The draft Electricity (Amendment) Bill, 2025 proposes major changes to the Electricity Act, 2003 to improve the financial health of India’s power sector, increase competition and bring tariffs closer to actual supply costs. It opens distribution to real competition by allowing multiple licensed suppliers to operate in the same area, using the existing poles, wires and substations instead of building parallel networks. All suppliers will carry a Universal Service Obligation to ensure no consumer is denied electricity, though state regulators may relax this requirement for very large consumers above 1 MW. The government says the reform is essential because Distribution Companies (DISCOM’s) are in deep financial distress, with losses of about ₹6.9 lakh crore and debt exceeding ₹7.4 lakh crore and has directed states to ensure at least 20% of power supply is handled by private players as part of the restructuring package.

Regulators will be required to move toward cost reflective tariffs so consumer prices match the real cost of generation transmission and distribution. States and UTs currently depend on heavy cross subsidies where industry pays more so farmers and low-income households pay less. The 2025 Bill plans to phase out these cross subsidies for major users like manufacturing Indian Railways and metro systems within five years. Subsidies for weaker groups will continue but through transparent budgeted payments rather than hidden tariff distortions. This shifts subsidy from electricity bills to the state budget and possibly to direct benefit transfers. Regulators will also set wheeling charges for new suppliers that use the existing network. This will determine whether public distribution companies remain viable and whether competition works. The Bill also changes governance. It aims to create an Electricity Council led by the Union Power Minister with state power ministers to improve policy coordination. State commissions will gain stronger powers to penalise non-compliance enforce standards and set tariffs when licensees delay filings. On infrastructure the Bill supports network sharing instead of parallel lines. It recognises Energy Storage Systems for the first time and sets up an Electric Line Authority for right of way and compensation issues. It strengthens clean energy obligations, deepens power markets, brings in cybersecurity rules and updates company law references including clearer rules for captive power plants.

For domestic users, competition........

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