The policy aims to align with Viksit Bharat and focuses on planning for the next two decades, targeting per capita electricity consumption of 2,000 kWh by 2030 and over 4,000 kWh by 2047 from 1,460 kWh in FY25.
The policy was issued in 2005 to give a broad direction and framework to the sector and has not been revised since. It is a mandatory guiding document for central and state power regulators under the Electricity Act, 2003.
Tariff
Emphasising the role of state regulators for bringing tariff discipline, the policy has recommended that tariffs fully reflect costs without creating regulatory assets.
On the longstanding issue of the delay in annual tariff revision, the ministry has suggested the tariff be linked to an appropriate index to enable automatic annual revisions if state regulators do not pass the order. “Tariff orders must be issued before the start of each financial year,” the draft policy stated.
Despite numerous government bailouts, discoms remain financially strained, creating the need for a more transparent, cost-reflective tariff structure, the ministry said. The draft policy comes right before the Budget session of the Parliament, where the ministry plans to table the Electricity Amendment Bill that focuses largely on financial health of discoms and encouraging the private sector into this segment.The policy proposes a progressive reduction of cross-subsidies ensuring no tariff falls below 50% of the average cost of supply, single-digit aggregate technical and commercial losses, and differential pricing for electricity during peak hours. It also suggests exemptions from cross-subsidies and surcharges for the manufacturing sector, Indian Railways, and metro rail to keep them competitive.
Distribution and Transmission
It proposes shared distribution networks for competition, a move that had earlier drawn much resistance from states. It also recommends establishing a distribution system operator that aligns with the requirement for multiple distribution licensees.
A risk-sharing and compensation mechanism is to be formulated to address mismatches in commissioning timelines between generation and transmission projects.
Generation
For renewable energy, the draft policy calls for enforcing consumption obligations and enable mechanisms such as virtual PPAs. Improving forecasting with central support to state load dispatch centres to establish a national meteorological data portal, is also on the cards.
State regulators have been advised to ensure parity between renewable and conventional power sources by 2030 to maintain grid stability. Nuclear projects should be eligible for green bond funding, the draft said, adding that brownfield expansion, replacing coal-based captive plants with nuclear where feasible, fleet-mode implementation, and establishing local supply chains for cost optimisation will be considered.
Retired thermal plant sites may also be repurposed for nuclear power wherever feasible. The draft policy also calls for incentivising domestic manufacturing of battery cells and other components for energy storage.
Financing
India’s power sector will require approximately ₹50 lakh crore by 2032 and ₹200 lakh crore by 2047 for generation, transmission, and distribution. For this, dedicated platforms and energy-specific funds may be established under NaBFID and NIIF, as per the draft policy.
Project bankability will be strengthened through risk-mitigation instruments, reserve funds, and multilateral support.
Additionally, climate finance taxonomy will be explored to unlock concessional green financing, the draft underlined.
Power market
It envisages market mechanisms such as bilateral contract settlement, standardised exchange-based contracts and routing long-term PPAs through power exchanges. It also lays out the phased introduction of capacity markets to ensure adequacy and the expansion of ancillary services through market-based procurement including demand response.
