The Electricity (Amendment) Bill, 2025 seeks to bring structural reform to India’s power distribution sector by introducing competition, enforcing financial discipline, and improving efficiency. It also maintains subsidies for farmers and low-income consumers, while aiming to make electricity supply more accountable and financially sustainable.
What the Bill proposes ?
The Bill allows competition between government and private distribution companies (discoms) under the supervision of State Electricity Regulatory Commissions (SERCs). It proposes a shared network model where multiple licensees can use the same infrastructure instead of duplicating lines and substations.
According to the Ministry of Power, this model is intended to improve efficiency, reduce technical and commercial losses, and lower the overall subsidy burden on state governments—without changing the subsidised tariffs paid by consumers.
Subsidies will continue to be provided under Section 65 of the Electricity Act, ensuring that farmers and other eligible consumers retain access to subsidised power.
Will competition raise electricity costs?
The government argues that competition will not increase electricity costs for farmers or common consumers. Instead, by reducing inefficiencies and eliminating duplication of infrastructure, it is expected to lower the total cost of supply.
Under the monopoly model, discom losses—both technical and commercial—are merged under one head, which often masks inefficiencies and power theft. Shared network usage, according to the Bill, will make the system more transparent and cost-effective.
How will cost-reflective tariffs work?
The Bill proposes cost-reflective tariffs, meaning tariffs will more accurately reflect the actual cost of supply. This is aimed at breaking the long-standing debt cycle among discoms, ensuring timely maintenance and better service.
At present, many industrial and commercial consumers cross-subsidise residential and agricultural users. The new framework will replace hidden cross-subsidies with transparent, budgeted subsidies, helping industries such as manufacturing, railways, and metros remain competitive while still protecting vulnerable consumers.
Will private players underpay for network use?
The Bill provides that SERCs will fix regulated, cost-reflective wheeling charges for all network users—public or private. These charges will be fairly distributed among network owners, ensuring adequate funding for maintenance, expansion, and employee payments.
The government points to the success of the Inter-State Transmission System (ISTS) model, where public and private players, supervised by the Central Electricity Regulatory Commission (CERC), share the same grid. Users pay monthly charges, which are then fairly redistributed among service providers.
Will private firms cherry-pick profitable areas?
The Bill maintains that government discoms will continue to operate alongside private licensees on a level playing field. Both will be bound by the same universal service obligation (USO), requiring them to supply power to all consumers in their licensed areas without discrimination.
SERCs will continue to regulate tariffs and performance standards such as reliability and voltage quality. Licences may be penalised or revoked for non-compliance.
The Bill also allows SERCs, in consultation with state governments, to remove the USO for large consumers—those with demand above 1 MW—who are already eligible for open access. These consumers can source power directly from producers. In such cases, a discom will act as a supplier of last resort, charging a premium over the cost of supply.
Does it centralise power or dilute state authority?
The Electricity (Amendment) Bill 2025 clarifies that electricity remains a subject in the Concurrent List, allowing both the Centre and states to legislate. The proposed Electricity Council will act as a consultative body to build policy consensus between them.
SERCs will retain powers to determine tariffs, issue licences, and regulate intra-state activities. The Centre has said that the Bill seeks cooperative governance rather than centralisation, aiming to balance state and federal roles in managing the power sector.
The proposed Bill seeks to modernise India’s electricity distribution system through competition and shared infrastructure, while ensuring continued subsidies for vulnerable groups. It mirrors successful models like the ISTS to promote efficiency and accountability, while maintaining the states’ regulatory powers.