Why the Bill was proposed
India’s power distribution system has long faced deep financial stress from high losses, weak billing efficiency and distortive cross-subsidies. The draft law responds to these structural challenges by encouraging regulated competition among distribution licensees and ensuring network costs are transparently allocated. The Bill’s stated aim is to make industry and logistics more competitive by reducing hidden cross-subsidy.
Competition in distribution: Multiple licensees — public and private — can operate in the same area, using a shared network and competing on performance. This removes the single-distributor monopoly model and seeks to improve service and investment.
Cost-reflective tariffs & cross-subsidy rationalisation: The Bill promotes tariffs that reflect actual supply costs and mandates transparent, budgeted subsidies for eligible consumers under a structured framework (Section 65). Industrial cross-subsidies are to be phased out for manufacturing, railways and metros in a staged manner to boost competitiveness.
Wheeling charges, network use and SERC powers
The draft empowers State Electricity Regulatory Commissions (SERCs) to set cost-reflective wheeling charges which will be uniformly applicable to all users of distribution networks. This mechanism is intended to fairly distribute funds for operations, maintenance and capacity expansion and to prevent wasteful duplication of infrastructure. The ministry’s draft provides the regulatory scaffolding for this approach.
Governance, accountability and the Electricity Council
The Bill proposes an Electricity Council to improve Centre-State coordination on power policy and to resolve regulatory friction. SERCs are given stronger enforcement powers including the ability to penalise non-compliance and determine tariffs suo motu if required applications are delayed. These measures aim to stabilise the sector’s finances and attract investment.
New market instruments and sustainability
Policymakers have included provisions for energy storage systems (ESS), strengthened non-fossil procurement obligations and new trading instruments to deepen the power market. The Bill’s market-making thrust is designed to support a faster rollout of renewables while managing grid reliability.
Concerns and opposition
The draft has drawn criticism from farmer groups and unions who fear that phasing out cross-subsidies and wider private participation could raise costs for small farmers and rural households. Several stakeholders have called for wider consultations and clearer guarantees on consumer protections before implementation. Media outlets and civil society have also flagged political and operational challenges in state adoption of reforms.
What happens next
The draft was circulated for comments and is expected to move through parliamentary processes following stakeholder consultations. Detailed rules — especially on wheeling charges, subsidy budgeting, and the Electricity Council’s functioning — will determine the Bill’s real-world impact on consumers and industry. Readers can review the government’s press note and the draft bill for full detail.