(MENAFN- Live Mint)

New Delhi: The power ministry has proposed a slew of reforms in the sector through a draft of amendments to the Electricity Bill, 2003. Among key proposals is giving more teeth to state electricity regulatory commissions to fix tariffs on their own and ending cross-subsidies. The proposals aim to plug“mounting" losses in the power sector and boost economic growth.

The ministry circulated the draft Electricity Amendment Bill 2025 on Thursday, seeking feedback from stakeholders within 30 days.

Currently, power distribution companies propose power tariffs to the commission for a fiscal year. The ministry noted delays in revision by the discoms while proposing to give power to the regulator to revise tariffs.

"Non-determination of tariffs before the beginning of the financial year has been resulting in mounting distribution sector losses. Currently, the Act does not explicitly authorize the Appropriate Commissions to determine tariffs on a suo moto basis before the financial year begins. The proposed amendment empowers the Appropriate Commissions to act suo moto, ensuring timely tariff determination, enhancing accountability," the ministry said.

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"This will ensure that revised tariffs are implemented from 1st April of each financial year, improving the overall financial discipline in the power sector," said the proposed draft amendment to the Electricity Act.

The cumulative financial losses of discoms have crossed ₹6.9 trillion, the ministry said.

Power tariff revisions have been a sensitive issue in the country as it impacts the common man's budget. Several state governments and political parties have resorted to subsidies and regular revisions are not common.

In another move that may impact tariffs, the ministry has proposed a progressive reduction of cross-subsidies. It suggested that cross-subsidy with respect to manufacturing enterprises, railways, and metro railways will be fully eliminated within five years from the date of commencement of the Electricity (Amendment) Act, 2025.

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In the power sector, cross-subsidy is a mechanism where some consumers, typically industrial or commercial users, pay higher electricity tariffs to cover the costs of providing subsidized power to other consumer groups such as households and farmers.

A note on the draft proposals said regulatory delays have weakened the sector's financial viability, while cross-subsidy-induced high industrial tariffs have impacted competitiveness and constrained economic growth.

Industrial electricity tariffs in India remain considerably higher than those in developed countries such as the US and emerging economies like China, Vietnam and Indonesia.

Discom privatization

The ministry also revived its plans to open up India's power distribution sector and it is looking at allowing multiple discoms to cater to a single area through the existing distribution infrastructure. This will allow private firms to enter electricity distribution, a domain dominated by state-run companies.

The Act currently permits parallel licensees to supply electricity in the same supply area, but with their own network, which can potentially lead to duplication of distribution networks. Currently in specific regions, only one discom operates.

"To address this issue, the proposed amendment explicitly mandates non-discriminatory open access to the existing distribution network. This ensures that multiple suppliers can efficiently utilize the existing infrastructure, eliminating redundancy and reducing overall infrastructure costs," the ministry said.

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A similar attempt was made by the government in 2022. However, the draft amendment was later put on the backburner amid opposition from some states and power sector employee unions.

This framework“will optimize resource utilization, improve service quality, and contribute to delivering more affordable and reliable electricity to end users," the draft amendment said.

Tata Power, Adani Group , Torrent Power and RP-Sanjiv Goenka Group's CESC Ltd are the major private players currently operating in this space. India has about 67 discoms, including 16 run by the private sector in Delhi, Mumbai, Odisha, West Bengal, Gujarat and Dadra and Nagar Haveli.

The proposed reforms come at a time when the government is looking at privatization of state discoms as these utilities are financially stressed.

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