeted support under Section 65 of the Act.
A significant provision requires complete elimination of cross-subsidies for the manufacturing industry, Indian Railways, and metro rail systems within five years from the commencement of the amended Act. Uniform wheeling charges fixed by SERCs will apply to all users of the distribution network, ensuring revenue adequacy for maintenance and future augmentation irrespective of whether the licensee is public or private.
If distribution licensees fail to file tariff petitions on time, SERCs are empowered to determine tariffs suo motu.
Performance Standards and Regulatory Strengthening
National minimum performance standards for reliability and service quality will be prescribed, while states may set higher benchmarks. SERCs will gain enhanced powers to enforce standards, impose penalties, and act suo motu on tariff matters.
An Electricity Council chaired by the Union Minister of Power will be constituted for Centre-State coordination and consensus-building on policy issues.
Renewable Energy and Sustainability
Energy Storage Systems are formally recognised within the definition of “power system”. SERCs are required to enforce a national minimum Renewable Purchase Obligation trajectory. Non-compliance will attract penalties of ₹0.35–₹0.45 per kWh.
Infrastructure, Governance and Market Development
Provisions empower regulators to frame rules for wheeling charges and prevent unnecessary duplication of networks. Cybersecurity obligations are introduced across the sector.
The draft replaces the “Telegraph Authority” with a modern “Electric Line Authority” vested with clear powers for right-of-way, compensation and dispute resolution.
Commissions are empowered to develop advanced market instruments and trading platforms, including contracts for difference, capacity markets and ancillary services.
Other Notable Changes
- Removal of Central Government consent requirement for licensing in areas that include defence establishments.
- Addition of wilful violation and gross negligence as grounds for removal of regulatory commission members.
- Time-bound disposal of regulatory proceedings within 120 days.
- Increase in the maximum strength of the Appellate Tribunal for Electricity.
The Ministry states that the reforms aim to improve financial viability of discoms, enhance service quality through competition, reduce power costs for industry and logistics, and create an investment-friendly environment while safeguarding subsidies for farmers and poor households through direct budget transfers.
The draft Electricity (Amendment) Bill, 2025 is now under stakeholder consultation ahead of its proposed introduction in Parliament.
FAQs
1. Will electricity become more expensive for farmers and poor households after this Bill?
No. The Bill explicitly protects subsidised tariffs for farmers and low-income households. All subsidies will continue to be provided through transparent, budgeted support from state governments under Section 65 of the Electricity Act. The reforms only remove cross-subsidies currently paid by industry; they do not reduce existing direct subsidies.
2. What does “multiple suppliers in the same area” actually mean for a normal consumer?
Instead of being tied to only one distribution company (like now), consumers in the same city or area will eventually be able to choose their electricity supplier, similar to choosing a mobile operator. All suppliers will use the same wires (shared network), so there will be no duplicate poles or cables, and competition is expected to improve service quality, billing efficiency, and reliability.
3. Why is the government ending cross-subsidy for industry and railways in five years?
Industrial and commercial consumers currently pay 20–80% above the actual cost of supply to indirectly subsidise other categories. This has made Indian manufacturing uncompetitive. The Bill mandates complete removal of this hidden surcharge for manufacturing enterprises, Indian Railways, and metro systems within five years, while compensating states through the budget so that farmer and household subsidies remain unaffected.
4. If a private supplier enters my area and the existing discom fails, will my power supply be disrupted?
No. The Bill introduces a “Supplier of Last Resort” (SoLR) mechanism. If any licensee defaults or exits, another designated licensee will automatically take over supply without interruption, ensuring continuity for all consumers.
5. When will these changes actually come into effect?
The document is still a draft. Public comments closed on 8 November 2025. After incorporating feedback, the Ministry of Power will finalise and introduce the Bill in Parliament (likely in the Winter Session 2025 or Budget Session 2026). Once passed by both Houses and notified, different provisions will come into force on dates specified by the Central Government, with the five-year cross-subsidy phase-out clock starting from the date of commencement of the amended Act.
