Draft National Electricity Policy set for inter-ministerial consultation

The new policy emphasizes on grid flexibility amid growing renewable energy integration and potential demand from data centres and green hydrogen plants

New Delhi: The Union power ministry has sent the draft National Electricity Policy 2026 for inter-ministerial consultation, said power secretary Pankaj Agarwal on Thursday.

Addressing the second edition of the Indian Power Sector Conference organized by the Federation of Indian Chambers of Commerce and Industry (FICCI), the secretary said the new policy emphasizes on grid flexibility amid growing renewable energy integration and potential demand from data centres and green hydrogen plants.

“We have aggregated all the stakeholders' comments. We have already moved the cabinet note for the inter-ministerial consultation, and I think it shouldn't be taking very long," Agarwal told reporters on the sidelines of the event.

This policy will replace the National Electricity Policy 2005.

The National Electricity Policy

In January, the ministry released a draft National Electricity Policy (NEP) proposing index-linked tariff revisions to force cost-reflective pricing if state electricity regulatory commissions (SERCs) fail to act. The index's nature and methodology will have to be devised by the SERCs under the draft policy.

According to the draft NEP, tariff orders must be issued before the start of each fiscal year, while true-up orders for the previous fiscal year must be issued within the current year. True-ups reconcile actual revenue and costs with the initial estimates.

“From FY27, state commissions must ensure that tariffs fully reflect costs without creating regulatory assets. Tariffs must be linked to a suitable index for automatic annual revision, which operates if no tariff order is passed by the state commission," the ministry, in its draft policy, had said, noting that recovery of cost of service is essential for the sustainability of the power sector.

Adjusted in future tariff

A regulatory asset is created when the regulator accepts certain expenditures but does not factor them into the present tariff. These expenditures are to be adjusted in the future tariff. The so-called regulatory assets now amount to around ₹3 trillion, additionally burdening the sector.

Further, the policy proposes to open up the power distribution sector and allow multiple players within a single distribution area. Currently, only one distribution company supplies power to consumers in a particular area.

The draft policy said: “Monopoly in distribution will be phased out by allowing multiple players. Public-private partnerships (PPP) and listing of utilities shall be promoted. The central government shall extend necessary support to facilitate the implementation. At present, the supply areas are coterminous with the distribution areas. However, in order to promote competition, state commissions may allow multiple licensees in the same areas.”

About the Author

Rituraj Baruah is a special correspondent covering energy, housing, urban affairs, heavy industries and small businesses at Mint. He has reported on diverse sectors over the last eight years including, commodities and stocks market, insolvency and real estate; with previous stints at Cogencis Information Services, Indo-Asian News Service (IANS) and Inc42.

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