SYLLABUS

GS-3: Infrastructure: Energy, Ports, Roads, Airports, Railways etc

Context: The Ministry of Power recently released the Draft Electricity (Amendment) Bill, 2025.

Key Features of the Bill

• Healthy Competition:
  o The Bill shifts from a monopoly-based electricity supply system to a performance-driven model.
  o It allows both public and private utilities to operate, fostering efficiency and better service delivery.

• Protecting Vulnerable Consumers: 
  o Subsidised tariffs for farmers and low-income households are safeguarded.
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   State Governments may continue to provide these subsidies under Section 65 of the Act.
  o This ensures affordable access to electricity while maintaining fair pricing practices
• Strengthening Regulatory Powers:
  o State Electricity Regulatory Commissions (SERCs) are empowered to determine cost-reflective wheeling charges.
  o This supports financial stability for distribution licensees and encourages efficient network use.
• Rationalising Tariffs and Cross-Subsidies
  o The Bill promotes cost-reflective tariffs and rationalisation of cross-subsidies.
  o This helps optimise network utilisation and makes industrial power more affordable.

• Enhancing Transmission Infrastructure
  o It strengthens the Inter-State Transmission System (ISTS) by enabling competition among Transmission Service Providers.
  o Oversight by the Central Electricity Regulatory Commission (CERC) ensures transparent and efficient operations.

Pros of the Bill

• Competitive Market: The Bill actively promotes competition by breaking distribution monopolies and enabling multiple players to operate in the same area, thereby enhancing consumer choice, service quality, and overall efficiency.
• Protection for Vulnerable Groups: The Bill ensures equitable access by firmly safeguarding subsidised tariffs for farmers and low-income households.
• Financial Stability: The Bill strengthens the financial health of discoms by promoting cost-reflective tariffs and rationalising cross-subsidies, which also facilitates fresh investments.
• Stronger Regulation: The Bill enhances regulatory accountability by empowering SERCs to set wheeling charges and revise tariffs proactively.
• Efficient Infrastructure Use: The Bill boosts network efficiency by allowing shared use of distribution infrastructure, which reduces duplication, lowers costs, and improves overall utilisation.

Cons of the Bill

• Implementation Hurdles: The transition to a competitive market will face resistance from state utilities as they will seek to protect their revenue streams and market share.
• Cross-Subsidy Transition Risks: The rationalisation of cross-subsidies will impact affordability for certain consumer groups if the transition is not phased gradually.
• Regulatory Overlaps: The expanded functions of SERCs and the Electricity Council will lead to coordination challenges and potential procedural delays.
• Infrastructure Gaps: The requirement to upgrade networks for competition and shared usage will place significant investment and execution pressures on states, especially those with limited capacity.

Way Ahead

• Robust Implementation: The reform process will move forward with clear timelines, strengthened institutional capacity, and active stakeholder participation to ensure a smooth rollout.
• Gradual Cross-Subsidy Reform: The transition will follow a phased reduction of cross-subsidies, supported by targeted subsidies that safeguard vulnerable consumers.
• Better Coordination: Regulatory bodies will operate with enhanced coordination to prevent overlaps and enable faster, streamlined decision-making.
• Consumer-Centric Approach: Consumer interests should be prioritised by strengthening awareness initiatives, grievance redressal systems, and protection mechanisms in a competitive market environment.
• Continuous Review: The reform framework will incorporate regular monitoring and adaptable policy measures to prevent unintended consequences and keep progress aligned with intended outcomes.

Sources:
PIB
Tribune India
Tribune India