National Electricity Policy in India (2026)

Policy Update
Purbaa Jagannath

Background

Electricity is a concurrent-list subject in India, and the framework for national-level power sector planning was laid down by the Electricity Act, 2003, which mandates the Central Government to formulate a National Electricity Policy (NEP) in consultation with the Central Electricity Authority (CEA) and the State Governments, and to review it from time to time (Ministry of Power). Under this mandate, the first National Electricity Policy (NEP 2005) was notified on 12 February 2005, at a time when the sector was defined by demand-supply deficits, limited household access to electricity, and weak generation, transmission and distribution infrastructure.

NEP 2005 set out core objectives: universal household electrification within five years, meeting full electricity demand by 2012 with adequate spinning reserve, per capita availability of over 1,000 units by 2012, a minimum lifeline consumption of one unit per household per day, financial turnaround of the sector, and protection of consumer interests (Ministry of Power; ADB Law and Policy Reform Program).

Two decades on, the sector has been transformed on several of these counts. Installed generation capacity has grown roughly fourfold, from about 1.15 lakh MW in early 2005 to over 5.2 lakh MW by early 2026, aided by significant private-sector participation. Universal household electrification was achieved by March 2021, a unified national grid became operational in December 2013, and per capita electricity consumption reached 1,460 kWh in 2024-25 (Press Information Bureau, 21 January 2026).

Yet persistent structural problems remain, chiefly in the distribution segment: accumulated losses and outstanding debt of distribution licencees have been estimated at around ₹690,000 crore, tariffs across several consumer categories remain non-cost-reflective, and heavy cross-subsidisation has pushed up tariffs for industry, weakening the competitiveness of Indian manufacturing (JSA Prism, January 2026; PIB, 21 January 2026).

Against this backdrop, the Ministry of Power released the Draft National Electricity Policy (NEP), 2026, for public consultation on 20-21 January 2026, intended to replace NEP 2005 once finalised. Framed around the vision of Viksit Bharat @2047, the Draft NEP 2026 sets out to increase per capita electricity consumption to 2,000 kWh by 2030 and over 4,000 kWh by 2047, ensure power availability even at peak demand, and align the sector with India’s climate commitments: a 45 per cent reduction in emissions intensity below 2005 levels by 2030 and net-zero emissions by 2070 (PIB, 21 January 2026; Lexology/JSA, February 2026).

The Ministry initially invited comments by 19 February 2026, and subsequently extended the deadline by a month, to 19 March 2026, in view of the scale and technical complexity of the proposed reforms (Lexplosion Solutions, March 2026). As of the date of this article, the policy remains in draft form and has not yet been formally notified.

Functioning

The National Electricity Policy operates through a layered institutional architecture consistent with the Electricity Act, 2003. The Ministry of Power, as the nodal Central Government authority, drafts and finalises the policy in consultation with the CEA and State Governments; the CEA subsequently translates the policy into an operational National Electricity Plan and, under the Draft NEP 2026, would additionally consolidate state- and utility-level Resource Adequacy (RA) plans into a national RA plan.

State Electricity Regulatory Commissions (SERCs) regulate tariffs and licensing within their jurisdictions, while Distribution Companies (DISCOMs) and State Load Despatch Centres (SLDCs) are responsible for on-the-ground implementation, including the preparation of their own RA plans (PIB, 21 January 2026).

The Draft NEP 2026 organises its reform agenda across thirteen thematic areas of intervention:

●      Resource Adequacy: decentralised RA planning by DISCOMs and SLDCs, consolidated nationally by the CEA.

●      Financial Viability & Economic Competitiveness: index-based automatic annual tariff revision where State Commissions fail to issue timely orders, progressive recovery of fixed costs through demand charges, and exemption of manufacturing, railways and metro rail from cross-subsidy surcharges.

●      Renewable Energy Generation & Storage: market-based RE capacity addition, distributed renewable energy (DRE) and peer-to-peer trading, and demand-side incentives such as Viability Gap Funding for Battery Energy Storage Systems (BESS) and pumped storage.

●      Thermal Generation: integration of storage and repurposing of older units for grid-support roles.

●      Nuclear Generation: adoption of Small Modular and Small Reactors under the SHANTI Act, 2025, targeting 100 GW of nuclear capacity by 2047.

●      Hydro Generation: accelerated storage-based hydroelectric development for flood moderation, irrigation and energy security.

●      Power Markets: a stronger regulatory framework for market monitoring to prevent collusion and gaming.

●      Transmission: technology upgrades, compensation-based resolution of Right-of-Way issues, and tariff parity for new renewable capacity by 2030.

●      Distribution: a push for single-digit AT&C losses, shared distribution networks, and a new Distribution System Operator (DSO) to integrate distributed renewables, storage and Vehicle-to-Grid (V2G) systems.

●      Grid Operations: functional unbundling of State Transmission Utilities and alignment of State Grid Codes with the CERC-specified Indian Electricity Grid Code.

●      Cybersecurity: a dedicated framework and mandatory in-country storage of power sector data.

●      Data Sharing: real-time visibility of distributed energy resources for DISCOMs and SLDCs.

●      Technology & Skill Development: transition to an indigenously developed SCADA system by 2030.

The policy’s on-ground financial and reform architecture is carried by dedicated central schemes. Chief among these is the Revamped Distribution Sector Scheme (RDSS), launched in July 2021 with a total outlay of ₹3,03,758 crore over FY 2021-22 to FY 2025-26 (estimated grant component: ₹97,631 crore), which conditions the release of central funds to DISCOMs on their performance against pre-agreed benchmarks for AT&C losses, the ACS-ARR gap, smart metering roll-out, and consumer service standards (Ministry of Power; Tribune, 2025). RDSS effectively operationalises the distribution-reform objectives that the Draft NEP 2026 seeks to carry forward and tighten.

Performance

Programme and sector-wide data published by the Ministry of Power, the CEA and the Press Information Bureau show consistent, and in FY 2025-26 record, expansion in generation capacity and renewable energy deployment.

Table 1: Installed Generation Capacity, 2005 vs 2026

Source: Ministry of Power, Annual Report 2004-05; Press Information Bureau, “Power Generation Capacity from Various Sources,” 12 March 2026; India Power Capacity update, August 2026; PIB, “Draft National Electricity Policy (NEP), 2026,” 21 January 2026.

Table 2: Renewable Energy Capacity Mix (as of 31 March 2026)

Source: Press Information Bureau, “India Ranks Third Globally in Renewable Energy Installed Capacity,” Ministry of New and Renewable Energy, 2026, based on IRENA Renewable Energy Statistics 2026 (data as of December 2025) and MNRE figures as on 31.03.2026.

India added a record 55.29 GW of non-fossil capacity in FY 2025-26 as a whole—the highest annual addition on record—and a further 30.6 GW of renewable capacity (led by 26.34 GW of solar, up 43 percent year-on-year) in the first half of calendar year 2026 alone. In July 2025, renewables met an all-time-high 51.5 percent of India’s electricity demand on a peak day of 203 GW (PIB, 2026). Total capacity added in the first ten months of FY 2025-26 stood at 52,537 MW, surpassing the previous full-year record of 34,054 MW set in FY 2024-25, with the gap between energy supplied and energy required narrowing from 0.5 percent in FY 2022-23 to almost nil by FY 2025-26 (India News Network, 16 February 2026).

Table 3: Distribution Sector Performance under RDSS

Source: Indian Smart Grid Forum, citing Ministry of Power reply in Rajya Sabha, 2025; RDSS MIS Dashboard, Ministry of Power, data as of August 2026; Ministry of Power, “Overview,” Revamped Distribution Sector Scheme.

The RDSS target of bringing AT&C losses down to a pan-India level of 12-15 percent, and closing the gap between the Average Cost of Supply and Average Revenue Realised (the ACS-ARR gap), was originally set for 2024-25. The national loss figure has fallen substantially since RDSS began, from 21.91 per cent in FY 2020-21 to 16.12 percent in FY 2023-24  but progress has since plateaued, with FY 2024-25 losses at 16.16 percent, still above the scheme’s target band (Indian Smart Grid Forum; Impressive Times, December 2025). RDSS itself carries a fixed sunset date of 31 March 2026, though smart-meter installation under sanctioned projects is expected to continue through March 2028 (Prayas Energy Group).

Impact

The impact of India’s National Electricity Policy framework is best assessed in two parts: the realised, two-decade impact of NEP 2005, and the anticipated impact of the still-draft NEP 2026, which has not yet been notified and therefore has no implementation record of its own.

NEP 2005’s core objectives have been substantially, if unevenly, met. Universal household electrification, a unified national grid, and a roughly fourfold increase in installed capacity represent a structural transformation of supply-side capacity that has largely eliminated the chronic energy and peaking shortages the 2005 policy was designed to address (PIB, 21 January 2026). India has also become the world’s third-largest market for installed renewable energy capacity, moving ahead of Brazil, with the fastest-growing major renewable energy market globally in 2025 according to the International Energy Agency (PIB, Ministry of New and Renewable Energy, 2026).

However, the financial turnaround envisaged for the sector has not materialised on the same scale: distribution licensees’ accumulated losses running into several lakh crore rupees, and AT&C losses still above the 15 percent mark nationally, show that the 2005 policy’s commercial-viability objective remains only partially realised two decades on.

The Draft NEP 2026, being a proposed reorientation rather than an implemented programme, cannot yet be evaluated for outcomes. Independent stakeholder analysis has so far characterised it favourably in direction: the energy think tank Ember described it as marking “a substantive shift in the philosophical underpinnings of the planning framework,” moving the emphasis from expanding raw access and capacity toward ensuring reliable 24×7 supply, deeper end-use electrification, and a systems-level approach to balancing renewable supply with demand (Ember Energy, 16 February 2026).

At a CEO Roundtable on Power Distribution convened on the sidelines of the Bharat Electricity Summit 2026, industry participants welcomed the draft policy’s direction, describing it as providing “clear strategic direction” for the distribution segment (News on Air, 20 March 2026). Whether these anticipated benefits — particularly around tariff rationalisation, DISCOM solvency, and renewable energy integration — materialise will depend on the policy’s eventual final text and, more importantly, on implementation capacity at the State and DISCOM level, which has historically lagged central policy ambition.

Emerging Issues

●      Policy still in draft form: as of this writing, the NEP 2026 remains under stakeholder consultation, with the comment window already extended once (from 19 February to 19 March 2026); the gap between an ambitious draft and a finalised, notified policy leaves its ultimate content and timeline for implementation uncertain.

●      Persistent DISCOM financial stress: distribution licensees’ accumulated losses of roughly ₹6,90,000 crore, and a national AT&C loss rate that has plateaued at just above 16 percent since FY 2023-24, indicate that the financial-viability problem the policy seeks to solve remains largely unresolved on the ground (JSA Prism; Indian Smart Grid Forum).

●      Renewable energy funding shortfall and solar over-concentration: a 2026 Parliamentary Standing Committee report found the Ministry of New and Renewable Energy received only ₹32,914.67 crore against a requested ₹45,806.61 crore for 2026-27—a shortfall of roughly 28 percent — while 92.8 percent of the sanctioned budget remains tied to solar schemes, with 72 percent of that earmarked for the PM Surya Ghar Muft Bijli Yojana alone; the Committee urged a more diversified renewable energy strategy (Whalesbook, citing the Committee report, 2026).

●      DISCOM resistance to rooftop solar: the same committee noted that DISCOMs continue to resist rooftop solar adoption schemes out of concern that self-generation will erode their revenue base, slowing uptake of flagship programmes and underscoring a misalignment between central renewable energy goals and state-level distribution utility incentives.

●      Regional implementation gaps: the pace of renewable energy scheme implementation in the North-Eastern region remains slow relative to targets, prompting the Committee to recommend stronger coordination between the Ministry of New and Renewable Energy and the Ministry of Development of North Eastern Region.

●      Smart-metering roll-out well behind schedule: only around 29.5 percent of the 20.33 crore smart meters sanctioned under RDSS had been installed as of August 2026, against a completion horizon extending to March 2028, even as RDSS itself carried a scheme sunset date of 31 March 2026, raising questions about the funding and institutional continuity of distribution reform beyond that date.

●      Equity concerns in tariff redesign: the Draft NEP 2026’s proposals to exempt manufacturing, railways and metro rail from cross-subsidy surcharges, and to allow SERCs to exempt large consumers from Universal Service Obligations, aim to boost industrial competitiveness but have not been accompanied by a published assessment of how the resulting revenue gap would be absorbed across residential and agricultural consumer categories.

Way Forward

●      Finalise the NEP 2026 promptly while substantively incorporating stakeholder feedback: the Ministry should use the extended consultation window to reconcile industry, State and think-tank inputs (such as Ember’s formal policy response) before notification, rather than treating the consultation as a formality.

●      Secure continuity of distribution-reform financing beyond RDSS’s FY 2025-26 sunset: a successor scheme, or a formal extension aligned with the smart-metering completion timeline to March 2028, is needed to avoid a funding gap for DISCOMs still working through their reform trajectories.

●      Diversify renewable energy funding beyond solar: in line with the 2026 Standing Committee’s recommendation, MNRE allocations should be rebalanced to strengthen wind, storage, biomass and small-hydro pipelines, and Budget requests should be funded closer to the requested level to avoid slowing project implementation.

●      Redesign DISCOM incentives around rooftop and distributed solar: revenue-neutral compensation mechanisms, such as the DSO model proposed in the Draft NEP itself, should be operationalised early so that DISCOMs’ commercial interests are aligned with, rather than opposed to, distributed renewable energy adoption.

●      Publish a distributional impact assessment of proposed cross-subsidy exemptions before finalisation, so that industrial tariff relief does not translate into an unexamined burden shift onto residential or agricultural consumers.

●      Build SERC and DISCOM capacity for the index-based automatic tariff revision mechanism, given that its effectiveness depends on State Commissions’ technical and administrative readiness to implement it consistently.

●      Strengthen regional coordination for renewable energy roll-out, particularly in the North-East, through joint mechanisms between MNRE and the Ministry of Development of North Eastern Region, as recommended by the Parliamentary Standing Committee.

●      Institutionalise transparent, periodic public reporting of AT&C loss and ACS-ARR gap data at the DISCOM level, to allow independent tracking of whether the single-digit AT&C loss target set out in the Draft NEP 2026 is actually being approached.

References

Press Information Bureau. (2026, January 21). Draft National Electricity Policy (NEP), 2026 released for public consultation with stakeholders. Ministry of Power. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2216661&reg=3&lang=2

Ministry of Power, Government of India. (n.d.). National Electricity Policy. https://powermin.gov.in/en/content/national-electricity-policy

Ministry of Power, Government of India. (n.d.). Electricity Act, 2003. https://powermin.gov.in/en/content/electricity-act-2003-52

Ministry of Power, Government of India. (2005). Annual Report 2004-05. https://powermin.gov.in/sites/default/files/uploads/ar04_05.pdf

Ministry of Power, Government of India. (n.d.). Revamped Distribution Sector Scheme (RDSS) Overview. https://powermin.gov.in/en/content/overview-5

JSA (Shardul Amarchand Mangaldas & Co / J. Sagar Associates) via Lexology. (2026, February 2). Government of India issues the draft National Electricity Policy, 2026 for stakeholder consultation. https://www.lexology.com/library/detail.aspx?g=b9ae80c9-560d-4e79-82fa-1ed62f3b7c0d

JSA. (2026, February). JSA Prism | Electricity and Power | January 2026. https://www.jsalaw.com/newsletters-and-updates/jsa-prism-electricity-and-power-january-2026-2/

Lexplosion Solutions. (2026, March 2). Power Ministry issues Draft National Electricity Policy, 2026 inviting comments/suggestions within 19th March, 2026. https://lexplosion.in/power-ministry-issues-draft-national-electricity-policy-2026-inviting-comments-suggestions-within-19th-february-2026/

Ember Energy. (2026, February 16). Ember’s response to India’s draft National Electricity Policy – 2026. https://ember-energy.org/latest-insights/embers-response-to-indias-draft-national-electricity-policy-2026/

Mercom India. (2026, January 21). Draft National Electricity Policy 2026 tightens performance benchmarks for DISCOMs. https://www.mercomindia.com/draft-national-electricity-policy-2026-tightens-performance-benchmarks-for-discoms

News on Air. (2026, January 21). Govt releases new Draft National Electricity Policy providing roadmap for sustainable power sector. https://www.newsonair.gov.in/govt-releases-draft-national-electricity-policy-2026

News on Air. (2026, March 20). CEO Roundtable on Power Distribution convened under draft National Electricity Policy on sidelines of ongoing Bharat Electricity Summit 2026. https://www.newsonair.gov.in/ceo-roundtable-on-power-distribution-convened-under-draft-national-electricity-policy-on-sidelines-of-ongoing-bharat-electricity-summit-2026

Press Information Bureau. (2026, March 12). Power generation capacity from various sources. Ministry of Power. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2238921&lang=1&reg=3

Press Information Bureau. (2025, December 1). India’s installed power capacity reaches 5.05 lakh MW, government speeds up renewable push. (Republished, News on Air.) https://www.newsonair.gov.in/indias-installed-power-capacity-reaches-5-05-lakh-mw-government-speeds-up-renewable-push

Press Information Bureau. (2026). India ranks third globally in renewable energy installed capacity: Shri Pralhad Joshi. Ministry of New and Renewable Energy. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2250039&lang=1&reg=3

India News Network. (2026, February 16). India achieves record power capacity growth of over 52 GW in FY26. https://www.indianewsnetwork.com/en/india-achieves-record-power-capacity-growth-over-52-gw-fy26-20260216

Sarkaritel. (2026, July 18). India adds 30.6 GW renewable energy capacity in H1 2026, solar leads growth: Pralhad Joshi. https://www.sarkaritel.com/india-renewable-capacity-h1-2026/

Karmactive. (2026, August). India adds record 26 GW solar in H1 2026, surpassing US install rate. https://www.karmactive.com/india-h1-2026-solar-wind-record-26-gw/

Indian Smart Grid Forum. (2025). Government accelerates smart meter deployment under RDSS scheme. https://www.indiasmartgrid.org/news-detail/government-accelerates-smart-meter-deployment-under-rdss-scheme

Impressive Times. (2025, December 8). Centre lists major initiatives to cut AT&C losses; national loss levels drop to 16.16% in FY25. https://impressivetimes.com/business/atc-losses-reduced-rdss-reforms-power-sector-india-fy25/

Prayas (Energy Group). (2025, May 15). Smart metering in India: A work in progress. https://energy.prayaspune.org/power-perspectives/smart-metering-in-india-a-work-in-progress

Whalesbook. (2026). Parliament panel urges renewable energy strategy shift beyond solar. https://www.whalesbook.com/news/English/renewables/Parliament-Panel-Urges-Renewable-Energy-Strategy-Shift-Beyond-Solar/6a7d44096ffbe1e6461737d9

Vision IAS. (2026, January 22). Draft National Electricity Policy (NEP) 2026 released. https://visionias.in/current-affairs/news-today/2026-01-22/economy/draft-national-electricity-policy-nep-2026-released

World Nuclear News. (2026, January 27). Indian government releases draft energy policy. https://www.world-nuclear-news.org/articles/indian-government-releases-draft-energy-policy

Asian Development Bank, Law and Policy Reform Program. (n.d.). National Electricity Policy, 2005 (India). https://lpr.adb.org/resource/national-electricity-policy-2005-india

About the Contributor

Purbaa Jagannath is a Research Intern at IMPRI (Impact and Policy Research Institute), working on policy writing. She holds a Bachelor of Social Work (Honours with Research), with a minor in Political Science, from the University of Delhi, and is currently pursuing a Master’s in Social Work at the Tata Institute of Social Sciences (TISS), Mumbai. Her academic and professional interests span social work, political science, and policy research, with recurring engagement with themes of governance and community development.

Acknowledgment

I am writing to express my sincere gratitude to IMPRI (Impact and Policy Research Institute) for providing me with the opportunity to prepare this policy update article and for fostering a rigorous learning environment that connects research with public policy practice. I’m thankful to my reviewers Anjali Singh and Himanshi Singh for reviewing this article.

Disclaimer

All views expressed in the article belong solely to the author and do not necessarily represent the views or policies of the organisation.

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