The Central Government has introduced the Electricity (Amendment) Bill, 2025, aiming to modernise and restructure India’s electricity sector to meet the demands of a rapidly growing economy.

The Bill is designed to improve competitiveness in Indian industry, reduce hidden cross-subsidies, and ensure reliable, affordable, and uninterrupted electricity for all categories of consumers — including households, agriculture, commercial complexes, transport systems, and manufacturing hubs.

One of the core features of the Bill is its emphasis on cost-reflective tariffs, which will ensure long-term financial discipline while maintaining government-backed subsidised tariffs for farmers and low-income households. By enhancing transparency, operational accountability, and optimum usage of shared networks, the Bill aims to minimise unnecessary duplication of infrastructure and accelerate the nationwide modernisation of power distribution.

The reform aligns with the national development agenda of Viksit Bharat 2047, ensuring that India’s energy system becomes resilient, future-ready, financially stable, and supportive of sustainable economic expansion.

Why India Needed the Electricity Amendment

Addressing Long-Standing Issues in the Power Distribution Sector

The amendment addresses persistent bottlenecks such as operational inefficiencies, high losses, market distortions, and the severe financial distress experienced by many distribution companies (discoms). High aggregate technical and commercial (AT&C) losses, low billing efficiency, and mounting debts have prevented the sector from providing high-quality, uninterrupted power.

Currently, most consumers have no choice but to depend on a single discom per region, limiting competition and failing to incentivise service quality. Industrial and commercial users also face inflated tariffs due to cross-subsidisation, which reduces India’s global manufacturing competitiveness.

Removing Market Distortions and Protecting Vulnerable Consumers

The Bill proposes to rationalise cross-subsidies, introduce direct procurement options for industries, and encourage market-based pricing. Despite tariff reforms, subsidised power supply for farmers and eligible beneficiary groups will remain safeguarded.

Strengthening Regulatory Framework

State Electricity Regulatory Commissions (SERCs) will determine fair wheeling charges to ensure equitable shared-network usage and sustainable financial operations for utilities. This system will prevent monopolies, promote healthy competition, and ensure investors, employees, and consumers are all protected.

Shared Infrastructure: Learning from the ISTS Model

A Proven Framework for Fair Access and Efficiency

India’s Inter-State Transmission System (ISTS) already operates successfully as a shared infrastructure model integrating government and private Transmission Service Providers (TSPs). Using a transparent and fair revenue-sharing mechanism regulated by the Central Electricity Regulatory Commission (CERC), the ISTS has reduced project costs, accelerated timelines, and ensured uninterrupted reliability.

Extending ISTS Principles to Distribution Networks

The Bill uses this success story as a blueprint for similar reforms in the distribution sector, ensuring fairness, cost-sharing, and improved system reliability.

Key Reform Areas Under the Electricity (Amendment) Bill, 2025

Structural Transformation

• Multiple distribution licensees may operate within the same area using common networks.

• Universal Service Obligation (USO) ensures all licensees provide non-discriminatory access to all consumers.

• SERCs may exempt USO requirements for large open-access users above 1 MW, improving market efficiency.

Tariff and Subsidy Reforms

• Encourages cost-based tariffs to reduce inefficiencies.

• Subsidies continue transparently under Section 65, ensuring direct government support for farmers and low-income groups.

• Cross-subsidies for Manufacturing Industry, Railways, and Metro Railways will be phased out within five years to improve industrial competitiveness.

Infrastructure and Network Expansion

• SERCs will set wheeling charges to avoid duplication and promote optimal usage of the distribution network.

• Energy Storage Systems (ESS) are officially recognised to support renewable energy integration and ensure grid stability—critical as India scales up solar and wind installations.

Strengthening Governance & Accountability

• A new Electricity Council will enhance Centre-State coordination.

• SERCs gain powers to enforce service quality standards, impose penalties, and fix tariffs suo motu when necessary.

Promoting Sustainable, Market-Driven Growth

• Mandates procurement of non-fossil fuel-based energy, with penalties for default.

• Encourages new market structures, advanced trading mechanisms, and competitive pricing.

Legal and Operational Clarifications

• Legislations and definitions updated to align with contemporary needs and the Companies Act, 2013.

• The Electric Line Authority is strengthened with powers equivalent to the Telegraph Authority under the Indian Telegraph Act, 1885, ensuring smoother dispute resolution, compensation, and infrastructure coordination.

Conclusion: A Future-Ready Power Sector for India

The Electricity (Amendment) Bill, 2025 marks a major turning point in India’s power sector. By promoting fair competition, encouraging private participation, improving governance, and ensuring tariff rationalisation, the Bill lays the foundation for a robust and investment-friendly electricity ecosystem. Importantly, the reforms balance industrial competitiveness with social welfare by continuing targeted subsidies for farmers and vulnerable consumers.

With a strong focus on affordability, sustainability, transparency, and reliability, the Bill plays a critical role in India’s long-term vision of Viksit Bharat 2047, helping build an energy-secure, modern, and globally competitive nation.