The government has proposed allowing multiple electricity distribution companies to operate in the same area using shared infrastructure, marking a major change from the existing provisions. Currently, more than one distribution licensee in a region is allowed but only under restrictive conditions. Under the current framework, any new company entering the market must build its own complete distribution network — including poles, wires, and substations — and could access existing infrastructure only with special permission. A similar attempt was made by the Centre in 2022, however, later the draft amendment was put on the backburner amid opposition from state governments and power sector employee unions.
The proposal is part of the Draft Electricity (Amendment) Bill, 2025 released by the power ministry on Friday.
The new Bill seeks to create a modern and efficient legal framework to address the severe financial stress faced by distribution companies, which together have accumulated losses of over ₹6.9 lakh crore. The Ministry of Power on Friday released the Draft Electricity (Amendment) Bill, 2025, inviting comments and suggestions from stakeholders within 30 days.
The Bill aims to make the power sector more financially sustainable, consumer-friendly, competitive, and cleaner. It requires electricity tariffs to reflect the actual cost of supply, while allowing state governments to continue giving subsidies, provided they pay these in advance. It also proposes to eliminate cross-subsidies for Railways, Metro systems, and Manufacturing Enterprises within five years.
The Bill further relaxes the universal service obligation that requires distribution companies to supply electricity to all consumers, including large industrial units capable of purchasing power directly from generators. Under the proposed changes, State Electricity Commissions can exempt distribution companies from supplying power to consumers with a demand of over one megawatt, allowing these consumers to buy electricity freely through open access. However, to ensure uninterrupted power supply, one distribution company in each area will be designated as the supplier of last resort in case other arrangements fail.
In another simplification, the requirement for obtaining a “no objection” from the Central Government for granting a license in areas that include defence establishments has been removed, helping to speed up clearances and reduce administrative delays.
The draft also empowers the Central Electricity Authority (CEA) to set cybersecurity standards for the power system, protecting grids and infrastructure from potential hacking or data breaches. Additionally, it proposes the creation of a new high-level body — the Electricity Council — to improve coordination between the Centre and States. The Council will be chaired by the Union Power Minister and will include all State Power Ministers as members. It will advise both Central and State Governments on policy matters, build consensus on reforms, and ensure uniform implementation of changes across the country.
