Subscribe
High capital costs, land acquisition delays, grid constraints need to be tackled to maintain India's renewable energy momentum
Economic Survey 2025-26 highlighted importance of battery storage, power efficiency for industrial competitiveness
This must appear alongside digital and financial reforms to transform electricity sector & enhance long-term growth
The Economic Survey 2025-26, tabled in the parliament on January 29, 2026, has underlined the need to address high capital costs, land acquisition delays and grid constraints to sustain India’s power and renewable energy momentum, while calling for large-scale deployment of battery storage and pumped storage projects to manage renewable variability.
It also stressed that for competitive businesses, energy costs are as critical as capital costs, making power sector efficiency central to India’s broader industrial and long-term growth strategy.
Against this backdrop, India’s installed power generation capacity climbed to 509.74 gigawatts (GW) as of November 2025, up 11.6 per cent year-on-year. The Survey presented this physical expansion alongside digital and financial reforms as part of a structural transformation of the electricity sector.
A key reform highlighted is the proposed India Energy Stack (IES), envisioned as a Digital Public Infrastructure (DPI) for the power sector. Built on open standards and protocols, IES aims to enable consent-based data sharing, interoperable systems and standardised measurement and settlement, allowing households, farmers and MSMEs to participate more easily in energy markets.
The platform is expected to unlock services such as peer-to-peer electricity trading, demand response, EV charging ecosystems and aggregation of rooftop solar and storage. By lowering entry barriers and standardising interfaces, IES could foster a new ecosystem of energy service providers and aggregators, shifting the focus from “energy access” to “energy agency”, where consumers can choose services and earn from distributed energy participation.
The Survey noted a significant improvement in the financial health of distribution utilities. In a historic first, DISCOMs and power departments recorded a positive Profit After Tax of Rs 2,701 crore in FY25, reversing years of losses.
Aggregate technical and commercial (AT&C) losses fell from 22.62 per cent in FY14 to 15.04 per cent in FY25, and the average cost of supply-annual revenue realisation gap narrowed to Rs 0.06 per kWh, indicating improved cost recovery. Outstanding dues dropped sharply from Rs 1.4 lakh crore in June 2022 to Rs 4,927 crore by January 2026, supported by tighter payment discipline and tariff adjustment mechanisms.
Central schemes such as Deen Dayal Upadhyaya Gram Jyoti Yojana, Integrated Power Development Scheme and SAUBHAGYA have seen investments of about Rs 1.85 lakh crore, electrifying 18,374 villages and connecting 28.6 million households. Under the Revamped Distribution Sector Scheme, projects worth Rs 2.8 lakh crore have been approved to upgrade networks and roll out smart meters.
The proposed Electricity (Amendment) Bill, 2026 aims to further improve efficiency through regulated competition in distribution, cost-reflective tariffs and stronger regulatory oversight, while safeguarding subsidised supply for vulnerable consumers.
Renewable energy (RE) now accounts for 49.83 per cent of total installed capacity as of November 2025. Total RE capacity has more than tripled in a decade to 253.96 GW, with a record 34.56 GW of non-fossil capacity added in the first eight months of FY26, led by solar.
Even as clean energy expands, coal continues to anchor energy security. India holds the world’s fifth-largest coal reserves and depends on coal for about 55 per cent of its energy mix and over 74 per cent of power generation.
In FY25, coal production reached a record 1,047.52 million tonnes, while imports fell 7.9 per cent, reflecting stronger domestic supply. The Survey suggested that coal will remain a stabilising pillar of grid reliability during a managed transition toward cleaner sources.
Overall, the Survey framed power sector reform, spanning infrastructure, digital systems, financial restructuring and storage deployment, as critical not only for energy security but also for enhancing industrial competitiveness in an economy where energy input costs directly shape growth prospects.