New national electricity policy proposes automatic, annual tariff increase

LUCKNOW: The proposal to automatically raise electricity bills every year — even if state regulators fail to issue timely tariff orders — has ignited controversy over India’s new draft National Electricity Policy (NEP), 2026.The Union ministry of power published the draft policy on Jan 20, inviting comments and suggestions from stakeholders within 30 days. Among its many financial reforms, one buried in Clause 2 under Section 4 on ‘Financial Viability and Competitiveness’, states: “From FY 2026-27, tariffs must be linked to a suitable index for automatic annual revision which operates if no tariff order is passed by the State Commission.”In simple terms, if a state electricity regulatory commission (SERC) misses its deadline to issue a new tariff order, power tariffs would automatically increase based on an inflation-linked index, such as the Wholesale Price Index (WPI) or Consumer Price Index (CPI). The exact formula remains undefined.Officials argue that this “enabling provision” is a necessary backstop. A source from the Uttar Pradesh Electricity Regulatory Commission (UPERC) said that the intent was to prevent utilities from bleeding financially in case of regulatory delays.“The idea is to allow an automatic increase for a defined period until the Commission decides,” the source said, stressing “it is not a blank cheque”.“The automatic increase should be subject to the filing of a petition by the utility,” he said.If a utility fails to file its tariff proposal on time, hikes would stop. The mechanism is meant to be a temporary bridge only when the regulatory process itself is delayed beyond the mandated 120-day window.However, consumer rights advocates see a dangerous overreach. Avadhesh Kumar Verma, chairman of the Uttar Pradesh Rajya Vidyut Upbhokta Parishad and a member of the Central Electricity Regulatory Commission’s advisory committee, has termed the provision “legally untenable”.“It strips SERCs of their core statutory duty. The revised policy proposes automatic cost recovery, without express Commission approval,” he said.He contended that sections 61, 62, and 86 of the Electricity Act, 2003, vest exclusive tariff-setting power with the commissions, and no policy could make tariffs self-executing.With the consultation window open, the automatic-tariff clause is poised to become the focal point as some view indexation as a practical tool for financial stability in a sector where discoms debts exceed Rs 7 lakh crore.Consumer groups, however, warned that it undermines due process, hampers consumer protection and could lead to unchecked hikes.