To make distribution companies more financially viable, the Ministry of Power has proposed an amendment to the Electricity Act, 2003, mandating the electricity regulators to issue cost-reflective power tariffs.

Stakeholders can send objections/suggestions to the draft amendments by November 10, 2025.

The Ministry stated in the Draft Electricity (Amendment) Bill, 2025, that distribution companies (DISCOM) were facing cumulative losses exceeding ₹6.9 trillion (~$77.68 billion), despite the introduction of several reforms.

The move comes in the background of the Supreme Court asking DISCOMs to issue cost-reflective electricity tariffs to ensure the financial viability of the power sector.

In August 2025, the Supreme Court directed the states to clear the pending dues of approximately ₹1.74 trillion (~$19.72 billion) owed to DISCOMs within four years. New dues created after April 1, 2024, must be liquidated within three years.

Stakeholders have been invited to submit their feedback within 30 days.

The Power Ministry also proposes to amend the Electricity Act to empower state electricity regulatory commissions (SERC) to file for tariff revisions suo motu.

The Ministry stated that this would prevent delays in tariff revisions, which would allow the revised tariffs to be implemented from April 1 of each financial year.

The proposed amendment also exempts DISCOMs from the universal service obligations for consumers eligible for open access exceeding 1 MW capacity.

It says that the SERCs may designate one of the DISCOMs to supply power to such consumers at a premium over the cost of supply, if other supply arrangements fail.  The move is expected to reduce the additional surcharge imposed on the industrial and commercial sector.

With the Electricity Act already allowing procurement of power from captive projects without paying open access surcharges, the amendment seeks to empower the central and state governments to frame their own rules governing captive generation.

Market-driven Instruments

Noting the massive power demands and limitations of the DISCOMs, the amendment also empowers the Central Electricity Regulatory Commission to introduce market-driven instruments that attract new investment, encourage competition, and ensure faster and more efficient renewable capacity addition.

The draft has also included renewable energy consumption obligations (RCO) as part of the Electricity Act. Consumers not meeting RCO must pay at least ₹0.35 (~$0.0039)/kWh and not more than ₹0.45 (~$0.005)/kWh.

It also proposed to prescribe a uniform benchmark service standard for all electricity consumers nationwide.

The draft Bill also proposes to limit the assessment period for unauthorized electricity use to one year. The mandatory deposit for appeals against such assessments would be reduced to one-third of the assessed amount. The appropriate authority can waive or reduce the deposit requirement in case of undue hardship.

Central and state governments can approve and implement the interstate transmission system and intrastate transmission systems.

In a bid to encourage the manufacturing sector, the amendment proposes to exempt the industry from paying cross-subsidy for five years.

It also proposes to remove the mandate to seek no objection from the Central government for license areas covering defense establishments, even in cases of no supply and infrastructure work.

In a bid to tighten the electricity regulatory commission, the amendment also enables the Central and State governments to register complaints against members of the Central Electricity Regulatory Commission and SERCs.

It recommends a maximum time of 120 days for electricity regulators to dispose of adjudicatory matters.

Pending Disputes

The Ministry said the Appellate Tribunal for Electricity (APTEL) has 2,628 cases pending as of September 2024, and the annual case registrations have increased from 461 in FY 2022 to 706 in FY 2024. To address the rising case backlog and time adjudication, it also proposes to increase the number of members in the APTEL from three to seven.

The draft amendment Bill simplifies the right-of-way for electric lines by including them within the Electricity Act, 2003. The state government may prescribe frameworks for fair land compensation, and unresolved disputes can be appealed to the district judge.

The Central Electricity Authority has been authorized to establish regulations to ensure the cybersecurity of integrated power system operations.

To avoid duplication of transmission networks, the amendment allows DISCOMs to supply power through their own or a shared network.

The draft proposes to constitute an Electricity Council with the Union Ministry of Power chairing it, and state electricity ministers as members, and the Union Power Secretary as member-convenor. The council will advise the Central and State Governments on policy measures, facilitate consensus on reforms, and coordinate the implementation of such reforms.

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