The Centre has introduced the Electricity (Amendment) Bill, 2025, with the objective of reshaping the country’s electricity ecosystem to better support a fast-expanding economy. The reform seeks to make Indian industry and logistics more competitive by rationalising electricity costs, reducing the burden of hidden cross-subsidies, and ensuring uninterrupted and affordable power to all — from households and farmers to commercial establishments and major industries. A key pillar of the Bill is its push for cost-reflective tariffs to strengthen long-term financial sustainability in the sector while continuing to guarantee subsidised tariffs for farmers and low-income consumers.
By promoting accountability, transparency, and efficient use of shared networks, the Bill aims to prevent duplication of infrastructure and accelerate nationwide modernisation of distribution systems. The overarching intent is to deliver reliable electricity, improve quality and supply standards, and ensure smooth coordination between the Centre and States for stronger policy implementation. These reforms form part of India’s broader vision for Viksit Bharat 2047, ensuring that the energy sector becomes resilient and future-ready.
Why the Amendment Was Necessary
The amendments were proposed to address persistent inefficiencies, market distortions, and financial stress that have long affected India’s power distribution system. Distribution companies (discoms) are burdened by high aggregate technical and commercial (AT&C) losses and inadequate billing efficiency, leading to rising debts and delayed payments. Limited competition forces consumers to rely on a single discom in each area, restricting service quality improvements. Industrial and commercial users face inflated tariffs due to cross-subsidisation, undermining India’s manufacturing competitiveness.
The Bill therefore seeks to rationalise cross-subsidies, promote direct power procurement for industries, and strengthen market-driven pricing while fully safeguarding subsidised power for farmers and eligible beneficiaries. At the regulatory level, State Electricity Regulatory Commissions (SERCs) will determine fair wheeling charges for shared distribution networks so utilities can maintain operations, invest in new infrastructure, and support employees. This framework ensures equitable cost sharing among all users — public or private — and prevents any monopoly in network expansion.
Shared Infrastructure: The ISTS Success Model
India’s Inter-State Transmission System (ISTS) already functions successfully as a shared network involving both government and private Transmission Service Providers (TSPs) under the regulatory oversight of the Central Electricity Regulatory Commission (CERC). Payments collected from users are redistributed fairly, resulting in lower project costs and faster construction timelines without compromising reliability. The Bill draws on this model to extend similar efficiency and fairness principles to the distribution segment as well.
Key Reform Areas Under the Bill
The legislation combines structural transformation with regulatory clarity to develop a power system that is efficient, environmentally sustainable, financially disciplined, and driven by consumer needs. Competition between public and private distribution companies will be regulated to ensure better service quality, improved operational performance, and reasonably priced electricity for industries — while continuing to protect the interests of agricultural and domestic consumers.
Structural Transformation
The Bill enables regulated competition by permitting multiple distribution licensees in the same area using common distribution infrastructure. It mandates Universal Service Obligation (USO) for all licensees to guarantee non-discriminatory access to all consumers. SERCs, in consultation with State Governments, may exempt licensees from USO for large open-access consumers above 1 MW, improving efficiency in the market.
Tariff and Subsidy Reforms
Cost-based tariffs will be promoted to reduce inefficiencies, while subsidies for vulnerable groups — especially farmers and low-income households — will continue transparently through budgetary support under Section 65. The Bill also targets the removal of cross-subsidies for the Manufacturing Industry, Railways, and Metro railways within five years to enhance industrial competitiveness.
Infrastructure and Network Expansion
Regulators will set wheeling charges to avoid unnecessary duplication of distribution networks and ensure efficient cost recovery. Energy Storage Systems (ESS) are formally recognised in the electricity ecosystem, supporting renewable energy integration and grid stability.
Stronger Governance and Accountability
The Bill introduces an Electricity Council to strengthen Centre-State coordination. SERCs will have powers to enforce service standards, apply penalties for non-compliance, and decide tariffs suo motu when required.
Sustainable and Market-Driven Growth
The Bill enforces non-fossil fuel procurement obligations and penalises defaults to promote cleaner energy. It also encourages new market structures and trading instruments to facilitate a more competitive energy marketplace.
Legal and Operational Clarifications
Definitions and legal references have been updated to reflect modern requirements, including alignment with the Companies Act, 2013. Provisions relating to the Electric Line Authority have been expanded for efficient dispute resolution, compensation, and coordination with local bodies. The Authority will hold powers equivalent to the Telegraph Authority under the Indian Telegraph Act, 1885.
The Electricity (Amendment) Bill, 2025 lays the foundation for a modern, efficient, and investment-friendly electricity sector in India. It promotes fair competition, strengthens regulatory institutions, rationalises tariffs, and supports large-scale industrial growth — while continuing to protect farmers and low-income households through targeted subsidies. With a strong focus on affordability, reliability, and sustainability, the Bill ensures that India’s energy transition remains aligned with national development priorities and the long-term mission of building a prosperous Viksit Bharat.