A few days ago, I had a conversation with a group of students who were keen to understand the impact of the amendments proposed in The Electricity (Amendment) Bill 2025. The students had a straightforward question: Will the amendments continue to serve the larger interests of people while improving efficiency and competition?
On the face of it, the answer seems to be yes. However, reading the fine print offers a different perspective. The proposed amendments, particularly to Sections 43, 61(g), and 90, may make the rules more favourable to larger consumers while creating uncertainty for smaller ones.
According to Section 43 of the Electricity Act 2003, every distribution company has a duty to supply electricity to applicants without any discrimination. In fact, it is the legal right of the consumer to get an electricity connection. The 2025 Amendment empowers the government to exempt the state power discom from the obligation to supply electricity to larger consumers and to transfer the right to serve such consumers to an alternative licensee.
While this amendment may introduce competition in the market, it also creates an opportunity for the new licensee to cherry-pick profitable customers. Although the intention may be to reduce the financial burden of discoms, the amendment could end up serving the interests of larger consumers. This undermines the very principles of social equity that the electricity sector is expected to uphold. Transferring larger consumers to a new licensee may lead to a reduction in the revenue of the existing licensees without a corresponding decrease in fixed costs. This could increase their financial problems, which are already burdened with debt and unpaid subsidies.
The amendments will be financially beneficial for the new licensee. They will get the benefit of using the existing distribution network without bearing equivalent infrastructure costs or universal service obligations.
Therefore, the amendment of Section 43 requires careful reconsideration. There is a need to explore the possibility of the introduction of a proper compensatory mechanism, such as network usage charges, universal service funds, or equitable cost-sharing frameworks, to prevent further widening of the gap between large and small consumers. Section 61(g) guides regulators in determining tariffs. The proposed amendment requires the Appropriate Commission to fix tariffs that reflect the cost of supply and progressively reduce cross-subsidies. It further adds that cross-subsidies for railways, metro railways, and manufacturing enterprises shall be fully eliminated within five years of the amendment’s commencement. Electricity is an essential good. Eliminating cross-subsidies without implementing compensatory measures will likely have the following long-term repercussions: i) Higher tariffs may affect the smaller enterprises. This amendment may result in higher costs and lower profi ts for these small enterprises; ii) Higher tariffs may force small householders to limit their electricity use; in the process, it may create energy poverty; iii) Higher tariffs due to the removal of cross-subsidisation may also widen the digital divide as those at the bottom of the pyramid may not be in a position to afford the electricity needed for devices and to access the internet.
Moreover, calculating the Cost of Supply (CoS) for small consumers presents significant challenges. Even within a single category, such as agriculture, SMEs, or institutions, the CoS can vary widely. As a result, CoS-based tariffs may lead to multiple rates within the same consumer segment, creating administrative
. In light of the above implications, the proposed amendment to Section 61(g) demands thorough reconsideration. Without addressing these foundational issues, enforcing a uniform CoS-based tariff risks creating further distortions and inequities in
. Section 90 currently provides clear legal safeguards for the removal of members of Central and State Electricity Regulatory Commissions, ensuring due process, defi ned grounds, and review by the Appellate Tribunal. Such provisions help in maintaining both the accountability and independence of regulators.
The proposed amendment introduces vague and subjective terms like ‘wilful violation’ and ‘gross negligence’ as new grounds for the removal of regulators. These additions open the door to subjective interpretation as they lack legal clarity. Such subjectivity increases the risk of regulatory capture, with regulators potentially refraining from making decisions that could go against large players.
Instead of focusing on strengthening the process of removing regulators, the Act should introduce changes to the selection process. Additionally, to ensure that regulators maintain an arm’s length relationship with all stakeholders, the Act should explicitly prohibit them from holding any honorary or unpaid positions in private clubs or associations during their tenure. This would boost impartiality and reduce potential conflicts of interest.
The amendment Bill also proposes that regulators may revise tariffs suo motu if licensees fail to file petitions within the prescribed timeline. The current process follows a trans parent, participatory approach, wherein utilities submit data and public hearings are conducted, culminating in tariff determination by the regulator. The proposed amendment appears to weaken the existing tariff-setting framework and reduce public participation in the regulatory process.
The financial problems of the power sector are not solely due to cross-subsidies. The current stress is largely caused by high transmission and distribution losses, billing inefficiencies, and poor collection performance. Without addressing these structural issues, making tariffs “cost-refl ective” merely shifts the burden of inefficiency onto consumers. Unfortunately, the current Bill remains conspicuously silent on these fundamental challenges.
Electricity reforms need to be undertaken by balancing efficiency with equity. To make these reforms inclusive, the Act should ensure the following: i) Reaffirm the universal duty of the licensee to supply elec tricity without exemptions; ii) Stress improvement of the electricity system while making tariffs refl ect the cost to serve; iii) Ensure that budgeted subsidies, whether capital or revenue, continue to support sectoral improvements and benefit small and marginal consumers; iv) Reinforce regulatory inde pendence, ensuring that regu lators operate at arm’s length from all stakeholders.
Citizens, consumer groups, and local bodies should use this opportunity to participate in strengthening the Electricity Act by sharing their views on these important amendments. If the public remains silent, the interests of the few will quietly become the law of the land. Let us hope the amended Act safeguards the public interest, not corporate profit.
The writer is a professor at XIMB.