Page 59 - Policy Economic Report - Jan 2026

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Draft National Electricity Policy (NEP), 2026 released for public consultation with stakeholders

The Ministry of Power announced the release of a new “Draft National Electricity Policy (NEP) 2026”. The
Draft NEP 2026 aims to transform the power sector for meeting the vision of Viksit Bharat @2047. The
policy, once finalised, intends to replace the existing NEP which was notified in 2005.

The first National Electricity Policy, notified in February 2005, addressed fundamental challenges of the
power sector, including demand–supply deficits, limited access to electricity, and inadequate
infrastructure. Since then, India’s power sector has witnessed transformational progress. Installed
generation capacity has increased fourfold with significant private sector participation; universal
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. Power markets and exchanges
have improved flexibility and efficiency in power procurement across the country.

In spite of these achievements, persistent challenges remain, particularly in the distribution segment like
high accumulated losses and outstanding debt. Tariffs in several segments remain non–cost reflective,
and high cross-subsidisation has resulted in elevated industrial tariffs, adversely affecting the global
competitiveness of Indian industry.

Against this backdrop, the Draft NEP 2026 sets ambitious yet necessary goals. The Policy targets per capita
electricity consumption of 2,000 kWh by 2030 and over 4,000 kWh by 2047. It also aligns with India’s
climate commitments, including reduction of emissions intensity by 45 percent below 2005 levels by 2030
and achievement of net-zero emissions by 2070, necessitating a decisive shift towards low-carbon energy
pathways.

Draft NEP 2026 includes following major interventions:

1. Resource Adequacy (RA):

• To ensure required capacity expansion through decentralized advance planning, DISCOMs and
SLDCs shall prepare RA plans at utility and state levels, in accordance with the regulations of State
Commissions. CEA will prepare a corresponding national plan to ensure adequacy at the national
level.

2. Financial Viability & Economic Competitiveness:

• Tariffs must be linked to a suitable index for automatic annual revision which operates if no tariff
order is passed by the State Commission.

• Tariffs should progressively recover fixed costs through demand charges to avoid cross-
subsidisation between the tariff components as well as among various categories of consumers.

• Exemption of cross-subsidies and surcharges on manufacturing industry, railways and metro
railways to increase the economic competitiveness of Indian goods and reduce logistics cost.

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