Draft electricity policy bats for ending cross-subsidies

Power tariffs with automatic annual revision, exemption of cross-subsidies on manufacturing industry, railways and metro railways and parity of transmission tariff with conventional power by 2030 for all types of new renewable capacity, these are part of reforms in the Draft National Electricity Policy, 2026.

The draft NEP, 2026 released by the power ministry targets per capita electricity consumption of 2,000 kWh by 2030 and over 4,000 kWh by 2047. It stands at 1460 kWh in 2024-25, marking a 52.6% increase (503 kWh) from 957 kWh in 2013-14.

However, the draft policy says that despite these achievements, persistent challenges remain, particularly in the distribution segment like high accumulated losses and outstanding debt.

“Tariffs in several segments remain non–cost reflective, and high cross-subsidisation has resulted in elevated industrial tariffs, adversely affecting the global competitiveness of Indian industry,” noted the policy. The ministry has sought for stakeholders' comments and once adopted it will replace the NEP, 2005.

Key features

Tariffs must be linked to a suitable index for automatic annual revision, which operates if no tariff order is passed by the State Commission. It also calls for a strong regulatory framework for market monitoring and surveillance to prevent collusion, gaming, or market dominance.

Tariffs should progressively recover fixed costs through demand charges to avoid cross-subsidisation between the tariff components as well as among various categories of consumers. Exemption of cross-subsidies and surcharges on manufacturing industry, railways, and metro railways to increase the economic competitiveness of Indian goods and reduce logistics cost.

On nuclear power generation, the draft policy said that in line with the provisions of SHANTI Act, 2025, adoption of advanced nuclear technologies, developing Modular Reactors, setting up Small Reactors, and use of nuclear energy by commercial and industrial consumers to achieve 100 GW by 2047.

Reforms in grid operation highlights functional unbundling of State Transmission Utilities (STUs) and creation of independent state-level entities to manage SLDC operations and transmission planning functions.