The draft law seeks mandatory cost-reflective tariffs, lower industrial power rates, and relief from cross-subsidies while boosting clean energy investment.
The government has proposed major amendments to the Electricity Act through the draft Electricity (Amendment) Bill 2025, making cost-reflective tariffs mandatory, easing industrial cross-subsidy burdens, and empowering regulators to ensure financial discipline and cleaner energy growth in the power sector.
In a major step towards power-sector reforms, the government has proposed amendments to the Electricity Act that would make cost-reflective tariffs mandatory, rationalise high industrial rates, and exempt railway systems and manufacturing companies from the burden of cross-subsidies.
The idea is to establish a robust and forward-looking legal framework that addresses the financial stress of power distribution companies, which are facing losses of over ₹6.9 trillion, while curbing high industrial tariffs that, according to the government, have affected competitiveness, constrained economic growth, and slowed the transition to clean energy.
“It is proposed to amend the Electricity Act to make it mandatory for Electricity Regulatory Commissions to determine cost-reflective tariffs. State governments will continue to have the flexibility to support specific consumer categories by providing advance subsidies on their behalf, ensuring that no consumer group is unduly burdened,” the ministry of power said in a draft of the Electricity (Amendment) Bill 2025.
The draft Bill, released for public consultation, also proposes empowering State Electricity Regulatory Commissions (SERCs) to determine tariffs suo motu.
This would ensure that revised tariffs are implemented from April 1 of each financial year, improving overall financial discipline in the sector.
The ministry has sought public comments on the Bill in 30 days.
The draft Bill highlights that high industrial tariffs, cross-subsidies, and rising power procurement costs have weakened the competitiveness of Indian industry, particularly micro, small, and medium enterprises (MSMEs).
“The proposed amendments aim to rationalise electricity tariffs, unlock demand, and reduce logistics costs, thereby strengthening India’s economic productivity,” it states.
The Bill further proposes to exempt “manufacturing enterprises, railways, and metro railways” from cross-subsidy obligations within five years, aiming to reduce transport and logistics costs, improve efficiency, and boost India’s global competitiveness.
Currently, electricity tariffs for Indian Railways and metro systems are burdened by cross-subsidies and surcharges.
To accelerate India’s clean energy transition, the draft Bill seeks to empower the Central Electricity Regulatory Commission (CERC) to introduce market-driven instruments to attract investment, encourage competition, and ensure faster addition of renewable energy capacity.
To ensure reliable power supply for consumers, the ministry also proposes provisions enabling the prescription of uniform benchmark service standards nationwide.
Among other measures, the Bill proposes allowing distribution licensees to supply electricity through either their own or a shared network.
Currently, multiple licensees in the same area must maintain separate networks, leading to duplication and excess costs.
The Bill also seeks to empower the Central Electricity Authority to frame regulations to safeguard the cybersecurity of integrated power system operations.
It seeks to enable central and state governments to refer complaints against members of the CERC and SERCs for failure to perform their duties, expanding grounds for removal to include wilful violation or gross negligence.
Further, the government proposes allowing SERCs to exempt distribution licensees from the Universal Service Obligation for consumers eligible for open access.
Feature Presentation: Rajesh Alva/Rediff