Centre proposes Electricity Act amendment, empower regulators to revise tariff suo motu

The measures proposed are supposed to help lower transport and logistics costs, improve efficiency, and enhance India’s competitiveness in global markets, said the official.

New Delhi: The Power Ministry has come out with a draft bill which seeks to empower state regulators to revise tariff suo motu, sharing the distribution network by multiple distribution companies.

“It is proposed to amend the Electricity Act to make it mandatory for Electricity Regulatory Commissions to determine cost-reflective tariffs,” the power ministry said in a draft of the Electricity (Amendment) Bill 2025.

The ministry circulated the draft bill on Thursday to seek feedback from stakeholders within 30 days from the date of issue.

The Ministry decided to introduce sweeping reforms in the power sector aimed at establishing a robust and forward-looking legal framework which address the financial stress of power distribution companies, curbing high industrial tariffs that has affected competitiveness, constrained economic growth, and slowed the transition to clean energy, said an official in the Power Ministry.

The bill also proposes to exempt manufacturing enterprises, railways, and metro railways from cross-subsidy within five years. At present, the electricity tariffs for Indian Railways and metro systems are burdened by cross-subsidies and surcharges.

This measure will help lower transport and logistics costs, improve efficiency, and enhance India’s competitiveness in global markets, said the official.

However, the ministry stated that the State Governments continue to have the flexibility to support specific consumer categories by providing advance subsidies on their behalf, ensuring that no consumer group is unduly burdened.

The ministry pointed out that despite major structural reforms under the Act, the distribution segment continues to face severe financial stress, with cumulative losses exceeding Rs 6.9 lakh crore.

Delay in timely revision of power tariff have further weakened the energy sector’s financial viability. Further, to prevent delays in tariff revisions, which often arise due to late filing of tariff petitions by utilities, said the official

The proposed reforms will ensure that revised tariffs are implemented from 1st April of each financial year, improving the overall financial discipline in the power sector, said the official.

The draft bill also provides for allowing 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.

At present, multiple licensees in the same area are required to maintain separate networks, leading to duplication and excess costs.