By R. Suryamurthy
Electricity reforms in India have always been as political as they are technical. The latest Draft Electricity (Amendment) Bill, 2025, unveiled by the Ministry of Power, is no exception. Framed as a “modernisation milestone,” the bill seeks to revive India’s financially crippled power sector through cost-reflective tariffs, regulatory empowerment, and market competition. But as the government chases efficiency, it risks deepening inequity — particularly for farmers and states who see the new framework as centralisation through the back door.
The Electricity Act, 2003, was once hailed as a game-changer for India’s power sector. Two decades later, that framework is fraying. Distribution companies (discoms) — mostly state-owned — are drowning in debt exceeding ₹6.9 lakh crore, while aggregate technical and commercial losses hover at 16%. Cross-subsidies that keep agricultural and household tariffs low have distorted industrial competitiveness, pushing manufacturing tariffs up by as much as 50%.
The new Bill’s answer is simple — make tariffs cost-reflective, introduce competition by allowing multiple distributors to share existing networks, rationalise cross-subsidies, and give regulators the power to revise tariffs suo motu. On paper, this promises to discipline state discoms and reduce inefficiency. In practice, it may unleash new fault lines between fiscal prudence and political reality.
At the heart of the farmer’s unease is the proposed phasing out of cross-subsidies. Today, industrial and urban consumers pay more to subsidise agriculture and low-income households. The Bill’s plan to cap and eliminate such subsidies over five years for industries and transport users aims to improve competitiveness. But as farmer groups like the All India Kisan Sabha (AIKS) point out, this could triple irrigation costs overnight.
A farmer using a 7.5-horsepower pump for six hours a day could see bills soar from ₹3,000 to ₹10,000 once cross-subsidies vanish. In regions where power for irrigation remains the difference between survival and debt, this isn’t reform — it’s rural shock therapy.
The government’s argument that states can continue to subsidise farmers directly through transparent budget allocations or cash transfers offers little comfort. In practice, delayed payments and red tape could disrupt timely irrigation, while pushing states already strained by GST compensation delays into deeper fiscal stress.
One of the Bill’s most controversial provisions allows multiple licensees to share existing distribution networks, ending the single-operator model that has prevailed since 2003. This change is meant to spur competition — much like telecom liberalisation did two decades ago — by letting consumers choose their electricity supplier without duplicating infrastructure.
But critics warn this could result in “cherry-picking.” Private players like Adani or Tata Power could target high-paying urban consumers, leaving public discoms to supply unprofitable rural and low-income areas. The public grid would still bear the cost of universal access, while profits get privatised.
Trade unions such as the Electricity Employees Federation of India (EEFI) and Centre of Indian Trade Unions (CITU) call it “backdoor privatisation,” arguing that it weakens the public sector’s ability to maintain equitable access. For them, this isn’t competition — it’s the fragmentation of public accountability under the guise of efficiency.
Electricity is on India’s Concurrent List, meaning both the Centre and states share legislative power. Yet, the Bill tilts the balance towards Delhi. The proposed Electricity Council, modelled loosely on the GST Council, will “advise” on national policies, but the Centre retains overarching rule-making powers “for the purposes of this Act.”
States like Kerala and Tamil Nadu have protested this as creeping centralisation. Kerala’s Power Minister, K. Krishnankutty, likened it to “a GST-like structure that erodes state autonomy,” warning that the Bill undermines cooperative federalism. The Council may aim to build consensus, but its very design — with the Union Power Minister as chair — ensures that the Centre’s voice will always dominate.
This power shift mirrors the farm law saga of 2020, where Delhi’s reform-by-decree approach provoked a massive backlash. Once again, economic rationalisation risks being conflated with political overreach.
Few dispute the intent behind reform. Power theft, delayed tariff revisions, and populist giveaways have long distorted the sector. The Bill’s provision to let regulators revise tariffs suo motu if discoms delay petitions could help enforce fiscal discipline. Likewise, timelines for resolving cases within 120 days could enhance transparency.
Yet, the social cost cannot be ignored. By making cost-reflective tariffs the norm, the government effectively transfers the burden of discom losses from state budgets to household bills. Farmers, small industries, and low-income consumers — already hit by high input costs — may bear the brunt.
Electricity is not a luxury good. For farmers, it is an input as essential as seed or water. Treating it purely as a market commodity undermines decades of rural development policy and the very logic of public welfare in essential services.
The Bill also faces pushback from electricity employees and unions, who fear job losses and contractualisation. The All India Power Engineers Federation has warned that multiple-licensee frameworks could lead to “outsourcing of public responsibility” to private intermediaries, weakening grid reliability in remote areas.
With the removal of universal service obligations (USO) for certain categories of consumers, discoms may no longer be required to serve all within a given area. Instead, a “supplier of last resort” will be designated — at a premium cost. That effectively turns electricity access into a tiered service, with rural India at the wrong end of the pricing ladder.
To its credit, the Bill introduces forward-looking provisions on clean energy. It broadens the term “renewable” to “non-fossil sources,” giving equal status to green hydrogen, waste-to-energy, and energy storage systems. This aligns with India’s net-zero goals and could attract major private investment.
However, farmers and workers worry that the energy transition — if driven primarily by private capital — will marginalise state utilities and raise tariffs further. Green energy, they argue, cannot mean expensive energy.
Perhaps the biggest flaw in the reform process is procedural. Stakeholders have barely 30 days to respond to a draft that rewires an entire sector. The haste mirrors the Centre’s approach during the farm laws — reform rushed without broad consultation.
Farmer groups like AIKS and worker unions such as CITU have already announced joint protests, framing the Bill as part of a neoliberal project that “hands over public utilities to private monopolies.” Their opposition is not to reform per se, but to reform without representation.
Reform is necessary — the status quo is unsustainable. But reform cannot be pursued by sidelining states and punishing farmers. A pragmatic approach would maintain targeted subsidies for small cultivators, ensure time-bound payments under direct benefit transfers, and require private distributors to serve both profitable and unprofitable consumers under uniform service standards.
The Electricity Council could indeed strengthen cooperative federalism — but only if states have real veto power, not ceremonial presence. Likewise, competition should enhance service quality without eroding social obligations.
The Draft Electricity (Amendment) Bill, 2025, captures India’s perennial dilemma: how to reconcile fiscal realism with social justice. It seeks to fix the sector’s balance sheet but risks dimming the moral one.
The real test of reform will not be whether investors applaud it, but whether it keeps the countryside lit — not just in kilowatts, but in trust. Because if the lights go out in rural India, the political and economic costs could be far higher than any discom bailout. (IPA Service)
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