The GST model for power

Implementing the ambitious electricity law changes can be easier with the promise of an Electricity Council

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Is it time for India’s ailing power distribution sector to celebrate? Earlier this month, the Union government released the proposed amendments it wishes to introduce to the Electricity Act, 2003. The official justification for the changes in the legislative framework for power distribution is that the sector has been suffering from huge losses, with regulatory delays weakening its financial viability and cross-subsidisation of tariffs, where higher tariffs on industry impact industrial competitiveness, constraining economic growth.

Hence, the Union power ministry on October 9 released the Draft Electricity (Amendment) Bill, 2025, to a wide range of stakeholders, seeking public comments and suggestions. The Draft has made several good suggestions to address the concerns afflicting the power distribution sector. No surprise that they have also been generally welcomed by many industry players, experts, and commentators. A closer look at the proposed changes, however, will reveal many aspects that the government must bear in mind if its stated goals for power distribution reforms are to be achieved.

Take the first proposal on tariff recovery for distribution companies. On paper, over 63 power distribution entities operating in 32 states and Union Territories show the average tariff collection efficiency at over 96-97 per cent. At the aggregate level, this may not look like a very alarming number for a sector that by March 2024 had accumulated a total debt of %7.53 trillion and a loss of 6.3 trillion. But the problem is that their receipt is much below what they should be collecting if the regulators had issued timely orders on tariff revisions. In the absence of such revisions, even a decent rate of bill collection hides a more serious financial challenge for most of the distribution agencies.