Draft Electricity Policy proposes automatic tariff revision

New Delhi: The Ministry of Power on Wednesday released the draft National Electricity Policy (NEP) 2026 for stakeholders comments, which proposes electricity tariff should be linked to a suitable index for automatic revision if no tariff order passed by the State Electricity Regulatory Commission.

Policy aimed at addressing high losses and debt of electricity distribution companies (discoms), non-cost-reflective tariffs, and high cross-subsidisation. The comments are to be submitted within 30 days.

The policy also said that the tariff should progressively recover fixed costs through demand charges to avoid cross-subsidisation between the tariff components as well as among various categories of consumers.

A non-cost-reflective tariff is a pricing structure in which the rate charged to a particular consumer category is below the utility's average cost of generating, transmitting, and distributing electricity to that category, the policy says.

While cross-subsidisation is a pricing mechanism in which certain consumer groups (industrial, commercial, and higher-income domestic users) are charged tariffs above the cost of supply to offset and subsidise the lower tariffs provided to other groups, such as agricultural consumers and low-income households.

The draft also seeks to foster competition, ensure grid resilience to integrate increased shares of variable renewable energy, and provide consumer-centric services with demand-side interventions, the Ministry said in a statement.

The Policy targets per capita electricity consumption of 2,000 kWh by 2030 and over 4,000 kWh by 2047.

It also aligns with India's climate commitments, including reducing emissions intensity by 45 per cent below 2005 levels by 2030 and achieving net-zero emissions by 2070, necessitating a decisive shift towards low-carbon energy pathways.

The NEP 2026 outlines strategies to overcome these challenges and achieve the stated objectives.

For resource adequacy, it said DISCOMs and State Load Dispatch Centres (SLDCs) shall prepare Resource Adequacy (RA) plans at the utility and state levels, in accordance with the regulations of state commissions. Central Electricity Authority (CEA) will prepare a corresponding national plan to ensure adequacy at the national level.

The policy also focuses on cybersecurity, technology adoption, and skill development.

On grid operations, the policy proposed for functional unbundling of state transmission utilities (STUs) and creation of independent state-level entities to manage SLDC operations and transmission planning functions.