Electricity Bill Aims to Eliminate Industrial Cross-Subsidy and Promote Competition
SDG 9: Industry, Innovation and Infrastructure | SDG 7: Affordable and Clean Energy
Institutions: Ministry of Power | State Electricity Regulatory Commissions (SERCs)
The Electricity (Amendment) Bill, 2025, marks a major structural reform aimed at transforming India’s power distribution sector by moving away from the old monopoly supply model to one based on performance and competition. The Bill, which supports the vision of Viksit Bharat 2047, seeks to resolve deep-rooted inefficiencies, ease financial strain on distribution companies (Discoms) from high aggregate technical and commercial (AT&C) losses, and optimize network costs.
Core Structural Reforms and Financial Rationalization
Cross-Subsidy Elimination: The Bill primarily targets the rationalization of cross-subsidy distortions that currently force industrial users to pay inflated tariffs to subsidize other consumer categories. It seeks to eliminate cross-subsidy for the Manufacturing Industry, Railways, and Metro railways within five years. This is expected to make Indian industry and logistics more competitive by rationalizing electricity costs.
Competition in Distribution: The Bill facilitates regulated competition by allowing multiple public and private licensees to operate in the same area using shared and optimized infrastructure, preventing wasteful duplication. It promotes cost-reflective tariffs to ensure the financial viability of the sector, while fully protecting subsidized tariffs for farmers and low-income households through transparent budgeted subsidies under Section 65.
Governance and Infrastructure: It mandates Universal Service Obligation (USO) for all licensees, ensuring non-discriminatory access, though large consumers (over 1 MW) may be made free from USO to enable Open Access. The Bill strengthens regulatory accountability, empowers State Electricity Regulatory Commissions (SERCs) to enforce standards and penalize non-compliance, and introduces provisions for Energy Storage Systems (ESS) to define their role in the electricity ecosystem.
Policy Relevance
This structural reform directly addresses the financial viability crisis in the power distribution sector and aims to dismantle a long-standing barrier to industrial competitiveness. By eliminating hidden cross-subsidies and promoting competition, the Bill is a blueprint for a modern, efficient, and resilient power sector aligned with the goal of increasing manufacturing output.
Equity Concerns and Public Debate
Despite the government’s assurance that competition will reduce overall supply costs by cutting AT&C losses, the Bill has faced widespread criticism. Consumer forums and trade unions have opposed it, arguing that the amendments are designed to facilitate privatization, which they fear will lead to higher tariffs for farmers and the public by removing the cross-subsidy safety net. Critics also view the proposed Electricity Council as a mechanism that could centralize authority and erode state autonomy.
What the Electricity Amendments Mean for a Common Man
The Electricity (Amendment) Bill, 2025, primarily aims to shift the power distribution sector from a regional monopoly model to one based on performance and choice. This has four key effects on the everyday consumer:
1. Protection of Subsidies and Power Costs
Subsidies Remain, but They Become Transparent: For the majority of residential users and farmers who receive subsidized power, the Bill ensures that these subsidies are fully protected and continue. Crucially, the subsidy is no longer hidden in the high tariffs paid by industries (the old “cross-subsidy” model). Instead, the subsidies must be clearly budgeted and paid by the State Government directly to the distribution companies (Discoms).
Impact: Your subsidized tariff remains the same, but the system is cleaner and financially more accountable, as states must allocate funds transparently.
2. Choice in Electricity Supplier (Potential for Better Service)
Regulated Competition: The Bill facilitates regulated competition in power distribution. This means that in the future, multiple public and private companies may be licensed to supply electricity in your area using the same existing network infrastructure.
Impact: You could potentially choose your power supplier based on reliability, service quality, and pricing (for non-subsidized tariffs), breaking the monopoly of the single, existing Discom. This shift encourages better service and operational efficiency from all providers.
3. Improved Service Reliability and Quality
Financial Health of Discoms: By mandating cost-reflective tariffs (where costs are properly covered) and allowing subsidies to be paid directly from the state budget, the Bill aims to improve the dire financial health of Discoms.
Impact: Financially healthy Discoms have the resources to invest in crucial areas like network maintenance, new technologies, and reducing power theft and technical losses, leading directly to fewer power cuts and improved supply quality.
Regulatory Power: The Bill strengthens the power of the State Electricity Regulatory Commissions (SERCs) to penalize non-compliance and determine tariffs if Discoms delay their applications.
Impact: The regulator has more tools to ensure you, the consumer, receive the minimum standards of service quality.
4. Impact on Industry (Job and Economic Growth)
Manufacturing Competitiveness: The removal of the industrial cross-subsidy (which inflated industrial tariffs) is expected to make electricity significantly cheaper for manufacturing companies, railways, and metros.
Impact: Lower input costs for businesses enhance industrial competitiveness, which can ultimately lead to more business investment, job creation, and economic growth in your region (supporting the Viksit Bharat 2047 vision).
Follow the full report here: Electricity (Amendment) Bill, 2025: Reforming The ELECTRICITY SECTOR