The Ministry of Power recently released the Draft Electricity (Amendment) Bill, 2025, inviting public comments and suggestions. The key proposed changes are summarised below:
Cross-Subsidies phasing out
Currently, there is substantial cross-subsidies and surcharges imposed on industrial consumers, including manufacturing enterprises, railways, and metro/mono-rail systems, resulting in high manufacturing and logistics costs that undermine industrial competitiveness. To address this challenge, the Amendment Bill introduces a proviso under Section 61(g) mandating the full elimination of cross-subsidies for manufacturing enterprises, railways, and metro-rail systems within five years from the enactment of the Amendment Bill.
Cost-Reflective Tariffs and Suo Motu Tariff Determination
Distribution Licensees in India have historically faced financial distress, primarily because the consumer tariffs often fail to reflect the true cost of electricity supply. To address this imbalance, the Amendment Bill proposes to amend Section 61(g) of the Electricity Act to mandatorily require the Appropriate Commission1 to determine cost-reflective tariffs. Further, the Amendment Bill introduces a new proviso to Section 64 of the Electricity Act, empowering the Appropriate Commission to determine tariffs suo motu in cases where distribution licensees delay the filing of tariff petitions.
USO
The Amendment Bill contemplates the inclusion of an exemption under Section 43 of the Electricity Act, relieving distribution licensees of their universal service obligation (USO) —that is, the obligation to supply electricity to all consumers within their area of supply. However, under the proposed amendment, the State Regulatory Commission will be authorised to designate one distribution licensee to act as a supplier of last resort, ensuring continuity of supply at a premium over the cost of supply if other arrangements fail.
Shared Use of Distribution Networks
The Amendment Bill envisages amending Section 14 of the Electricity Act to allow distribution licensees to supply electricity using the network of any other distribution licensee. It further empowers the Appropriate Commission to establish a regulatory framework for managing multiple licensees operating in the same area, ensuring that network expansion and augmentation are carried out efficiently and without duplication of infrastructure.
Electricity Council
The Amendment Bill intends to incorporate a new Section 166(1A) into the Electricity Act to constitute an Electricity Council. The Electricity Council is envisaged as a high-level institutional mechanism to advise the central and state governments on policy matters, facilitate consensus on power sector reforms, and coordinate their implementation. This initiative aims to strengthen cooperative federalism, ensure policy alignment across jurisdictions, and support the effective achievement of the objectives of the Electricity Act
Electric Line Authority
The Amendment Bill seeks to amend Section 164 of the Electricity Act to establish the Electric Line Authority. Following the enactment of the Telecommunications Act, 2023, which repealed the Indian Telegraph Act, 1885 (“Telegraph Act”), the transitional provisions under the Telecommunications Act provided that the Telegraph Act will continue to apply to the laying of transmission lines under Section 164 of the Electricity Act, as if it had not been repealed, until the said Section 164 is amended. Accordingly, the Amendment Bill envisages transferring the powers of the Telegraph Authority under the repealed Telegraph Act to the newly constituted Electric Line Authority under Section 164 of the Electricity Act.
Timelines for proceedings
The Amendment Bill provides for the addition of Section 92(6) to the Electricity Act, which mandates that all proceedings before the Appropriate Commission be decided expeditiously, with an effort to dispose of cases within 120 days.
Minimum Renewable Purchase Mandate
Section 86(1)(e) of the Electricity Act requires the SERCs to specify the portion of total electricity consumption in a distribution licensee’s area that must be procured from non-fossil fuel sources. 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, the Amendment Bill proposes to insert Section 142(2) to provide for penalties for non-compliance with Section 86(1)(e), stipulating that, without prejudice to any other penalty under the Electricity Act, a defaulting person shall be liable to pay a penalty ranging from Rs 0.35 to Rs 0.45 per kWh.
Energy storage systems
The Amendment Bill, for the first time, introduces a definition of “Energy Storage Systems” under Section 2(26a) and correspondingly amends the definition of “power system” to include such energy storage systems. These amendments signify the growing statutory recognition of energy storage as an integral component of India’s power ecosystem.
Expanded role of CEA
Furthermore, the Amendment Bill seeks to modify the powers of the Central Electricity Authority under Section 73 of the Electricity Act, to specify cybersecurity requirements for the power system, excluding systems outside integrated grid operations. Lastly, the Amendment Bill seeks to amend Section 176(1) to expand the Central Government’s rule-making authority, permitting it to make rules “for the purposes of this Act” rather than merely “for carrying out the provisions of this Act”, thereby facilitating proactive policy alignment and addressing emerging challenges in the power sector.
Summary
The Bill proposes phasing out cross-subsidies for manufacturing enterprises, railways, and metro systems within five years, and requires State Electricity Regulatory Commissions (SERCs) to set cost-reflective tariffs. Regulators can also revise rates suo motu to update tariffs from April 1 yearly—promoting greater predictability and fairness for industrial consumers. This represents a fundamental shift toward cost-reflective electricity pricing.
For consumer categories needing subsidies, the amendment bill directs state governments to fund them through budgetary provisions rather than inflating tariffs for commercial and industrial consumers. This move will curb under-recoveries, make subsidies transparent, and make financial support explicit rather than hidden in electricity prices.
Exempting distribution licensees from the universal service obligation for consumers with loads above 1 MW pragmatically recognises the procurement flexibility large users deserve. The Bill also mandates uninterrupted supply for manufacturing units, including a designated supplier of last resort if open access fails, guaranteeing continuity vital for sectors like electronics, pharmaceuticals, and heavy engineering. Also, the Amendment Bill allows licensees to supply power through shared networks, reducing duplication and overheads. By optimising infrastructure use, this can reduce power costs, foster genuine competition, and expand consumer choice—ensuring genuine open access.