New electricity bill set to modernise India’s power sector

New Delhi: The government on Saturday said that the Electricity (Amendment) Bill, 2025 introduces key reforms to modernise India’s power sector, promoting competition in distribution, strengthening regulatory oversight, and supporting fair pricing mechanisms. 

The Bill was brought forward to resolve deep-rooted inefficiencies, like persistent financial losses in distribution companies (discoms) due to poor billing efficiency, high aggregate technical and commercial (AT&C) losses; lack of competition in electricity supply, with consumers tied to a single discom, limiting service quality and innovation; and cross-subsidisation distortions, where industrial users pay inflated tariffs to subsidise other categories, making Indian manufacturing less competitive.

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According to an official document, it facilitates regulated competition in electricity distribution, allowing multiple licensees to operate in the same area using shared and optimized infrastructure.

The Bill also 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).

The bill promotes cost-reflective tariffs while protecting subsidised consumers 

The Bill not only promotes cost-reflective tariffs while protecting subsidised consumers (farmers, poor households) through transparent budgeted subsidies under Section 65, but also seeks to eliminate cross-subsidy for the Manufacturing Industry, Railways, and Metro railways within five years.

It also empowers Appropriate Commissions to regulate wheeling charges and prevent duplication of distribution networks and introduces provisions for Energy Storage Systems (ESS) and defines their role in the electricity ecosystem.

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The Bill establishes an Electricity Council for Centre-State policy coordination and consensus-building and empowers State Electricity Regulatory Commissions (SERCs) to enforce standards, penalise non-compliance, and determine tariffs suo moto if applications are delayed.

The Electricity (Amendment) Bill, 2025 is a major step toward transforming India’s power system to meet the needs of a rapidly growing economy, said the document.

Notably, the reforms fully protect subsidised tariffs for farmers and low-income households.