The coming years could become expensive for millions of electricity consumers across India. The central government’s draft National Electricity Policy (NEP) has triggered a big debate on power tariffs.
If this policy is implemented, electricity bills could increase automatically every year starting from 2026–27.
So far, many state governments avoided increasing electricity rates for long periods due to political reasons. However, the new policy aims to end this practice.
Index-Linked Tariff System Proposed
The draft policy introduces an index-linked tariff system. Under this system, if state electricity regulatory commissions do not decide tariffs on time, electricity prices will automatically increase based on a fixed formula.
This means tariff hikes will no longer depend entirely on political decisions. Instead, electricity rates will adjust automatically when needed.
Government Concerned About DISCOM Losses
The government is worried about the worsening financial health of power distribution companies (DISCOMs). Across the country, DISCOMs have outstanding dues of nearly ₹3 lakh crore.
According to official data, power companies suffered an average loss of 50 paise per unit in FY 2023. One of the main reasons for this loss is that the money recovered from consumers is lower than the actual cost of supplying electricity.
Electricity Amendment Bill May Be Introduced
The draft Electricity (Amendment) Bill is likely to be presented in the upcoming Budget Session of Parliament.
The proposal also states that power distribution companies must inform consumers every month about changes in electricity purchase costs.
The government has invited feedback and suggestions from all stakeholders on this draft policy within 30 days.
Major Changes From 2026–27
As per the draft policy, from the financial year 2026–27, regulatory commissions must set electricity tariffs that fully cover the cost of generating and supplying power.
The existing system of delaying tariff hikes or adding losses later will be removed. Electricity prices may also be linked to an index, such as inflation, to ensure regular adjustments.
Why Industries Pay Higher Electricity Prices
Industries in India pay some of the highest electricity rates in the world. This happens because industries bear the burden of providing subsidized electricity to farmers and domestic consumers.
Together, these two categories consume about 45% of the country’s total electricity.
Impact on Common Consumers
The new policy will directly affect household and agricultural consumers. Over time, the gap between the actual cost of electricity and the subsidy provided will be reduced.
As a result, electricity bills may increase gradually, possibly with small monthly hikes, instead of sudden large increases in the future.
