Centre unveils Draft Electricity Amendment Bill 2025, to reform power sector

The Union Government has released the draft Electricity (Amendment) Bill, 2025, outlining a comprehensive roadmap to reform India’s power sector by strengthening the financial health of distribution companies, encouraging competition, improving regulatory oversight, and fast-tracking the shift towards clean energy in line with the Viksit Bharat @ 2047 vision.

The proposed legislation seeks to resolve long-standing issues such as heavy financial losses of distribution utilities, high electricity tariffs for industries, excessive cross-subsidisation, and slow progress in renewable energy deployment.

A key provision of the draft Bill focuses on restoring the economic stability of power distribution companies (DISCOMs). It makes cost-based tariffs mandatory and authorises electricity regulatory commissions to fix tariffs on their own initiative every year from April 1. This move aims to eliminate delays in tariff revision and ensure that utilities recover the actual cost of supplying electricity.

To support industrial growth and improve economic efficiency, the Bill proposes restructuring of tariff systems and gradual reduction of cross-subsidies that have made electricity expensive for industries. The reforms are expected to lower operational costs for businesses, stimulate demand, attract fresh investment, and enhance India’s position in global markets.

In the area of clean energy, the amendments grant the Central Electricity Regulatory Commission (CERC) the authority to introduce market-oriented mechanisms to draw private investment into renewable power projects. The Bill also proposes enforceable non-fossil fuel obligations to bring the Electricity Act in line with the Energy Conservation Act and help meet the national goal of achieving 500 GW of non-fossil energy capacity by 2030.

For consumers, the draft law introduces nationwide service standards to ensure better quality and reliability of power supply and greater accountability of utilities. Among the consumer-centric measures are limits on the period for assessing cases of unauthorised electricity use to one year and a reduction in the pre-deposit amount required to file appeals, making dispute resolution easier and more affordable.

The Bill also aims to reinforce regulatory institutions. Governments will be empowered to forward complaints against members of the Central and State Electricity Regulatory Commissions on expanded grounds for disciplinary action. A deadline of 120 days has been proposed for settling adjudicatory cases, while the strength of the Appellate Tribunal for Electricity (APTEL) will be increased to reduce the backlog of pending matters.

Another major reform involves transferring powers related to the laying and maintenance of power lines from the repealed Telegraph Act of 1885 to the Electricity Act, 2003. State governments will design compensation policies for landowners affected by such projects. The Bill further permits distribution companies to use shared electricity networks, subject to regulatory approval and applicable charges, to minimise duplication of infrastructure and cut operational costs.

For domestic and small consumers, the reforms are expected to bring improvements in service quality and reliability through uniform standards and tighter oversight. However, the introduction of cost-reflective tariffs could result in gradual increases in electricity prices for categories that currently receive higher subsidies.

The Centre has assured that subsidies for identified groups, including tribal households and economically weaker sections, will continue under Section 65 of the Electricity Act, with State Governments providing financial support in a transparent manner so that the overall health of the power sector is not affected.

In Andhra Pradesh and Telangana, where power utilities continue to face financial strain, the proposed amendments are likely to strengthen revenue collection and reduce accumulated losses. Annual tariff determination and rationalised subsidy structures are expected to improve cash flows and decrease reliance on State budgetary assistance.

Lower industrial tariffs and a more competitive electricity market could also encourage investment in manufacturing and renewable energy projects in both States, potentially expanding employment opportunities and increasing government revenues over time. However, State Governments may need to allocate additional funds for subsidies if they choose to shield certain consumer groups from higher tariffs.

The provision allowing shared use of power networks is also expected to reduce capital spending on transmission and distribution systems, easing financial pressure on State utilities.

The draft Electricity (Amendment) Bill, 2025, was opened for public and stakeholder feedback on October 9, 2025. Consultations are currently underway with State Governments, industry representatives, consumer organisations, and experts from the power sector.

Once enacted, the new law will be implemented uniformly across the country, including in Andhra Pradesh and Telangana.

The details were shared by Minister of State for Power Shri Shripad Naik in a written response in the Lok Sabha on Friday.