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The Ministry of Power told the Rajya Sabha that electricity tariffs are determined by the Appropriate Electricity Regulatory Commissions under the Electricity Act, 2003, guided by the National Tariff Policy, with State Governments free to subsidise any class of consumers.
The Revamped Distribution Sector Scheme, launched in July 2021, has an outlay of Rs 3,03,758 crore with Gross Budgetary Support of Rs 97,631 crore; projects worth Rs 1.53 lakh crore for loss-reduction infrastructure and Rs 1.31 lakh crore for smart metering have been sanctioned.
RDSS smart metering works cover 19.79 crore consumers, 2.05 lakh feeders and 52.53 lakh distribution transformers across 28 States and 45 distribution utilities; Rs 47,124 crore has been released under RDSS since FY2023.
Average hours of supply in rural areas rose from 12.5 hours in FY14 to 22.6 hours in FY26, and in urban areas from 22.1 hours to 23.4 hours over the same period.
The Draft National Electricity Policy, 2026 proposes Resource Adequacy Plans, progressive recovery of fixed costs through demand charges, automatic monthly Fuel and Power Purchase Cost Adjustment, a stabilisation fund, single-digit AT&C losses and the establishment of Distribution System Operators.
Generation and transmission in India have largely been fixed; distribution has not. Two metrics explain why. AT&C losses — Aggregate Technical and Commercial losses — combine physical losses in the wires with commercial losses from theft, unmetered supply and unbilled or uncollected consumption; every unit lost is a unit bought and not paid for. The ACS-ARR gap is the difference between the Average Cost of Supply and the Average Revenue Realised per unit: when it is positive, a distribution company loses money on every unit it sells. RDSS was designed around exactly these two numbers, targeting single-digit AT&C losses through smart metering, regular energy audits, GIS-based asset mapping and consumer indexing. The third piece is cross-subsidy: industrial and commercial consumers are charged above the cost of supply so that agricultural and domestic consumers can be charged below it. When a large consumer leaves the DISCOM through open access under the Electricity Act, 2003, it takes that subsidy contribution with it, which is why a cross-subsidy surcharge is levied to compensate the licensee. The Draft National Electricity Policy, 2026 attacks the same problem from the tariff-design end — recovering fixed costs through demand charges, passing fuel cost variations through automatically via the Fuel and Power Purchase Cost Adjustment mechanism, and requiring tariffs to reflect prudent cost of supply without creating regulatory assets.
Simple Analogy: A regulatory asset is an IOU a regulator writes to a DISCOM: 'we know your costs went up, but we will not raise tariffs now — recover it later.' Enough IOUs and the DISCOM is solvent only on paper.
Improve the quality and reliability of power supply through a financially sustainable and operationally efficient distribution sector
Key: Launched July 2021 with an outlay of Rs 3,03,758 crore and Gross Budgetary Support of Rs 97,631 crore; funds loss-reduction infrastructure and smart metering for distribution licensees other than private sector licensees; targets a pan-India AT&C loss of 12-15% and a zero ACS-ARR gap
Strengthen urban distribution and IT-enable the sector
Key: Launched December 2014; works worth Rs 58,686 crore executed, subsuming the Restructured Accelerated Power Development and Reforms Programme (R-APDRP) and covering ERP, SCADA/DMS in 59 towns, Real Time Data Acquisition Systems in 1,414 towns and 6.54 lakh smart meters; closed March 2022
Plan and monitor smart grid policies and programmes
Key: Established 2015; funded pre-feasibility studies, project appraisal, projects and capacity building; installed 1,45,343 smart meters in Rajasthan and 24,214 in Chandigarh; Rs 72.27 crore released in total, of which Rs 31.85 crore since FY2023; closed March 2024
Rural electrification and universal household electrification respectively
Key: Deen Dayal Upadhyaya Gram Jyoti Yojana for rural feeder separation and network strengthening, and Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA) for last-mile household connections — the two schemes that preceded RDSS
Create universal digital enablement for data exchange across the power sector
Key: A new Government of India initiative to standardise digital interoperability in electricity, analogous in intent to the digital public infrastructure stacks in payments and identity
Provide a long-term roadmap for financial sustainability, affordability and renewable integration
Key: Proposes Resource Adequacy Plans for least-system-cost procurement, fixed-cost recovery through demand charges, automatic monthly FPPCA, a stabilisation fund, timely annual tariff revision including indexation-based mechanisms, single-digit AT&C losses, Distribution System Operators, shared distribution networks and transmission modernisation using FACTS, dynamic line rating and synchronous condensers
Make storage viable so renewable power becomes dispatchable
Key: A National Framework for Promotion of Energy Storage Systems issued September 2023; a Viability Gap Funding scheme approved September 2023 under which 13.22 GWh is under implementation with Rs 3,760 crore; a second VGF scheme approved June 2025 for 30 GWh with Rs 5,400 crore from the Power System Development Fund; and ISTS charge waivers extended to co-located BESS commissioned up to June 2028 and PSPs whose construction is awarded by June 2028
Build domestic battery manufacturing capacity
Key: A Production Linked Incentive scheme of the Ministry of Heavy Industries approved in May 2021 with an outlay of Rs 18,100 crore for 50 GWh of ACC manufacturing capacity, of which 10 GWh is earmarked for Grid Scale Stationary Storage
Regulates tariffs of central generating stations and inter-State transmission and trading; issues regulations such as the General Network Access (GNA) Regulations, 2022 whose Third Amendment allows connectivity to be granted separately for solar and non-solar hours
Determine retail tariffs in each State, considering power procurement, transmission, wheeling and supply costs, and assess the pass-through of fuel price and demand changes under the FPPCA mechanism
The technical planning authority; prepares the National Electricity Plan for generation and transmission, concurs in hydro and pumped storage schemes, and advises on capacity addition. The concurrence limit for hydro stations and off-stream open loop and on-stream PSPs was raised from Rs 1,000 crore to Rs 3,000 crore by a Ministry of Power order of 1 August 2025, with off-stream closed-loop PSPs exempted from concurrence
Hears appeals against orders of the CERC and SERCs — the appellate layer created alongside the regulatory commissions
Handle consumer complaints; the Draft National Electricity Policy, 2026 proposes strengthening them with online complaint registration, tracking and disposal, including virtual hearings
Forecast renewable generation and help grid operators manage the variability and intermittency of renewable power
The consolidating statute that replaced the Indian Electricity Act, 1910 and the Electricity (Supply) Act, 1948; it unbundled generation, transmission and distribution, made State Electricity Regulatory Commissions mandatory, introduced open access, and created the Appellate Tribunal for Electricity
Electricity is Entry 38 of the Concurrent List, which is why distribution and DISCOM operations fall to States and their regulatory commissions while the Centre supplements through schemes
Prescribe standards for new connections, quality and reliability of supply, metering, billing, grievance redressal, compensation for specified service deficiencies and consumer-centric service delivery
Permitted energy storage systems to be developed, owned, leased or operated by consumers, widening the range of ownership and business models for storage
Ministry of Power guidelines dated 14 June 2024, 21 March 2025 and 15 December 2025 link transmission line RoW compensation to prevailing market land rates, addressing the commonest cause of transmission project delay
States get additional borrowing consent of 0.5% of Gross State Domestic Product conditional on undertaking power sector reforms — one of the sharpest instruments of conditional fiscal federalism currently in use
The Draft Policy's proposal for Distribution System Operators is what makes distributed renewables, storage and V2G technically manageable — a shift from a one-way grid to a two-way one
MNRE's budgetary support for intra-State transmission under the Green Energy Corridor scheme is the transmission-side counterpart to the generation-side renewable push
The scheme for flexibility in utilisation of domestic coal — allowing plants supplying DISCOMs to use cheaper coal — is a cost-reduction lever that connects power tariffs to coal linkage policy
GS Paper 3 > Infrastructure > Energy; Economy > Government Policies and Interventions
General Awareness > Infrastructure Schemes and Economy
General Awareness > Government Schemes
General Awareness > Infrastructure
Power sector reform, the Electricity Act and RDSS figures are standing topics across Prelims, Mains GS3 and banking awareness
Aggregate Technical and Commercial losses — physical network losses plus commercial losses from theft, unmetered supply and uncollected billing
The difference between the Average Cost of Supply and the Average Revenue Realised per unit of electricity; a positive gap means the DISCOM loses money on every unit sold
Fuel and Power Purchase Cost Adjustment — the mechanism allowing variations in fuel and power purchase costs to be passed through to consumer tariffs; the Draft Policy proposes making it automatic and monthly
Costs a regulator allows a distribution licensee to defer to future tariffs instead of recovering immediately; the Draft National Electricity Policy, 2026 seeks to stop their creation
The right under the Electricity Act, 2003 for a consumer to buy power from a supplier other than the local distribution licensee, using the licensee's network on payment of wheeling charges and a cross-subsidy surcharge