The Ministry of Power on Tuesday released the Draft National Electricity Policy (NEP) 2026 for public consultation, proposing a comprehensive framework to guide the development of India’s power sector over the coming decades. The draft policy, once finalised, will replace the existing National Electricity Policy notified in 2005.
The first National Electricity Policy, issued in February 2005, focused on addressing demand-supply deficits, limited electricity access and infrastructure constraints. Since then, India’s installed power 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 kilowatt hours in 2024-25, according to the release.
Despite these developments, the Ministry noted that structural challenges persist, particularly in the distribution segment. These include high accumulated losses, outstanding debt, non-cost-reflective tariffs and high cross-subsidisation, which has resulted in elevated industrial tariffs.
The Draft NEP 2026 sets targets to raise per capita electricity consumption to 2,000 kilowatt hours by 2030 and over 4,000 kilowatt hours by 2047. The policy aligns with India’s climate commitments, including reducing emissions intensity by 45 per cent below 2005 levels by 2030 and achieving net-zero emissions by 2070, requiring a shift towards low-carbon energy sources.
Among the proposed interventions, the draft policy introduces resource adequacy planning, requiring distribution companies and State Load Despatch Centres to prepare advance capacity plans at the utility and state levels, with the Central Electricity Authority responsible for a corresponding national plan.
On financial viability, the draft proposes linking tariffs to suitable indices for automatic annual revision if tariff orders are not issued by State Electricity Regulatory Commissions. It also calls for progressive recovery of fixed costs through demand charges, exemption of cross-subsidies and surcharges for manufacturing, railways and metro railways, and strengthening dispute resolution mechanisms.
In renewable energy and storage, the draft policy outlines market-based capacity addition, deployment of battery energy storage systems, trading of surplus distributed renewable energy, and parity between renewable and conventional power in scheduling and deviation by 2030. It also proposes demand-side incentives, including viability gap funding for storage projects.
The draft includes measures for thermal generation, such as integration of storage and repurposing older units for grid support, as well as proposals for nuclear power development. In line with the SHANTI Act, 2025, it outlines adoption of advanced nuclear technologies, modular and small reactors, and a target of 100 gigawatts of nuclear capacity by 2047.
For hydropower, the policy proposes accelerated development of storage-based projects to support flood moderation, irrigation and energy security. It also calls for a stronger regulatory framework for power markets to prevent collusion and market dominance.
In transmission, the draft proposes adoption of new technologies to address right-of-way challenges, parity of transmission tariffs for renewable energy by 2030, and a utilisation-based framework for allocation of transmission connectivity. Distribution-related proposals include achieving single-digit aggregate technical and commercial losses, shared distribution networks, creation of a Distribution System Operator, and N-1 redundancy at the distribution transformer level in cities with populations above 10 lakh by 2032.
The policy also proposes reforms in grid operations, including functional unbundling of State Transmission Utilities, establishment of independent entities for load despatch and transmission planning, mandatory domestic storage of power sector data, and transition to indigenously developed SCADA systems by 2030.
The Ministry has invited comments from stakeholders as part of the public consultation process before finalising the National Electricity Policy 2026.
