By Enersider Desk | New Delhi
The Electricity (Amendment) Bill, 2025 is aimed at improving the power distribution sector by introducing financial discipline, promoting competition, and enhancing efficiency. It aims to build a modern power sector in line with the vision of Viksit Bharat @ 2047. The Bill retains provisions for subsidised tariffs for farmers and other eligible consumers, with State Governments continuing to provide these subsidies under Section 65 of the Act.
Additionally, the Bill provides for healthy competition between the Government and Private Discoms in electricity supply under the supervision of SERCs. This is intended to improve service quality and efficiency. It further aims to make both Government and Private utilities more performance-oriented, shifting from monopoly supply to a more accountable and consumer-focused system
- Will competition raise electricity costs for farmers or common consumers?
Competition reduces the overall cost of electricity supply by improving efficiency and accountability in supply.
Shared network usage will eliminate duplication of distribution lines and sub-stations. Under monopoly electricity supply model, technical and commercial losses are high and often merged under one head, masking inefficiencies and theft. When State Governments provide subsidised electricity to segments like farmers or domestic consumers, the subsidy burden includes not only the intended social support but also the cost of monopoly operations.
By enabling shared network usage and facilitating competition, the reforms will reduce losses and lower the effective subsidy burden on State Governments, without altering the subsidised tariffs paid by consumers.
- Will cost-reflective tariffs make power unaffordable for farmers and the poor?
Cost-reflective tariffs will break the DISCOM debt cycle, enabling reliable service, timely maintenance, and distribution network infrastructure upgrades.
Cross-subsidy elimination for manufacturing industries, Railways, and Metros will improve competitiveness and help in job creation. Hidden cross-subsidies are replaced with transparent and budgeted subsidies (under section 65 of the Act), protecting vulnerable consumers like farmers and poor.
- Will competition lead to underpayment of network (wheeling) charges?
Under the proposed Bill, SERCs will fix cost-reflective wheeling charges. All distribution network users – public or private – will pay these regulated charges. The collected charges will then be shared fairly among licensees based on network ownership. This ensures utilities have adequate funds for salaries, maintenance, and network expansion.
The country already has a successful model of Inter-State Transmission System (ISTS) which operates on shared infrastructure. Transmission Service Providers (TSPs) viz., Powergrid (CPSU) and private companies both compete and build ISTS assets under the supervision of CERC. Users make monthly payments which are then redistributed to the TSPs fairly. This model has lowered costs and time of building ISTS, while maintaining reliability.
- Will this end Government DISCOMs or allow cherry-picking by private companies?
Government DISCOMs will continue to operate alongside private licensees in a regulated, level-playing environment. Competition would reduce costs, improve efficiency and service quality. The ISTS experience shows that regulated competition lowers costs and enables rapid expansion of the network.
Each distribution license covers all consumers within the SERC defined distribution area – either an entire Municipal Corporation or three adjoining districts or a smaller area only if specifically notified by the Appropriate Government. SERCs regulate these areas.
Regulators set cost-reflective tariffs for all distribution licensees. Universal Service Obligation (USO) applies to all licensees. This means every supplier must serve all consumers in its area, without discrimination. Additionally, distribution licensees serving subsidised consumers (eg. farmers, poor households) receive State subsidies. USO will be applicable to all consumers including farmers and domestic consumers, other than large consumers specifically exempted by SERCs.
SERCs enforce performance standards (reliability, voltage, outage frequency) and can penalise or revoke licences for non-compliance.
The Bill also allows SERCs, in consultation with State Governments, to remove USO for large consumers (>1 MW) who are currently eligible for open access under the Act. These large consumers can procure their own power through open access without Discom support. A distribution licensee as supplier of last resort will provide supply at a premium over cost of supply, if needed, without incurring loss.
Thus, the framework ensures fair competition, full coverage, and financial stability for all licensees.
- Does the Bill centralise powers or erode State autonomy?
Electricity is in the Concurrent List, enabling both Centre and States to legislate. The Bill envisages implementation of reforms through a consultative process between them.
The proposed Electricity Council will serve as a consultative body to build policy consensus. At the same time SERCs will continue to determine tariffs, issue licences, and regulate intra-State activities.
The Bill thus preserves the federal balance, promotes cooperative governance, and strengthens the framework for addressing the challenges of the power sector.
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