Kamal Ghorui
New Delhi: The ministry of power on Wednesday released the draft National Electricity Policy (NEP) 2026, proposing automatic annual tariff revisions linked to a suitable index if state regulators fail to issue tariff orders, exemption of cross-subsidies for the manufacturing sector and railways, renewable energy capacity addition through market-based mechanisms and captive power plants, and a strong regulatory framework to prevent collusion, gaming and market dominance.Inviting stakeholder feedback, the ministry said the proposed policy aims to transform the power sector in line with the government’s vision of Viksit Bharat by 2047. Once finalised, the policy will replace the existing NEP notified in 2005.According to the ministry, the first National Electricity Policy, issued in February 2005, addressed core challenges such as demand-supply gaps, limited electricity access and inadequate infrastructure. Since then, the sector has seen transformational change, with installed generation capacity rising fourfold alongside significant private sector participation. Universal electrification was achieved by March 2021, a unified national grid became operational in December 2013, and per capita electricity consumption rose to 1,460 kWh in 2024–25. Power markets and exchanges have also enhanced flexibility and efficiency in power procurement, the ministry said.“Despite these achievements, persistent challenges remain, particularly in the distribution segment, including 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 impacting the global competitiveness of Indian industry,” the ministry said in a statement.The draft NEP 2026 sets ambitious targets, aiming to raise per capita electricity consumption to 2,000 kWh by 2030 and over 4,000 kWh by 2047. It also aligns with India’s climate commitments, including a 45% reduction in emissions intensity from 2005 levels by 2030 and the goal of net-zero emissions by 2070, necessitating a decisive shift towards low-carbon energy pathways.The policy proposes a comprehensive overhaul of planning and finances. Distribution companies (DISCOMs) and State Load Despatch Centres (SLDCs) will prepare advance Resource Adequacy plans at utility and state levels, while the Central Electricity Authority (CEA) will draw up a national plan to ensure capacity adequacy. On the financial front, tariffs are proposed to be indexed for automatic annual revision, with greater recovery of fixed costs through demand charges to reduce cross-subsidies across consumer categories. Manufacturing units, railways and metro railways may be exempted from cross-subsidies and surcharges to boost competitiveness and lower logistics costs, while consumers with contracted loads of 1 MW and above could be exempted from the universal service obligation. The policy also calls for stronger dispute resolution mechanisms, tighter market monitoring, measures to bring AT&C losses down to single digits, shared distribution networks, creation of a Distribution System Operator, and improved grid operations through functional unbundling of state utilities and alignment of state grid codes with national standards.On generation and infrastructure, the policy emphasises rapid expansion of renewable energy through market-based routes, captive plants and large-scale deployment of storage. DISCOMs may install storage for small consumers to achieve economies of scale, while bulk consumers install their own, with provisions for peer-to-peer trading of surplus power and storage. Renewable and conventional power are to be treated at par in scheduling and deviations by 2030. The roadmap also supports market-based deployment of battery and pumped storage, domestic manufacturing of storage components and incentives such as viability gap funding. Thermal plants will be supported through storage integration and repurposing of older units for grid support, with exploration of direct steam utilisation for district cooling and industrial processes. Nuclear generation will focus on advanced and modular reactors, including small reactors for commercial and industrial use, to reach 100 GW by 2047, while hydro development will prioritise storage-based projects for flood control, irrigation and energy security. Transmission reforms include adoption of advanced technologies, compensation to address right-of-way issues, parity in transmission tariffs for renewables by 2030, and utilisation-based allocation of connectivity. The policy also mandates a robust cybersecurity framework, domestic storage of power sector data, structured data sharing with real-time visibility of distributed energy resources, and a transition to indigenously developed SCADA systems and domestic software for critical applications by 2030.
