The Ministry of Power has released the much-awaited draft Electricity (Amendment) Bill, 2025. The bill comes at a crucial juncture when the power sector is witnessing rapid transformation, driven by rising electricity demand, the growing integration of clean energy and increasing consumer expectations. Amidst this, the performance of the power distribution segment continues to be a major area of concern, with cumulative losses exceeding Rs 6.9 trillion. At its core, the draft bill aims to address long-standing structural issues in the power distribution segment and usher in reforms to meet emerging needs and requirements. It proposes reforms across five key areas – financial viability, economic competitiveness, energy transition, ease of living and doing business, and regulatory strengthening.
Among its key provisions, the draft bill proposes the sharing of distribution networks to promote efficiency and competition. It proposes to explicitly allow distribution licensees to supply power through their own or shared networks, with non-discriminatory open access mandated under Section 42. Apart from this, the bill emphasises cost-reflective tariff determination by electricity commissions to empower state commissions to determine tariffs suo motu, ensuring timely implementation.
Key proposals under the draft Electricity (Amendment) Bill, 2025
Distribution network sharing: The draft bill proposes to amend Section 14 of the Electricity Act, 2003, to allow distribution licensees to supply electricity through either their own or a shared network, subject to applicable charges and regulatory oversight by the state electricity regulatory commissions (SERCs). The bill also proposes to empower the appropriate commission to establish a regulatory framework for managing multiple licensees operating in the same area. Additionally, the bill proposes to amend Section 42 to explicitly mandate non-discriminatory open access to the existing distribution network. This will ensure that multiple suppliers can efficiently utilise existing infrastructure, eliminating redundancy and reducing overall infrastructure costs.
The proposal aligns with Section 42(3) of the Electricity Act, 2003, which allows any consumer within a distribution licensee’s area to procure power from another licensee. In such cases, the existing licensee is obligated to function as a common carrier, providing non-discriminatory access to its network in accordance with the regulations framed by the SERC.
Cost-reflective tariffs and suo motu tariff determination: The draft bill proposes to make it mandatory for electricity regulatory commissions to determine cost-reflective tariffs. It also notes that state governments will continue to have the flexibility to support specific consumer categories through advance subsidy payments. Additionally, to avoid delays in tariff revisions arising from the late filing of tariff petitions by utilities, the bill seeks to empower SERCs to determine tariffs suo motu, ensuring that revised tariffs are implemented from April 1 of each financial year.
Exemption from the universal service obligation: The bill proposes that SERCs, in consultation with the state governments, may exempt distribution licensees from the obligation to supply power to consumers with demand exceeding 1 MW (eligible for open access). To ensure reliability, SERCs may designate a supplier of last resort to serve such consumers at a premium over the cost of supply if their existing arrangements fail.
Eliminate cross-subsidies: To reduce high industrial and transport tariffs, the bill proposes to eliminate cross-subsidies for manufacturing enterprises, Indian Railways and metro railways within five years of its enactment. This is aimed at lowering logistics and transit costs, enhancing industrial competitiveness and improving overall economic efficiency.
Electric line authority: The draft bill introduces a new definition of “electric line authority” under Section 2(20a), designating it as the person or officer authorised by the appropriate government to perform functions related to the placement, maintenance and management of electric lines. This amendment replaces the earlier dependency on the Indian Telegraph Act, 1885, which was repealed by the Telecommunications Act, 2023, and transfers those powers directly into the Electricity Act, 2003 to ensure legal continuity for right-of-way and line installation activities.
Regulatory strengthening: To strengthen accountability and ensure timely adjudication, the draft bill proposes to empower the central and state governments to refer complaints against members of the Central Electricity Regulatory Commission (CERC) and SERCs for failure to perform their duties, and to expand the grounds for removal to include wilful violation or gross negligence. Further, a timeline of 120 days is proposed for the disposal of adjudicatory matters by the commissions to ensure efficiency.
Additionally, the bill proposes to increase the number of members in the Appellate Tribunal for Electricity from three to seven to address the growing case backlog and ensure timely adjudication.
Promote captive generation: The bill seeks to empower the central and state governments to frame rules governing captive generation, providing regulatory clarity and a consistent framework for industries to invest in self-generation and adopt cleaner, more efficient power sources. While the eligibility conditions are already defined under Rule 3 of the Electricity Rules, 2005, the amendment primarily seeks to provide explicit authority to frame procedures for verification of captive status.
Renewable purchase mandate: To align with the Energy Conservation Act, 2001 and ensure consistency across laws, the draft bill proposes to introduce provisions in the Electricity Act, 2003 for enforceable non-fossil energy consumption obligations. This measure aims to advance India’s goal of reliable, affordable and clean energy. The amendment bill seeks to ensure that the percentage specified by the SERC is not less than the percentage prescribed by the central government.
Further, to strengthen compliance with renewable purchase obligations, the bill proposes that, in addition to any other penalty under the Electricity Act, 2003, a defaulting entity will be liable to pay a penalty ranging from Re 0.35 to Re 0.45 per kWh of shortfall, thereby ensuring stricter enforcement and accountability in meeting renewable energy targets.
Constitution of an electricity council: The amendment bill proposes to establish an electricity council as a high-level institutional mechanism to strengthen cooperative federalism in the power sector. Chaired by the union minister for power, with state electricity ministers as members and the union power secretary as member-convenor, the council will advise the centre and states on policy matters, build consensus on reforms and coordinate their effective implementation. The initiative aims to promote policy alignment across jurisdictions and ensure cohesive, reform-driven growth of the power sector, in line with the vision of Viksit Bharat @2047.
Market development: The amendment bill proposes to empower the appropriate commission to promote the development of a power market, including trading, and to introduce and regulate market platforms, intermediaries and products – such as non-transferable specific delivery contracts for difference – in accordance with prescribed regulations. Additionally, to accelerate India’s clean energy transition, the bill proposes to specifically empower the CERC to introduce market-driven instruments that attract investment, encourage competition, and ensure faster and more efficient renewable capacity addition.
Other provisions: The amendment bill, for the first time, introduces a definition of “energy storage systems” under Section 2(26a) and correspondingly expands the definition of “power system” to include such systems, recognising their growing role in grid stability and renewable integration.
In addition, the bill seeks to amend Section 73 of the Electricity Act, 2003, to empower the Central Electricity Authority to specify cybersecurity requirements for the power system, excluding systems outside integrated grid operations, thereby strengthening grid resilience and data security.
Further, acknowledging the need for consistent service quality across the country, the bill proposes provisions for prescribing uniform benchmark service standards to ensure reliable and equitable power supply for all consumers.
Conclusion
The draft Electricity (Amendment) Bill, 2025 proposes far-reaching reforms aimed at opening up the power distribution segment to competition, phasing out cross-subsidies and strengthening regulatory accountability to enhance the efficiency and financial sustainability of India’s electricity system.
To recall, a similar electricity (amendment) bill was introduced in Parliament in August 2022, but was later referred to the Parliamentary Standing Committee on Energy for further deliberation. The latest draft, released in October 2025, is broader and more evolved – incorporating lessons from the earlier version and feedback from states and stakeholders.
Once enacted, the bill has the potential to transform India’s power sector by making discoms more efficient, competitive and financially viable. However, the true impact will hinge on effective implementation and the genuine introduction of competition in the distribution space – a reform that can lower the overall cost of electricity supply while driving greater efficiency, accountability and consumer choice.
Priyanka Kwatra
