India’s power ministry has released a draft National Electricity Policy that sets aggressive consumption and clean energy targets while proposing structural
reforms to tariffs, power markets and distribution companies, nearly two decades after the existing policy was notified in 2005.
The Draft National Electricity Policy (NEP) 2026 targets per capita electricity consumption of 2,000 kilowatt hours (kWh) by 2030, up from 1,460 kWh in 2024–25, and more than 4,000 kWh by 2047. The targets are set as the government seeks to support economic growth and rising energy demand. It also aligns with India’s climate commitments, including a 45% reduction in emissions intensity from 2005 levels by 2030 and achieving net-zero emissions by 2070.
To prevent capacity shortages, the draft mandates resource adequacy planning, requiring distribution companies (DISCOMs) and State Load Dispatch Centres (SLDCs) to prepare advance capacity plans at the utility and state level. The Central Electricity Authority will prepare a national plan to ensure system-wide adequacy.
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The policy takes aim at the financially stressed distribution segment, where high losses and debt remain persistent. It proposes automatic annual tariff revisions linked to an index if state regulators fail to issue tariff orders, and a gradual shift towards recovering fixed costs through demand charges to reduce cross-subsidisation. To boost competitiveness, it recommends exempting manufacturing units, railways and metro systems from cross-subsidies and surcharges, citing their impact on industrial power costs and logistics.
Regulators may also allow distribution licensees to be exempted from universal service obligations for consumers with contracted loads of 1 megawatt and above, while dispute resolution mechanisms are to be strengthened to cut delays and litigation.
On clean energy, the draft pushes renewable capacity addition through market-based mechanisms and captive power plants, along with large-scale deployment of energy storage. It proposes storage installation by DISCOMs for small consumers to benefit from economies of scale, while allowing bulk consumers to invest directly. Consumers will also be allowed to trade surplus renewable power and storage capacity, either peer-to-peer or through aggregators. Operational parity between renewable and conventional power in scheduling and deviation norms is targeted by 2030.
The policy also supports market-based deployment of battery energy storage systems, domestic manufacturing of battery components, and incentives such as viability gap funding for storage and pumped hydro projects.
While prioritising renewables, the draft retains a role for conventional sources. It proposes repurposing older thermal plants for grid support, accelerated development of storage-based hydropower, and scaling up nuclear power to 100 gigawatts by 2047, including modular and small reactors.
Additional measures include stricter power market surveillance, reforms in transmission pricing and connectivity, efforts to reduce distribution losses to single-digit levels, and mandatory domestic storage of power sector data to strengthen cybersecurity and system resilience.
