Power Sector Reform’s Darker Side: Consumers May End Up Paying More

India’s draft Electricity (Amendment) Bill, 2025 aims to overhaul the country’s financially-stricken power distribution system, but behind the rhetoric of efficiency and competition lies a troubling undercurrent: the cost burden could ripple back to consumers.

Key reform highlights

• The Bill proposes to end the monopoly of state-owned distribution companies (discoms), by allowing multiple distributors in a given area, opening retail electricity to private players, and removing cross-subsidies over a five-year phase.
• To qualify for central assistance, states must opt for discom reforms: listing utilities, allowing private participation or divesting up to 51 % in new entities and meeting service and financial milestones.

The hidden catch for consumers

• With increased competition and private participation, tariffs may rise closer to cost-reflective levels as cross-subsidies are phased out. Under the reforms, especially in industrial/transport segments, the promise of “cheap power” may fade.
• State governments will likely take on discom debt (~₹7.08 lakh crore losses + ₹7.42 lakh crore debt as of FY24), but the reform package shifts the structural burden—while discoms get technical fixes, the ultimate cost of efficiency may move to end-users.
• In essence: the model re-imagines the power sector as a profit-oriented utility rather than a welfare-driven service. The required rate base and return for private entrants could push tariff floors upward.

What this means for you

• Short term: Possible tariff hikes or more frequent cost adjustments as discoms reset.
• Medium term: Improved reliability and service quality may be realised, but at the price of higher bills for households and small business consumers.
• Best to watch: Tariff orders from state-regulatory commissions, rollout of “open access” for large consumers, and how government compensates for the loss of cross-subsidies.

This reform is ambitious and necessary — India’s power distribution sector has long been the weakest link. The question is: who compensates when the system shifts from social service to market-driven utility? It appears the answer may lie partly with consumers.