The Electricity Amendment Bill 2025 could be headed to the budget session. What is at stake?

The government is preparing to table the controversial Electricity Amendment Bill 2025 in the upcoming budget session of Parliament. As part of preparations for its introduction, the Ministry of Energy will now begin structured consultations with key stakeholders, including the electricity industry, unions, utilities and consumer groups, with the aim of building consensus around one of the most ambitious electricity sector reforms in two decades.

What is the Electricity Amendment Bill 2025?

The Electricity (Amendment) Bill, 2025 aims to overhaul India’s electricity distribution and regulatory framework to make electricity supply more competitive, financially sustainable and consumer-driven. The bill moves away from the traditional monopoly-based distribution model and opens the door to regulated competition, allowing multiple distribution licensees to operate in the same area using shared network infrastructure.

One of the bill’s key promises is that subsidized rates for farmers and low-income households will be fully protected by transparent, budgeted subsidies, even if the broader rate structure is more cost-reflective. The government says this approach balances social protection and financial discipline.

Why is the government pushing for this reform?

The proposed amendment is driven by long-standing structural weaknesses in the Indian power sector, particularly at the distribution level. Many state-owned distribution companies continue to experience heavy losses due to poor billing efficiency, high overall technical and commercial (AT&C) losses and tariff distortions.

Another major concern is cross-subsidies, in which industrial and commercial consumers pay higher rates to subsidize other categories. The government says this has made Indian manufacturing and logistics less competitive compared to their global counterparts. The bill proposes a phase-out of cross-subsidies for the manufacturing, rail and metropolitan sectors within five years.

How will competition and prices evolve?

Under the Bill, State Electricity Regulatory Commissions (SERCs) will play a greater role in enforcing cost-reflective tariffs, regulating transmission charges and ensuring the financial viability of all distribution licensees. These circulation charges would apply uniformly to all users of the distribution network, whether public or private, helping to finance maintenance, salaries and future expansion of the network.

The reform framework reflects the existing Interstate Transportation System (ISTS) model, in which public and private players compete to build assets while sharing infrastructure under regulatory oversight. The government says this model has already reduced costs and improved reliability in transport and can now be replicated in distribution.

What does this mean for governments and consumers?

The bill proposes the creation of an Electricity Board to improve Centre-State coordination in policy and implementation. Although competition is encouraged, states retain an important role in how reforms are implemented at the local level, including in decisions on universal service obligations and open access thresholds.

For consumers, the government says the changes will lead to better quality of supply, fewer outages and more responsible public services. All distribution license holders will be subject to universal service obligations, guaranteeing non-discriminatory access to electricity, although large consumers benefit from greater freedom to procure electricity directly.

Unions and some state governments have expressed concerns that increased private sector participation could weaken job security, dilute public control over a strategic sector and shift risks to consumers. There is also concern that cost-reflective tariffs, despite subsidy guarantees, could lead to higher bills if states delay or underfund subsidy payments.