What is the difference between the existing mechanism for private participation in the distribution sector and what the draft bill proposes?

This is different from privatisation of distribution utilities. In the proposed draft amendment, the government has tried to ease the functioning of multiple players involved in distribution.

Presently, the Electricity Act permits parallel licensees to supply electricity in the same supply area, but with their own network, which can potentially lead to duplication of distribution networks. Taking note of this fact, the proposed amendment explicitly mandates non-discriminatory open access to the existing distribution network. This ensures that multiple suppliers can efficiently utilise the existing infrastructure, eliminating redundancy and reducing overall infrastructure costs.  

Simply put, if made effective, it will create competition in the sector on the lines of what has happened to the cable network segment or telecom, where there is competition among the operators.

Challenges that multiple players concept will put forth?

While it will break monopoly in the area, it will also lead to cherry picking by the stronger participants. To avoid such a situation the way rules are drafted and the policy is implemented will be of paramount importance.

The bill proposes granting state regulators authority to revise tariffs suo motu. How will this help?

At present, the Act does not explicitly authorise the appropriate commissions to determine tariffs on a suo moto basis before the financial year begins. 

 It is a known fact that non-determination of tariffs before the beginning of the financial year has been resulting in mounting distribution sector losses.The proposed amendment empowers the Appropriate Commissions to act suo moto, ensuring timely tariff determination, enhancing accountability.

How will the proposed Electricity Council work?

A major challenge for implementing power sector reforms has been to build consensus among the states. Electricity is on the Concurrent List in India, meaning both the Central government and State governments have the power to legislate on it.

The proposed council is expected to work on the lines of the GST council. The Minister-in-charge of the Ministry dealing with Power (Electricity) in the Central government shall be the Chairperson of the Electricity Council. The Ministers-in-charge of the departments dealing with Electricity in the State governments shall be its members. The role of the Council will be to advise the Central and State governments on policy measures, facilitate consensus on reforms, and coordinate the implementation of such reforms.

This initiative aims to strengthen cooperative federalism, ensure policy alignment across jurisdictions, and support the effective realisation of the objectives of the Electricity Act.

The proposed amendments talks about facilitating the integration of renewable energy sources and accelerate the shift to clean energy. It has proposed change in nomenclature from “renewable” to “non-fossil sources”. Will this work?

It proposes to recognise the Energy Storage Systems (ESS) as part of the power system, giving them the same legal status as generation, transmission and distribution. This will encourage investment in battery, pumped hydro and hybrid renewable projects, helping to balance supply and demand.

The term “renewable” has been replaced with “non-fossil sources” – a broader category covering renewables, nuclear, green hydrogen-based electricity, waste-to-energy and other low-carbon options. This expands the policy space for emerging clean technologies.

State regulators must now ensure that the share of electricity purchased from non-fossil sources is no less than the percentage set by the Central government. This national benchmark brings uniformity, strengthens enforcement and builds confidence for investors and lenders. The penalty of ₹0.35–₹0.45 per unit for non-compliance replaces the earlier discretionary regime, ensuring greater accountability and incentivising utilities to procure more green renewable power.