India has released the draft of its National Energy Policy (NEP) 2026, signaling a major shift in the power sector. The government clarified its intent that electricity will no longer be sold below the cost of production, aiming to bring financial stability to distribution companies (discoms) burdened by significant debt. This new policy framework is set to gradually phase out cross-subsidies across the country.
Key Changes in the New Policy
The draft of the National Energy Policy 2026 states that power will not be sold below the actual cost of production. If any state government wishes to provide electricity subsidies, they will be required to account for these subsidies explicitly in their budget. The primary focus of this policy is to implement cost-based tariffs, which will help discoms recover from their financial woes and reduce their debt burden.
Focus on Discoms’ Financial Health
Presently, discoms across the country carry a total debt of 7.18 lakh crore rupees, with accumulated losses amounting to 6.9 lakh crore rupees. The NEP 2026 aims to strengthen the financial health of these electricity distribution companies by phasing out excessive cross-subsidies. This move is expected to improve the operational efficiency and financial viability of the power sector, preventing discoms from selling power at a loss.
Exemptions and Future Investments
The new policy proposes exemptions from cross-subsidies and surcharges for electricity supplied to specific sectors like manufacturing, railways, and metro rail. This step is intended to enhance the competitiveness of Indian products and reduce logistics costs. Additionally, consumers in loss-making areas, particularly rural and agricultural regions, will be able to purchase electricity from any distribution company. The power sector will require significant investment, with an estimated 50 lakh crore rupees needed by 2032 and 200 lakh crore rupees by 2047.
Solar Power for Agriculture and State Burden
As part of the NEP 2026, there is a target to install solar panels on all agricultural feeders by 2030. This will ensure a stable power supply for farmers during the day. Another key objective of the policy is to eliminate the burden of electricity subsidies on state governments by 2030, encouraging a more sustainable and financially responsible approach to power distribution.
