Why in news?

The Electricity (Amendment) Bill, 2025 introduces major reforms to modernize India’s power sector by promoting competition in electricity distribution, rationalizing tariffs to be more cost-reflective, and phasing out cross-subsidies for industries and railways within five years. 
 
Background

• Purpose: To amend the Electricity Act, 2003 and introduce major reforms to strengthen the power sector, ensure consumer choice, promote competition, and attract investments.
• Context: Previous attempts at amendments (notably in 2014, 2018, and 2021) faced stakeholder resistance, especially from states and power sector employees.

 
Major Provisions

1. Introduction of Multiple Distribution Licensees

• Provision for Competition: Allows more than one distribution licensee in the same area, promoting competition and consumer choice.
• Non-discriminatory Open Access: Ensures that all distribution companies get non-discriminatory access to distribution networks.

 
2. Separation of Carriage and Content

• Decoupling Supply and Wires: Transmission (wires) and electricity supply (content) functions separated, encouraging new suppliers while the network remains regulated.

 
3. Direct Benefit Transfer (DBT) of Subsidies

• Targeted Subsidies: Mandates DBT of subsidies to consumers, reducing pilferage and financial stress on discoms.

 
4. Strengthened Regulatory Commissions

• SERCS/EERCs Powers Enhanced: Greater autonomy and accountability to resolve disputes, modify tariffs, and monitor compliance.
• Time-bound Decisions: Deadlines for tariff determination and dispute resolution enforced.

 
5. Promotion of Renewable Energy

• Renewable Purchase Obligation (RPO): Increased and made statutory, with penalties for non-compliance.
• National Renewable Energy Policy: Mandate for the Central Government to notify a comprehensive policy.

 
6. Stringent Penalties for Violations

• Enforcement: Higher penalties for theft, unauthorized use, or non-compliance with provisions.

 
7. Duty and Role of Load Dispatch Centers

• Grid Reliability: Empowerment of national and regional load dispatch centers for system Operation.

 
Other Important Points

• Tariff Rationalization: Aims for cost-reflective tariffs, reduction in cross-subsidy over time.
• Smart Meters/Metering Reforms: Promotes smart meters, prepaid meters, and efficient metering infrastructure.
• Consumer Rights: Ensures time-bound service delivery and strengthens consumer grievance redressal.
• Franchisee and Sub-licensee Framework: Flexibility for local franchisees in distribution.

 
Criticisms & Concerns

• State Opposition: States worry about loss of revenue and erosion of control over electricity distribution.
• Employee/Discom Resistance: Possible job losses and uncertainty due to privatization and restructuring.
• Rural vs Urban Divide: Fears that private licensees may prefer urban, profitable areas, neglecting rural supply.

 
Potential Benefits

• Increased efficiency and reduced losses in power distribution.
• Greater consumer choice and improved service quality.
• Boost to renewable energy integration and investment.

 
Potential Challenges

• Effective regulation and implementation at state level.
• Transition challenges for existing utilities and staff.
• Addressing subsidy and cross-subsidy transition periods.

Download Pdf