New Delhi: India’s draft National Electricity Policy (NEP) 2026 signals a decisive withdrawal of long-standing mechanisms in the power sector, proposing automatic tariff revisions, curbs on cross-subsidies and a phased end to distribution monopolies. The government has invited stakeholders to submit comments on the draft.
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The Ministry of Power said on Wednesday that it has released the Draft NEP 2026 for consultation, noting that the policy, once finalised, will replace the existing National Electricity Policy notified in 2005. Comments have been sought from states, regulators, utilities, industry bodies and other stakeholders on the draft framework.
At its core, NEP 2026 takes aim at what it calls the sector’s entrenched distortions. “The continued practice of setting tariffs below the cost of supply has resulted in DISCOMs being trapped in recurrent debt cycles,” the draft policy states, adding that tariffs in several segments remain “not cost reflective” and that cross-subsidisation has “undermined the global competitiveness of Indian industry.”
One of the most consequential proposals is the introduction of automatic tariff adjustment mechanisms. From FY 2026–27, State Commissions are directed to ensure that “tariffs fully reflect costs without creating regulatory assets,” while 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 draft also mandates that tariff orders be issued before the start of each financial year and that regulatory proceedings be concluded within 120 days, sharply reducing room for prolonged delays.
Draft NEP 2026 proposes a phased rollback of cross-subsidies, stating that they “must be reduced progressively, ensuring no tariff falls below 50 percent of ACoS.” It goes further by recommending that manufacturing enterprises, railways and metro railways be exempted from cross-subsidy and additional surcharge payments.
The policy argues that high industrial tariffs have become a structural handicap, noting that current arrangements compel discoms to contract power for large consumers even when they are capable of procuring electricity independently, inflating fixed costs and tariffs for others.
In a significant departure from past policy, the draft suggests that regulators “may exempt the distribution licensees from the Universal Service Obligation in respect of consumers having a contracted load of 1 MW and above, capable of self-procurement”.
According to the policy, this would reduce fixed-cost burdens on discoms, enable industries to access competitively priced power and lower costs for smaller consumers.
The draft policy also explicitly targets monopoly structures in distribution. It states that “monopoly in distribution will be phased out by allowing multiple players”, with public-private partnerships, shared distribution networks and even listing of state-owned discoms proposed to improve accountability and efficiency.
To reinforce discipline, NEP 2026 proposes national benchmarks for reliability indices such as SAIDI and SAIFI, mandatory public disclosure of performance data and compensation to consumers for failure to meet service standards.
While reaffirming India’s clean energy trajectory, the policy withdraws special operational treatment for renewables over time. It states that by 2030 or earlier, regulators must ensure “parity in scheduling and deviation between RE and conventional sources to ensure grid stability.”
The draft also discourages net metering beyond 5 kW and promotes storage-backed self-consumption, signalling a shift away from grid-dependent rooftop solar models.
NEP 2026 does not envisage a near-term exit from coal but reframes its role. Coal-based plants are expected to provide flexibility, reserves and grid support, with older units potentially repurposed as synchronous condensers. “Coal-based power will continue to play a critical role in meeting baseload demand,” the policy states.
Nuclear power is repositioned as a scalable clean option, aligned with the government’s 100 GW target by 2047, while energy storage is elevated to a standalone market participant eligible for market-based procurement and ancillary services.
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Announcing the draft, the Ministry of Power said NEP 2026 aims to transform the sector in line with the vision of Viksit Bharat @2047, building on gains such as universal electrification and a unified national grid, while addressing persistent weaknesses in distribution finances.