India Plans To Amend Its Electricity Law To Eliminate Industrial Cross-subsidies Within Five Years And Accelerate Renewable Energy Deployment.

 

India plans to amend its electricity law to eliminate industrial cross-subsidies within five years and accelerate renewable energy deployment.

 

On October 10, India's Ministry of Power released the "Draft Amendment Bill for the Electricity Act, 2025," aiming to strengthen the financial health of distribution companies (DCOs) through structural reforms, optimize the industrial electricity pricing system, accelerate renewable energy deployment, and protect consumer rights. The draft bill is open for public comment for 30 days.

 

The amendments focus on three key areas. First, by implementing a cost-reflective pricing mechanism, regulators will be required to proactively set tariffs when utilities fail to submit timely reports, aiming to address the massive losses of distribution companies (DCOs) exceeding 69 trillion rupees. Second, the amendments plan to phase out cross-subsidies for the manufacturing industry, India's railways, and the metro network over five years. State regulators will also be allowed to exempt distribution companies from mandatory power supply obligations for large megawatt-level users, thereby reducing industrial electricity costs and opening up the direct power purchase market.

 

To accelerate the transition to clean energy, the draft bill introduces market-based mechanisms such as contracts for difference (CFDs) to attract private investment. It also authorizes the central government to set a national minimum non-fossil energy consumption ratio, with each state achieving a target of no less than this benchmark. Entities that fail to meet their renewable energy obligations will face financial penalties. Regarding consumer rights, the bill establishes uniform minimum standards for electricity distribution services nationwide, caps the penalty period for illegal electricity use at 12 months, and reduces the appeal bond from 50% to one-third of the assessed value.

 

The draft simultaneously promotes infrastructure modernization and regulatory system optimization, explicitly allowing multiple distribution entities to share grid facilities and authorizing the Central Electricity Authority to develop cybersecurity standards. Furthermore, it expands the scope of the removal clause for members of the Electricity Regulatory Commission, shortens the case hearing period to 120 days, and increases the number of members of the Electricity Appellate Tribunal from three to seven. A new Electricity Council, chaired by the Union Minister of Power, will coordinate the implementation of reforms across states to jointly build a financially resilient, market-competitive, and environmentally sustainable electricity system.