Draft Electricity (Amendment) Bill, 2025 Intends to Remove Wasteful Duplication in Building Distribution Network

1. At a Glance

• Draft Electricity (Amendment) Bill, 2025 proposes to amend the Electricity Act, 2003 to permit a distribution licensee (discom) to supply power using another discom's existing network on payment of SERC-determined charges, eliminating duplicate poles, wires and substations [1][2].
• Released by the Ministry of Power for public consultation; addresses long-standing structural barrier to genuine retail competition in the distribution segment [1][2].
• Aspirant relevance: federalism (Concurrent List Entry 38), power-sector reforms, regulatory commissions, cross-subsidy debate, and renewable-energy obligations [2].

2. Why in the News

• PIB release dated 09 Feb 2026 by Ministry of Power explaining that the Bill removes "wasteful duplication" in building distribution networks [1].
• Draft circulated by Ministry of Power (October 2025) and is currently under stakeholder consultation [2].

3. Background & Evolution

• Electricity Act, 2003 (consolidating Indian Electricity Act 1910, Electricity (Supply) Act 1948, ERC Act 1998) already allows multiple distribution licensees in the same area and mandates non-discriminatory open access, but required each new entrant to build its own network [1].
• Electricity (Amendment) Bill, 2014 and Electricity (Amendment) Bill, 2022 previously attempted to unbundle "carriage and content" (separate wires business from supply business) — both lapsed amid state opposition [2].
• 2022 Bill had proposed a Cross-Subsidy Balancing Fund; the 2025 draft does NOT replicate this mechanism [2].

4. Core Static Facts

• Parent Act amended: Electricity Act, 2003 [1].
• Ministry: Ministry of Power, Government of India [1][2].
• Constitutional basis: "Electricity" — Entry 38, Concurrent List, Seventh Schedule.
• Regulator empowered to set wheeling/usage charges: State Electricity Regulatory Commission (SERC) [1][2].
• Coordination body proposed: Electricity Council, chaired by Union Power Minister, with state power ministers as members [2].
• Cross-subsidy abolition timeline: manufacturing enterprises, railways and metro railways to be freed of cross-subsidy within 5 years [2].
• Large-consumer exemption: SERC may exempt discoms from obligation to supply consumers with peak demand > 1 MW [2].
• Renewable/non-fossil obligation penalty: 35–45 paise per unit for non-compliance [2].
• RPO expansion: Renewable Purchase Obligation widened from "renewable" to "non-fossil" sources (covers large hydro, nuclear) [2].
• Removal of regulators: Centre may initiate removal of SERC members; States may initiate removal of CERC members — reciprocal, new under this Bill [2].
• New removal grounds: wilful violation of the Act, gross negligence [2].
• Electric Line Authority replaces functions of the now-repealed Indian Telegraph Act, 1885 [2].

5. Multi-Dimensional Analysis

Economic

• Avoids capex duplication of poles/wires/substations → expected to lower tariffs for end consumers [1].
• Phasing out cross-subsidy on industry/railways aims at cost-reflective tariffs, improving manufacturing competitiveness [2].
• Ambiguity on AT&C loss apportionment and capex risk-sharing among co-licensees may chill network investment [2].

Legal / Constitutional

• Electricity is on the Concurrent List; states retain stake in tariff and licensing decisions [2].
• Reciprocal removal powers between Centre and states over CERC/SERC members raise federalism and regulatory-independence concerns [2].

Administrative / Governance

• SERC becomes pivotal — fixes network-usage charges, oversees non-discriminatory access [1][2].
• Creation of Electricity Council institutionalises Centre–State coordination similar to GST Council model [2].

Environmental

• Replacement of "renewable" with "non-fossil" in RPO broadens compliance basket to nuclear and large hydro, aligning with India's Panchamrit / net-zero-2070 commitments [2].
• Fixed penalty band (35–45 p/unit) close to current REC clearing prices (30–40 p), may dampen genuine market signal [2].

Social / Consumer

• Multiple discoms → consumer choice akin to telecom number-portability model [1].
• Exempting >1 MW consumers from universal supply obligation may push large users to open access; cross-subsidy pool for poor/agriculture could shrink [2].

6. Recent Developments (last 12-18 months)

• October 2025: Ministry of Power released the Draft Electricity (Amendment) Bill, 2025 for public comments [2].
• 09 February 2026: PIB explainer on network-duplication removal published [1].
• PRS Legislative Brief on the Draft Bill released, flagging concerns on cross-subsidy, PPAs and federal balance [2].

7. Prelims Hooks

• Parent statute amended: Electricity Act, 2003 [1].
• Network-usage charges between discoms to be fixed by SERC, not CERC [1].
• Electricity Act, 2003 already allowed multiple distribution licensees in same area — the Bill does NOT introduce this, it only allows shared use of network [1].
• Proposed Electricity Council chaired by Union Minister of Power [2].
• Cross-subsidy on manufacturing, railways, metro rail to end in 5 years [2].
• SERCs may exempt discoms from supply obligation for consumers with demand above 1 MW [2].
• Penalty for breach of non-fossil purchase obligation: 35–45 paise/unit [2].
• RPO term shifts from "renewable" to "non-fossil" — includes large hydro and nuclear [2].
• Electric Line Authority replaces Telegraph Authority post-repeal of Indian Telegraph Act, 1885 [2].
• Centre gets new power to initiate removal of SERC members; States can do so for CERC members [2].
• Electricity = Entry 38, Concurrent List.

8. Mains Relevance

• GS-II: Government policies; issues of Centre–State relations & cooperative federalism in regulatory appointments.
• GS-III: Infrastructure (Energy); economic growth; environment & climate (RPO/non-fossil).
• Probable question stems: 1. "Allowing distribution licensees to share networks marks a shift from carriage-content unbundling to carriage-sharing. Examine in light of the Draft Electricity (Amendment) Bill, 2025." (GS-III, 250 w) 2. "Critically evaluate how the Draft Electricity (Amendment) Bill, 2025 reconciles consumer choice with discom financial viability." (GS-III, 250 w) 3. "The reciprocal power of Centre and States to initiate removal of each other's regulatory commission members threatens regulatory independence. Discuss." (GS-II, 150 w)

9. Related Topics to Study Next

• Electricity Act, 2003 — base statute; "open access", trading licence.
• UDAY Scheme (2015) — discom financial turnaround precedent.
• Revamped Distribution Sector Scheme (RDSS) — capex for discoms; relevant to investment-risk debate.
• National Electricity Policy & Tariff Policy — context for cross-subsidy phase-out.
• CERC vs SERC architecture — for federal regulatory questions.
• Renewable Purchase Obligation & REC mechanism — for non-fossil penalty discussion.
• Panchamrit / India's NDC under UNFCCC — links to RPO widening.
• GST Council — institutional analogue for the proposed Electricity Council.

10. Common Errors / Trap Areas

• The Bill does not introduce multiple licensees in one area — that already exists under the 2003 Act; it only enables network sharing [1].
• Network-usage charges are fixed by SERC, not the CERC or the Appellate Tribunal [1].
• RPO is being widened to "non-fossil" (includes nuclear, large hydro) — not merely "renewable" [2].
• The 2025 draft drops the Cross-Subsidy Balancing Fund that the 2022 Bill had proposed [2].
• Cross-subsidy phase-out applies only to industry, railways, metros — agriculture/domestic untouched [2].