Draft national electricity policy intended for inter-ministerial consultations | Today’s news
New Delhi: The Union Power Ministry has sent the draft National Energy Policy 2026 for inter-ministerial consultation, Power Minister Pankaj Agarwal said on Thursday.
Speaking at the second annual Indian Power Sector Conference organized by the Federation of Indian Chambers of Commerce and Industry (FICCI), the secretary said the new policy emphasizes grid flexibility amid growing integration of renewable energy and potential demand from data centers and power plants for green hydrogen.
Read also | The budget must allocate funds for the implementation of the NEP, bridging the digital divide in the classroom
“We have collected the comments of all stakeholders. We have already moved the cabinet note for inter-ministerial consultation and I think it should not take too long,” Agarwal told reporters on the sidelines of the event.
This policy will replace the National Electricity Policy of 2005.
National Electricity Policy
In January, the ministry released a draft National Electricity Policy (NEP) that proposes revisions to indexed tariffs that would force cost-reflective pricing if the State Electricity Regulatory Commission (SERC) does not act. The nature and methodology of the index will have to be suggested by SERC as part of the policy proposal.
Under the NEP proposal, tariff orders must be issued before the beginning of each fiscal year, while correction orders for the previous fiscal year must be issued during the current year. Revisions reconcile actual income and expenses with original estimates.
Read also | The center plans independent testing of the disputed electricity meters
“Beginning in FY27, the state commission must ensure that tariffs are fully cost-reflective without creating regulatory assets. Tariffs must be linked to an appropriate index for an automatic annual review that operates if no tariff order is passed by the state commission,” the department said in its policy proposal, noting that cost-of-service recovery is critical to the sustainability of the power sector.
Adjusted in a future tariff
A regulatory asset arises when a regulator accepts certain expenses but does not include them in the current tariff. These expenses are to be adjusted in the future tariff. So-called regulatory assets now amount to approx ₹3 trillion, further burdening the sector.
The policy further proposes to open up the power distribution sector and allow multiple players within a single distribution area. Currently, only one distribution company supplies energy to consumers in a certain area.
Read also | Why your electricity bill may automatically increase every year
The draft policy states: “Monopoly in distribution will be phased out by allowing more players. Public Private Partnerships (PPPs) and list of utilities will be encouraged. Central government will extend necessary support to facilitate implementation. Currently, supply areas coincide with distribution areas. However, to promote competition, state commissions may allow multiple licensees in the same areas.”
In July, a consultative committee of the power ministry discussed a proposed framework that will allow more distribution companies (discoms) to supply power through existing distribution networks across states.
The move would allow private players to enter the power distribution space in states where demand is met only by public sector companies.
Union Power Minister Manohar Lal then said that a detailed implementation framework to allow multiple distribution licensees would be worked out by state electricity regulatory commissions “to ensure fairness, transparency and non-discriminatory access to the grid”, and that the proposal also “fully protects the interests of distribution licensees and their employees”.
According to the government, increased competition is expected to promote better consumer service, better reliability, greater innovation and operational efficiency, while ensuring optimal use of existing infrastructure and preventing unnecessary expenditure.
The bill to amend the Electricity Act 2003, released in October 2025, also revived the government’s plans to open up India’s power distribution sector and allow multiple discoms to serve one area through existing distribution infrastructure.
The energy minister noted on Thursday that the 2005 policy addressed issues such as electricity access and scarcity, among others, while the current challenges are different and several evolving issues need to be addressed, including grid stability, renewable energy integration, storage and so on.
