Power and Energy Sector Reforms - Newspaper Summary

 The sources detail significant, multi-pronged reforms and strategic investments underway in India's Power and Energy sector as of October 2025. These initiatives are driven by the need to address massive financial losses, foster competition, ensure timely tariff adjustments, and crucially, align India's energy landscape with global climate mandates like the European Union’s (EU) Carbon Border Adjustment Mechanism (CBAM).

Here is a discussion of the Power & Energy Sector Reforms in the larger context of India's economy, business, and policy landscape:

I. Structural Reforms in the Power Distribution Sector

The Power Ministry has proposed a major overhaul of the power sector through draft amendments to the Electricity Bill, 2003. The primary goals of these reforms are to plug cumulative financial losses in the distribution segment, which have already crossed ₹6.9 trillion, and boost overall economic growth.

A. Ending Cross-Subsidies to Boost Industrial Competitiveness

A key proposal focuses on dismantling the system of cross-subsidies within the sector.

• Mechanism: Cross-subsidy involves industrial or commercial users paying higher electricity tariffs to subsidize power provided to other consumer groups, particularly households and farmers.
• Proposed Change: The draft bill proposes the progressive reduction and eventual elimination of cross-subsidies within five years from the date the Electricity (Amendment) Act, 2025 commences.
• Impact on Business: This practice has historically hurt industrial competitiveness and economic growth. Eliminating cross-subsidies for manufacturing enterprises, railways, and metro rail within five years is intended to rationalize tariffs, unlock demand, and reduce logistics costs.

B. Introducing Competition and Private Participation

The government is reviving plans to introduce competition in the power distribution segment, which is currently dominated by state-run distribution companies (discoms).

• Licensing Overhaul: The amendments are looking to allow multiple distribution licencees to cater to a single area using existing infrastructure.
• Market Entry: This will facilitate the entry of private firms, such as Adani Enterprises, Tata Power, Torrent Power, and CESC, allowing them to strengthen their presence across the country. A similar attempt in 2022 faced opposition from state discoms.
• Market Development: The proposed role of the State Electricity Regulatory Commissions (SERCs) is expanded to actively promote market development, including power trading, and regulating new market platforms and products.

C. Regulatory Accountability and Tariff Determination

The reforms address regulatory delays that have exacerbated discom losses.

• Suo Moto Tariff Fixing: The proposed amendments empower the SERCs to fix tariffs on a suo moto basis before the beginning of the financial year to ensure timely revisions and enhance accountability. Non-determination of tariffs on time has been cited as a cause of mounting losses.
• Accountability for Regulators: In a notable shift, the draft introduces provisions for disciplinary action against members of both Central and State Electricity Regulatory Commissions (CERC and SERCs) for failure to perform statutory duties, signaling a departure from the high degree of autonomy regulators traditionally held.
• National Oversight: The draft suggests establishing a National Electricity Council, headed by the Union Power Minister and comprising State Power Ministers, to build consensus on reforms and oversee coordinated implementation.

II. Strategic Energy Projects and Green Transition

India is actively pushing for self-reliance and global compliance in its energy mix, focusing heavily on green energy and key infrastructure development.

A. Green Hydrogen and Compliance with EU CBAM

India's response to the EU's Carbon Border Adjustment Mechanism (CBAM), an extra tariff on imports from countries that do not meet EU emissions targets, is visible through strategic investments in green energy.

• EU CBAM Challenge: The full rollout of CBAM is set for January. This mechanism poses a compliance test for Indian manufacturers, such as steelmakers, who rely heavily on coal-based production, unlike their European counterparts whose grids are substantially powered by renewables.
• Corporate Response (Jindal Stainless): India's largest stainless steelmaker, Jindal Stainless Ltd., is investing ₹700–800 crore from internal resources into renewable power and green hydrogen projects to cut embedded emissions. Approximately 65% of this investment is dedicated to Power Purchase Agreements (PPAs) for round-the-clock 300MW renewable energy supply, with the remaining 35% going to captive solar projects and green hydrogen generation.
• Ports as Green Hydrogen Hubs: The government has designated three major ports—Deendayal Port, Paradip Port, and VO Chidambaranar (VOC) Port—as green hydrogen hubs. These ports are leveraging proximity to industrial clusters, established infrastructure, and access to international markets. Industry leaders have committed over ₹1.5 lakh crore in investments across the value chain linked to these ports. India's position as a cost-competitive producer is strengthened by recent SECI green ammonia tenders, which achieved price discoveries nearly 45% lower than comparable global auctions.

B. Hydropower Development and Geopolitical Context

The government is moving to fast-track strategic energy projects, particularly in sensitive regions.

• Sawalkote Hydropower Project: The Union government granted environmental clearance to the long-delayed 1,856 MW Sawalkote hydropower project on the Chenab river in Jammu and Kashmir.
• Strategic Significance: The clearance ends nearly a decade of uncertainty and signals the government's push to fast-track strategic energy projects, strengthening regional development and energy security. It also underscores India's focus on fully utilising its western rivers for hydropower development while navigating complex bilateral water-sharing issues with Pakistan, especially with the Indus Water Treaty currently noted as being in abeyance. The project, once operational, is expected to generate over 7,000 million units of electricity annually.

C. Renewable Energy Investment by Industrial Players

Beyond government mandates, large industrial users are actively investing in green power for captive use.

• MRF’s Investment: MRF Ltd. entered into a power supply and consumption agreement with Serentica Renewables India Private Ltd. to purchase solar and wind power under the Centre’s captive power policy. MRF plans to acquire up to 26% of Serentica Renewables' paid-up equity capital for ₹99 crore.