Electricity (Amendment) Bill, 2025 - UPSC Current Affairs 2025

SYLLABUS

GS-3: Infrastructure: Energy, Ports, Roads, Airports, Railways etc

Context: The Ministry of Power recently released the Draft Electricity (Amendment) Bill, 2025.

Healthy Competition:
The Bill shifts from a monopoly-based electricity supply system to a performance-driven model.
It allows both public and private utilities to operate, fostering efficiency and better service delivery.
Protecting Vulnerable Consumers:
Subsidised tariffs for farmers and low-income households are safeguarded.
State Governments may continue to provide these subsidies under Section 65 of the Act.
This ensures affordable access to electricity while maintaining fair pricing practices.
Strengthening Regulatory Powers:

State Electricity Regulatory Commissions (SERCs) are empowered to determine cost-reflective wheeling charges.
This supports financial stability for distribution licensees and encourages efficient network use.
Rationalising Tariffs and Cross-Subsidies
The Bill promotes cost-reflective tariffs and rationalisation of cross-subsidies.
This helps optimise network utilisation and makes industrial power more affordable.
Enhancing Transmission Infrastructure
It strengthens the Inter-State Transmission System (ISTS) by enabling competition among Transmission Service Providers.
Oversight by the Central Electricity Regulatory Commission (CERC) ensures transparent and efficient operations.

Competitive Market: The Bill actively promotes competition by breaking distribution monopolies and enabling multiple players to operate in the same area, thereby enhancing consumer choice, service quality, and overall efficiency.
Protection for Vulnerable Groups: The Bill ensures equitable access by firmly safeguarding subsidised tariffs for farmers and low-income households.
Financial Stability: The Bill strengthens the financial health of discoms by promoting cost-reflective tariffs and rationalising cross-subsidies, which also facilitates fresh investments.
Stronger Regulation: The Bill enhances regulatory accountability by empowering SERCs to set wheeling charges and revise tariffs proactively.
Efficient Infrastructure Use: The Bill boosts network efficiency by allowing shared use of distribution infrastructure, which reduces duplication, lowers costs, and improves overall utilisation.

Implementation Hurdles: The transition to a competitive market will face resistance from state utilities as they will seek to protect their revenue streams and market share.
Cross-Subsidy Transition Risks: The rationalisation of cross-subsidies will impact affordability for certain consumer groups if the transition is not phased gradually.
Regulatory Overlaps: The expanded functions of SERCs and the Electricity Council will lead to coordination challenges and potential procedural delays.
Infrastructure Gaps: The requirement to upgrade networks for competition and shared usage will place significant investment and execution pressures on states, especially those with limited capacity.

Robust Implementation: The reform process will move forward with clear timelines, strengthened institutional capacity, and active stakeholder participation to ensure a smooth rollout.
Gradual Cross-Subsidy Reform: The transition will follow a phased reduction of cross-subsidies, supported by targeted subsidies that safeguard vulnerable consumers.
Better Coordination: Regulatory bodies will operate with enhanced coordination to prevent overlaps and enable faster, streamlined decision-making.
Consumer-Centric Approach: Consumer interests should be prioritised by strengthening awareness initiatives, grievance redressal systems, and protection mechanisms in a competitive market environment.
Continuous Review: The reform framework will incorporate regular monitoring and adaptable policy measures to prevent unintended consequences and keep progress aligned with intended outcomes.