Power ministry proposes amendments to Electricity Act, invites public opinion
- October 11, 2025
The Union power ministry, on October 9, 2025, issued the “Draft Electricity (Amendment) Bill, 2025” that proposes key changes in provisions of the “Electricity Act, 2003.”
These amendments seek to strengthen and reform the electricity sector, in alignment with evolving industry requirements.
The power ministry has invited comments/suggestions on this draft amendment bill, which the ministry expects to receive within 30 days.
Overall objective
According to an official power ministry communication, despite major structural reforms under the Electricity Act, 2003, such as unbundling of utilities, competition, and open access, the distribution segment continues to face severe financial stress, with cumulative losses exceeding Rs.6.9 lakh crore. Regulatory delays have further weakened the sector’s financial viability, while cross-subsidy induced high industrial tariffs have impacted industrial competitiveness and constrained economic growth.
The proposed amendments seek to ensure the financial sustainability of the power sector and promote ease of doing business and ease of living. They also aim to enhance industrial competitiveness, increase the share of non-fossil electricity generation, and strengthen regulatory accountability.
Here is a brief account of the proposed amendments:
Empowering electricity regulatory commissions
It is proposed to make it mandatory for electricity regulatory commissions to determine cost-reflective tariffs. This will promote financial viability of the power sector. To prevent delays in tariff revision that usually arise from late filing of tariff petitions by utilities, it is proposed to empower SERCs to determine tariffs suo moto, ensuring that tariff revisions are implemented with effect from April 1, which is the first day of the financial year.
State government will still have the flexibility to support specific customer categories by providing subsidies on their behalf, ensuring that no consumer group is unduly burdened.
Exempting distribution licensees from USO
It is proposed to exempt distribution licensees from the Universal Service Obligation (USO) for consumers eligible for Open Access (OA). To ensure uninterrupted supply for such consumers, SERCs may designate one of the distribution licensees to supply power at a premium over the cost of supply, of other supply arrangements fail. This reform will unlock substantial electricity demand from industries that can access affordable power directly.
Currently, all distribution licensees are bound by USO to supply electricity to all consumers, including those eligible for OA (i.e. with demand of above 1 MW).
Exemption from cross-subsidy
It is proposed to exempt manufacturing enterprises, railways and metro railways from cross-subsidy within five years. This measure seeks to help lower transportation and logistics costs, ultimately enhancing India’s competitiveness in the global market.
Currently, electricity tariffs for railways, metro rail and mono rail systems are burdened with cross-subsidies and surcharges, which increase the costs of transporting goods and people. The proposed reform aims at alleviating this burden.
Introducing new market mechanisms
It is proposed to empower Central Electricity Regulatory Commission (CERC) to introduce market-driven instruments to attract investment and promote capacity addition in the renewable energy (RE) sector. Currently, the only “incentive” for RE generators is selling power to distribution utilities through long-term PPAs. Creating innovative market-based mechanisms could provide more incentive, as has been seen in the UK and some EU nations.
Empowering governments to act against quasi-judicial bodies
It is proposed to empower the Central and state governments to refer complaints against members of CERC and SERCs for failure to perform their duties, and to expand the grounds for removal to include willful violation or gross negligence. A timeline of 120 days is proposed for disposal of adjudicatory matters by CERC and SERCs, to ensure efficiency. The proposal seeks to strengthen accountability and ensure timely adjudication of quasi-judicial authorities related to the power sector.
Incorporating provisions of Telecommunication Act, 2023
It is proposed to incorporate provisions related to electric lines and related works, currently under Telecommunication Act, 2023, under the Electricity Act, 2003, to ensure continued legal authority for licensees to install and maintain electric lines. State governments may prescribe frameworks for fair land compensation, with unresolved disputes appealable to the District Judge. This reform seeks to expedite right-of-way related issues.
Sharing of distribution networks
It is proposed to explicitly allow distribution licensees to supply electricity through either their own or a shared network, subject to applicable charges and regulatory oversight by SERCs. Currently, multiple licensees in the same area are required to maintain separate networks, leading to duplication and excess costs.
Note: The detailed communication on the “Draft Electricity (Amendment) Bill, 2025” is available on the official website of the Union Ministry of Power, and may be accessed using this external link.