Electricity Amendment Bill: Centre signals course correction after stakeholder pushback

The Union government is recalibrating key provisions of the proposed Electricity (Amendment) Bill, 2025 after receiving extensive feedback from regulators, consumer groups and state governments, even as it signals intent to move ahead with legislation aimed at opening up power distribution and enforcing greater financial discipline among utilities.

Power Minister Manohar Lal said Janurary 19, 2026 that the government may introduce the Bill to further reform the distribution sector, rein in losses at state-owned distribution companies (discoms) and reduce the subsidy burden on states. The draft amendments to the Electricity Act, 2003, released in November, proposed a wide-ranging overhaul of the sector, including measures to deepen competition, strengthen regulation and rationalise subsidies.

While the Bill seeks to push long-pending structural reforms, Power Secretary Pankaj Agarwal acknowledged that refinements are needed to address concerns related to state finances, consumer impact and regulatory oversight. Speaking on the sidelines of the inauguration of the Centre of Excellence for Power Regulation conference on January 19, Agarwal said the ministry had received a large number of comments on the draft amendments, many of which were being examined for possible incorporation.

“Consultations have been held with consumer associations and regulatory bodies, and further engagement with state-owned discoms is expected. The reform process is continuing in parallel, with workable suggestions being implemented even as discussions on the final shape of the Bill are ongoing,” he said.

Agarwal said the government is also factoring in the recommendations of the 16th Finance Commission, particularly on discom debt and the possibility of states taking over certain liabilities. Any financial restructuring mechanism would be aligned with broader fiscal devolution and state-level reform frameworks, they added.

Speaking at the inauguration of the Centre of Excellence for Power Regulation conference, the power minister also underscored the need to rationalise regulations and reduce litigation in the power sector, aligning reforms with the government’s broader ease-of-doing-business agenda.

What the Bill proposes

The Electricity (Amendment) Bill seeks to overhaul the Electricity Act, 2003 with the objective of improving efficiency, financial viability and consumer choice. A central proposal is the introduction of distribution sub-licensing or multiple supply licensees, allowing more than one company to operate in the same area using a common distribution network. The government argues this will introduce competition in retail power supply, improve service quality and reduce losses.

The draft Bill also proposes strengthening state electricity regulatory commissions by giving them greater autonomy in tariff-setting, reducing the role of discoms in the process and enforcing stricter timelines and contractual discipline. It further envisages a phased reduction of cross-subsidies, with subsidies to be delivered more transparently through direct benefit transfers to consumers rather than being embedded in tariffs.

In addition, the amendments aim to address chronic discom losses through tighter payment security mechanisms, timely clearance of dues and greater accountability in power procurement. Provisions related to renewable purchase obligations and grid discipline are expected to be aligned with India’s expanding clean energy targets.

The government’s push comes as the distribution sector has shown signs of financial turnaround. The power ministry said on Sunday that the sector returned to profits in FY25, aided by reforms under the Revamped Distribution Sector Scheme and stricter enforcement of late payment surcharge norms.

However, several states have expressed reservations, particularly over the perceived erosion of their powers in electricity distribution, a subject under the Concurrent List of the Constitution. Consumer groups have also cautioned that competition could initially benefit urban, high-paying consumers, while rural and low-income users remain dependent on financially stressed public utilities.

As consultations continue, the Centre appears to be signalling a more calibrated approach — balancing reform ambitions with political and fiscal realities — before the Bill is eventually brought before Parliament.