The Electricity (Amendment) Bill, 2025 introduces a structural shift that could redefine how Indian consumers interact with the power grid. For decades, power distribution in each region was dominated by a single state-run or public discom, a monopoly that, while intended to centralise responsibility, eventually cemented inefficiencies, financial distress and chronic service failures.
According to a presser released by the Press Information Bureau (PIB), the new Bill seeks to open up this closed ecosystem. It enables multiple power distribution licensees to operate simultaneously within the same geography, using a shared network. This model, known globally as “network access with competition,” invites private players to enter the distribution business while preserving universal service obligations.
By moving away from the monopoly model that has governed distribution since the Electricity Act of 2003, the government signals an ambition to create a competitive, consumer-centric electricity market. The intention is clear: better service quality, reduced outages, faster grievance redressal, and innovations driven by market competition.
A Universal Service Obligation (USO) will remain binding on all licensees, ensuring uninterrupted, non-discriminatory supply. This safeguard is critical to prevent market fragmentation and ensure that affordability and reliability remain paramount. However, State Electricity Regulatory Commissions (SERCs), after consulting State Governments, will be empowered to exempt licensees from the USO in the case of large consumers, defined as those consuming more than 1 MW, who rely heavily on open access for their operations.
Addressing long-standing vulnerabilities in power sector
India’s power distribution system has historically suffered from severe structural weaknesses. The Achilles heel of the power sector has always been the distribution segment, where Aggregate Technical and Commercial (AT&C) losses in many states routinely exceed 20-25 per cent. These losses, combined with poor billing efficiency and rampant theft, have resulted in financially crippled discoms, delayed payments to generating companies, and recurring distress cycles.
Industrial and commercial consumers, who subsidise household and agricultural consumers in many states, have long expressed concern over inflated tariffs. Cross-subsidy burdens have made industrial power costs among the highest in Asia, placing Indian manufacturing at a disadvantage.
The proposed Bill addresses these issues by aiming for transparent, cost-reflective tariffs. Subsidy-dependent categories such as farmers, agricultural pump users and low-income households will continue to receive government support, but through direct, budget-backed mechanisms under Section 65, rather than hidden cross-subsidies. This shift aligns with the Modi government’s broader governance model of transparent welfare delivered through direct fiscal commitments instead of opaque institutional burdens.
Within five years of implementation, cross-subsidies for key economic sectors, including manufacturing, railways and metro rail, are expected to be significantly reduced. This is positioned as a transformative reform intended to strengthen India’s industrial competitiveness.
Ensuring Financial Discipline
A central objective of the Bill is ensuring that distribution companies, whether state-run or private, retain the financial viability needed to maintain networks, pay employees and support infrastructure upgrades. The legislation empowers SERCs to determine uniform, cost-reflective wheeling charges applicable to all licensees using the distribution network.
This uniformity is intended to prevent tariff manipulation and ensure that shared infrastructure remains financially sustainable. Wheeling charges, which cover the cost of transporting power across the distribution network, are essential for revenue stability. By establishing uniformity, the Bill prevents undercutting, cross-subsidisation and rate distortions that could destabilise smaller licensees.
The PIB statement notes that the successful model of the Inter-State Transmission System (ISTS) under the Central Electricity Regulatory Commission (CERC) serves as a guiding template. The ISTS framework brought competition and private investment into transmission while preserving unified regulation and network viability. It reduced infrastructure duplication, enhanced project timelines, and lowered costs, outcomes that the Centre hopes to replicate in distribution.
Governance, Sustainability and Market Expansion
The Electricity (Amendment) Bill, 2025 lays out six major pillars to guide the reform process:
Structural Reforms: The foundation of the Bill rests on breaking monopoly structures and enabling regulated competition in distribution. This shift is intended to attract private capital, introduce modern technologies and improve consumer services.
Tariff and Cross-Subsidy Rationalisation: Gradually reforming tariffs to reflect actual costs while ensuring support for vulnerable groups is central to the Bill. This reduces distortions and brings transparency into the financing of subsidies.
Infrastructure and Network Efficiency: The Bill emphasises the need for improving distribution infrastructure, ensuring high uptime, minimising losses and deploying smart technologies for real-time monitoring.
Governance and Regulatory Strengthening: A new Electricity Council will be established as a Centre–State coordination platform. This addresses long-standing federal friction in the electricity sector, where states often resist central tariff guidelines or reforms.
SERCs will receive greater authority, including the power to take suo moto tariff decisions if discoms delay filings or violate norms, an essential step to prevent paralysis in tariff updates.
Sustainability and Market Development: The Bill formalises the role of Energy Storage Systems (ESS) within the electricity architecture, an urgent necessity as India scales up renewable energy.
Non-fossil energy procurement obligations are strengthened with explicit penalties for non-compliance, signalling a push towards cleaner energy.
Legal and Operational Clarity: The Bill updates outdated definitions, aligns references with the Companies Act, 2013, and expands the powers of Electric Line Authorities to streamline project execution.
Granting Electric Line Authorities powers equivalent to the Telegraph Authority under the Indian Telegraph Act, 1885 is expected to speed up the laying of electric lines, reduce bureaucratic delays and support rapid infrastructure expansion.
A Future-oriented power sector
The inclusion of Energy Storage Systems, along with reinforced renewable purchase obligations, indicates a sharp focus on preparing India’s power grid for a high-renewable future. As solar and wind energy form larger portions of the generation mix, the ability to store power becomes critical to maintain grid stability.
The Bill prepares the regulatory and operational ecosystem for these technological shifts. It enables storage operators to participate in the market, lays down rules for their integration, and creates pathways for utilities to procure storage as a service.
These provisions make the Bill not merely a distribution reform initiative but a broader modernisation blueprint for India’s entire electricity value chain.
Legal clarity has long been a weak link in India’s power reforms. Slow litigation, complex procedural rules and ambiguities in authority have delayed hundreds of transmission and distribution projects.
The Bill attempts to bridge these gaps by: updating definitions, aligning regulatory references with contemporary company law, codifying and expanding the role of Electric Line Authorities, harmonising compensation mechanisms and reducing bureaucratic impediments.
Empowering Electric Line Authorities with Telegraph Authority-like powers is expected to cut down delays in land access, right-of-way permissions, infrastructure installation and conflict resolution.
Powering Viksit Bharat
Positioned within the larger national agenda, the Electricity (Amendment) Bill, 2025, is seen as a foundational step toward India’s goal of becoming a fully developed economy by 2047. Affordable, reliable energy is the backbone of industrial growth, logistics efficiency, and rural development.
The Bill seeks to: reduce power costs for industry, support farmers and poor households through transparent subsidies, modernise distribution infrastructure, attract private capital and innovation, ensure regulatory stability, enable renewable integration.
In essence, the Bill aims to create an electricity sector that supports India’s manufacturing expansion, digital economy, urbanisation and rural transformation.
The Electricity (Amendment) Bill, 2025 arrives at a pivotal moment for India’s power sector. By combining competition, regulatory empowerment, tariff transparency, and clean energy integration, it attempts to correct deep-rooted inefficiencies that have long hindered sectoral progress.
For consumers, the promise is simple but profound: more choice, better service and stable, affordable electricity.
For India’s economy, it signals a crucial step towards a resilient, future-ready power sector capable of powering the vision of Viksit Bharat @ 2047.
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