Power Ministry Releases Draft National Electricity Policy 2026 with Transformative Reforms
New Delhi: The Ministry of Power unveiled the draft National Electricity Policy (NEP) 2026 on Wednesday, proposing sweeping reforms aimed at overhauling India's electricity landscape. This comprehensive policy framework seeks to address persistent challenges while accelerating the sector's transformation in alignment with the government's Viksit Bharat vision for 2047.
Key Proposals and Structural Changes
The draft policy introduces several groundbreaking measures designed to enhance efficiency, promote competition, and ensure financial sustainability. Among the most significant proposals are:
- Automatic Tariff Revisions: Implementation of annual tariff adjustments linked to a suitable index when state regulators fail to issue timely tariff orders
- Cross-Subsidy Exemptions: Removal of cross-subsidies for the manufacturing sector and railways to boost industrial competitiveness
- Renewable Energy Expansion: Accelerated capacity addition through market-based mechanisms and captive power plants
- Regulatory Strengthening: Establishment of a robust framework to prevent collusion, market gaming, and dominance
The ministry has invited stakeholder feedback on these proposals, emphasizing that the finalized policy will replace the existing NEP notified in 2005.
Historical Context and Current Challenges
According to ministry officials, the first National Electricity Policy issued in February 2005 successfully addressed fundamental challenges including demand-supply gaps, limited electricity access, and inadequate infrastructure. Since then, the sector has witnessed remarkable transformation with installed generation capacity increasing fourfold alongside substantial private sector participation.
Notable achievements include universal electrification achieved by March 2021, operationalization of a unified national grid in December 2013, and per capita electricity consumption rising to 1,460 kWh in 2024-25. Power markets and exchanges have further enhanced flexibility and efficiency in power procurement.
However, the ministry acknowledges that "persistent challenges remain, particularly in the distribution segment." These include high accumulated losses, outstanding debt, non-cost-reflective tariffs in several segments, and elevated industrial tariffs resulting from cross-subsidization that adversely impacts India's global competitiveness.
Ambitious Targets and Climate Alignment
The draft NEP 2026 sets ambitious consumption targets, aiming to raise per capita electricity consumption to 2,000 kWh by 2030 and over 4,000 kWh by 2047. The policy aligns with India's climate commitments, including a 45% reduction in emissions intensity from 2005 levels by 2030 and the net-zero emissions goal by 2070, necessitating a decisive shift toward low-carbon energy pathways.
Comprehensive Planning and Financial Overhaul
The policy proposes a complete restructuring of planning and financial mechanisms:
- Resource Adequacy Planning: Distribution companies and State Load Despatch Centres will prepare advance plans at utility and state levels, while the Central Electricity Authority develops a national capacity adequacy plan
- Financial Reforms: Tariff indexing for automatic annual revision, greater recovery of fixed costs through demand charges, and reduced cross-subsidies across consumer categories
- Sector-Specific Exemptions: Manufacturing units, railways, and metro railways may receive exemptions from cross-subsidies and surcharges to enhance competitiveness and lower logistics costs
- Operational Improvements: Stronger dispute resolution mechanisms, tighter market monitoring, measures to reduce AT&C losses to single digits, shared distribution networks, creation of a Distribution System Operator, and improved grid operations
Generation and Infrastructure Development
The policy emphasizes rapid renewable energy expansion through multiple approaches:
- Market-based deployment mechanisms and captive power plants
- Large-scale storage deployment with DISCOMs installing storage for small consumers and bulk consumers installing their own systems
- Provisions for peer-to-peer trading of surplus power and storage capacity
- Equal treatment of renewable and conventional power in scheduling and deviations by 2030
Additional generation initiatives include:
- Market-based deployment of battery and pumped storage with domestic manufacturing incentives
- Thermal plant support through storage integration and repurposing of older units
- Nuclear generation focus on advanced and modular reactors targeting 100 GW by 2047
- Hydro development prioritizing storage-based projects for multiple benefits
Transmission and Cybersecurity Reforms
The policy outlines comprehensive transmission reforms including adoption of advanced technologies, compensation mechanisms for right-of-way issues, parity in transmission tariffs for renewables by 2030, and utilization-based connectivity allocation.
Cybersecurity receives special emphasis with mandates for:
- A robust cybersecurity framework for the power sector
- Domestic storage of power sector data
- Structured data sharing with real-time visibility of distributed energy resources
- Transition to indigenously developed SCADA systems and domestic software for critical applications by 2030
This comprehensive draft policy represents a significant step toward modernizing India's power sector while addressing both immediate challenges and long-term sustainability goals.
