NextFin news, On Saturday, October 11, 2025, the Government of India unveiled draft amendments to the Electricity Act 2003, proposing sweeping reforms to privatize electricity distribution and overhaul tariff structures across the country. The draft Electricity (Amendment) Bill, 2025, released by the Ministry of Power, aims to create a financially sustainable and transparent power sector by mandating cost-reflective tariffs and gradually eliminating cross-subsidies.
The proposed changes seek to address the chronic financial losses faced by power distribution companies (discoms), which currently have accumulated losses exceeding Rs 6.9 lakh crore. By enabling privatization of distribution, the government intends to attract private investment and improve operational efficiency in the sector.
Key provisions in the draft bill include making it mandatory for State Electricity Regulatory Commissions (SERCs) to determine tariffs that accurately reflect the cost of supply. The bill also empowers SERCs to revise tariffs annually from April 1 to enhance predictability and financial discipline. While cost-reflective tariffs will be enforced, state governments retain the flexibility to provide targeted subsidies to protect vulnerable consumer groups.
Another significant reform is the planned phase-out of cross-subsidies within five years, particularly exempting manufacturing enterprises, railways, and metro rail systems from bearing these costs. This exemption aims to reduce energy expenses for these sectors, thereby lowering freight and passenger fares and boosting industrial competitiveness.
The bill also proposes governance reforms such as allowing distribution licensees to share existing network infrastructure to reduce duplication and costs. The Central Electricity Authority (CEA) will be authorized to implement cybersecurity regulations to safeguard the integrated power system.
Furthermore, the draft empowers the Central Electricity Regulatory Commission (CERC) to introduce market-based mechanisms to promote renewable energy investments and competition. Uniform benchmark service standards nationwide are also proposed to ensure reliable power supply and improve consumer service quality.
Disciplinary provisions are expanded to hold members of Central and State Electricity Regulatory Commissions accountable for negligence or failure to perform duties. Additionally, the bill allows state commissions to exempt distribution licensees from Universal Service Obligations where consumers qualify for open access, providing greater flexibility.
The Ministry of Power stated that these amendments represent the most comprehensive update to India’s electricity law since 2003. The reforms are designed to enhance the financial health of discoms, attract private sector participation, foster competition, and ensure fair and transparent pricing for consumers across India.
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