The Consultative Committee of the Power Ministry, chaired by Power Minister Manohar Lal, met on Thursday to deliberate on a government proposal that would allow new electricity distribution licensees to supply power using existing networks by paying regulated wheeling charges, according to the Ministry.
Current Duplication of Infrastructure
Currently, more than one distribution licensee can operate in the same area, but each must establish its own distribution network. The Ministry said this results in duplication of poles, lines and substations, increasing capital expenditure and discouraging fresh investment, ultimately leading to inefficient resource utilisation.
Proposed Framework Details
Under the Ministry's proposed framework, existing distribution licensees will continue to own, operate and maintain their networks. New distribution licensees will be able to use the existing network by paying regulated wheeling charges, while retaining the option to develop their own network wherever permitted by the concerned State Electricity Regulatory Commission (SERC).
Opposition from States and Unions
The issue of multiple distribution licensees in a single service area is contentious. States, power sector employees and central trade unions strongly oppose several amendments in the draft Electricity Act, 2025. Their main contention is that the Bill allows multiple licensees using the same public-funded network, enabling private firms to cherry-pick high-paying consumers while public Discoms serve low-revenue rural and domestic consumers. In October 2025, the Electricity Employees' Federation of India (EEFI) claimed that Section 43(4) empowers regulatory commissions to allow consumers with demand above 1 megawatt to shift to private suppliers, reducing revenue of public Discoms and narrowing cross-subsidy. Meanwhile, state utilities must maintain contract demand for those high-end consumers as back-up, putting further financial burden on state Discoms.
Ministry's Assurances
The Ministry assured that a detailed implementation framework would be developed by SERCs to ensure fairness, transparency and non-discriminatory access. The proposal fully protects interests of incumbent distribution licensees and their employees. All licensees will continue to be bound by the universal service obligation under the Electricity Act, and the regulatory framework will prevent selective supply only to profitable consumers.
Consumer Freedom and Expected Benefits
Power Minister Manohar Lal emphasised that consumers will have the freedom to choose their electricity supplier, similar to choices in telecommunications and aviation. Increased competition is expected to encourage better consumer service, improved reliability, greater innovation and operational efficiency, while ensuring optimal utilisation of existing infrastructure and avoiding unnecessary expenditure. The Minister noted that the concept is not new to India and has been successfully implemented in Mumbai for several years, where consumers exercise supplier choice while the distribution network is developed in a coordinated manner under SERC supervision.
Implications for the Energy Sector
For commodity traders and energy analysts, this regulatory shift signals a potential restructuring of India's electricity distribution landscape. While no specific price impact is detailed, increased competition and efficient infrastructure use could alter wholesale power procurement patterns and distribution margins over time. Stakeholders should monitor SERC implementation frameworks and state-level reactions, as these will determine the pace and scope of market reforms.
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