Power ministry’s draft policy moots automatic revisions of tariff | India News

NEW DELHI: The power ministry’s draft National Electricity Policy (NEP) 2026, released Wednesday, has proposed an annual reset of tariffs, including an index-linked automatic revision in case the regulator fails to act to ensure sound financial health of power utilities, while seeking to limit cross-subsidies for manufacturing units and railways, in an attempt to make tariffs reasonable.While underlining that coal-based generation will remain critical, it has backed nuclear capacity addition with the involvement of the private sector and suggested that atomic energy could emerge as a source for captive plants, replacing thermal.The draft has retained focus on renewable energy capacity addition and also laid emphasis on storage, apart from drawing up a robust cybersecurity blueprint to guard critical infrastructure from rising threats, especially from overseas actors.Draft power policy proposes end to distribution monopolyThe overall focus of the draft National Electricity Policy 2026, is on enhanced power availability, with annual per capita consumption projected at 2,000 kWh by 2030 and at over 4,000 kWh by 2047, compared with the current 1,460 kWh.It also aligns with India’s climate commitments, including reducing emissions intensity by 45% from 2005 levels over the next five years and achieving net-zero emissions by 2070, which will require a shift to low-carbon energy.Although the 40-page draft has performed lip service to “consumer-centricity”, it has underlined the need to provide competition in distribution areas. “In line with the intent of the (Electricity) Act, monopoly in distribution will be phased out by allowing multiple players. Public-Private Partnerships (PPPs) and the listing of utilities shall be promoted. The central govt shall extend necessary support to facilitate the implementation,” the power ministry said, while recognising its limitations and urging state electricity commissions to act.

There is significant emphasis on ensuring timely tariff orders by regulatory bodies, cost recovery and reduction in losses. “From FY2026-27, state commissions must ensure that tariffs fully reflect costs without creating regulatory assets. Tariffs must be linked to a suitable index for automatic annual revision which operates if no tariff order is passed by the state commission… Free power supply should be avoided and subsidies should be paid in advance,” it said.According to the ministry, the first NEP, issued in Feb 2005, had addressed core challenges such as demand-supply gaps, limited electricity access and inadequate infrastructure. Since then, the sector has seen transformational change, with installed generation capacity rising four-fold alongside significant private sector participation, while per capita electricity consumption reached 1,460 units in 2024–25. Officials said that despite these achievements, the power sector continues to face challenges, with distribution companies accumulating losses of nearly Rs 6.9 lakh crore and outstanding debt nearing Rs 7.2 lakh crore. They added that cross-subsidisation has resulted in high industrial tariffs.The policy further focuses on cybersecurity, technology adoption and skill development, and proposes the introduction of a distribution system operator to facilitate network sharing and the integration of distributed renewables, storage and vehicle-to-grid systems. It also suggests a utilisation-based framework for the allocation of transmission connectivity, along with appropriate regulatory mechanisms to ensure optimal use and prevent the speculative holding of connectivity. The draft adds that a strong regulatory framework must be in place to support market monitoring and surveillance and prevent collusion, gaming, or market dominance. “It provides a robust framework for industry, investors and the govt to collaborate in building a resilient, consumer-centric and globally competitive power sector,” said Sambitosh Mohapatra, partner and leader, climate and energy, PwC India.