Draft National Electricity Policy, 2026
The Draft National Electricity Policy (NEP) 2026, released by the Ministry of Power on January 21, 2026, for public consultation, seeks to replace the existing policy notified in 2005 and modernise India’s power sector in line with the Viksit Bharat 2047 vision.
Over the past two decades, India’s power sector has undergone significant transformation. Installed generation capacity has expanded nearly fourfold with growing private sector participation. Universal electrification was achieved by March 2021, a unified national grid was commissioned in December 2013, and per capita electricity consumption rose to 1,460 kWh in FY 2024–25. Additionally, the development of power markets and exchanges has enhanced flexibility and efficiency in electricity procurement nationwide.
Despite this progress, structural challenges persist, particularly in the distribution segment. DISCOMs continue to face high accumulated losses and mounting debt burdens. Tariffs in several consumer categories remain non-cost reflective, while extensive cross-subsidisation has led to elevated industrial power tariffs, undermining the global competitiveness of Indian industry.
1. Financing Target Revision
India’s electricity demand is expected to rise sharply through 2047, driven by rapid economic growth, urbanisation, industrial expansion, and large-scale electrification of transport and household energy use. Cooling demand, data centres, and new manufacturing capacity will further push peak loads higher, making reliable round-the-clock power a national priority. The Draft National Electricity Policy sets an investment target of 2,00,000 crore INR for the year 2047.
| Period | NEP 2005 Investment | Draft NEP 2026 Investment |
| Year 2012 | ₹ 9,00,000 | |
| Year 2032 | ₹ 50,00,000 | |
| Year 2047 | ₹ 2,00,00,000 |
2. Features of Draft National Electricity Policy, 2026
The Draft National Electricity Policy bill lays out a broad set of reforms aimed at modernizing India’s power sector to meet rapidly rising electricity demand while accelerating the shift to cleaner and more reliable energy. Its features focus on strengthening tariff and DISCOM (Distribution Companies) finances, improving long-term resource adequacy and grid planning, and enabling faster integration of renewables and storage through market-based mechanisms. At the same time, it supports a balanced generation mix—upgrading thermal flexibility, expanding hydro and nuclear capacity, and building stronger electricity markets and infrastructure. Together, these measures are designed to scale investment, improve grid stability, and deliver affordable, round-the-clock power for India’s future.
| Theme | Key reforms / actions | Targets / timelines |
|---|---|---|
| Financial & Tariff Reforms | Annual tariff orders mandatory; auto-indexation if delayed (fuel/PPC/O&M indices); demand charges for fixed costs; peak-hour differentials; cross-subsidy floor at 50% ACoS; industry/railways/metros exempt; 1 MW+ consumers exempt from USO; advance subsidies | Ongoing implementation |
| Resource Adequacy | DISCOM/SLDC decentralized planning; CEA national coordination; 5+10 year rolling T&D planning (consumer-driven) | Medium–long term planning |
| Renewables & Storage | Market-based RE; enforce RCO; P2P trading; virtual PPAs; DRE aggregators; scale BESS/PSP with VGF; domestic cell manufacturing | RE tariff parity with thermal by 2030 |
| Generation Mix | Thermal flexibility retrofits; steam co-gen; pithead coal; nuclear expansion via SMRs + SHANTI 2025; hydro expansion (storage + flood control) | Nuclear 100 GW by 2047; RE parity 2030 |
| Markets & Infrastructure | Capacity markets; bilateral settlement; ancillary services; DSOs/shared networks; N-1 redundancy for cities >10L; utilization-based transmission | N-1 redundancy by 2032; RE parity 2030 |
| DISCOM Reforms | Single-digit AT&C loss target; competition via private participation/shared infrastructure | Ongoing |
| Tech & Governance | Indigenous SCADA rollout; cybersecurity framework; data sovereignty; STU unbundling; real-time DER visibility | Indigenous SCADA by 2030 |
| Scale & Financing | Financing ramp-up; per-capita consumption growth | ₹9L Cr (2012) → ₹50L Cr (2032) → ₹200L Cr (2047); 1,000 kWh → 2,000 kWh (2030) → 4,000+ kWh (2047) |
3. Detailed Comparison: NEP 2005 vs Draft NEP 2026
NEP 2005 was primarily focused on short-term goals like meeting demand by 2012 and expanding universal electricity access, while the Draft NEP 2026 sets a long-term vision through 2047 with higher per-capita consumption targets and alignment with net-zero ambitions. The newer draft introduces stronger financial reforms, including index-linked tariffs, peak pricing, stricter cross-subsidy rules, and a clear push to bring AT&C (Aggregate Technical and Commercial) losses into single digits. It also modernizes the market structure by enabling greater competition, open access, and new mechanisms like capacity markets, peer-to-peer trading, and exchange-linked PPAs. Finally, Draft NEP 2026 places much heavier emphasis on clean energy integration—scaling renewables with enforceable obligations, expanding storage through market incentives, and setting a major nuclear target of 100 GW by 2047.
| Aspect | NEP 2005 | Draft NEP 2026 |
| Vision & Timeline | Short-term (demand met by 2012); universal access focus | Long-term (2047); per capita 2,000 kWh (2030), 4,000+ kWh (2047); net-zero alignment |
| Per Capita Consumption | >1,000 kWh by 2012 | 2,000 kWh by 2030; >4,000 kWh by 2047 |
| Tariff Mechanism | Cost recovery; progressive cross-subsidy reduction | Annual index-linked revisions; auto-adjustment; demand charges; peak pricing |
| Cross-Subsidies | Reduce gradually (no floor) | Floor at 50% ACoS; industry/railways exempt; 1 MW+ USO exemption |
| AT&C Losses | Energy audits by 2007; no quantified target | Single-digit mandatory |
| Discom Reforms | Restructuring, metering by 2007 | Financial turnaround; DSOs; shared networks; agri solarization by 2030 |
| Open Access/Markets | Phased promotion; exchanges encouraged | Seamless C&I access; capacity markets; P2P; exchange-routed PPAs |
| Renewables | Promote non-conventional; private participation | RCO enforcement; thermal parity by 2030; hybrids; forecasting support |
| Storage | Not emphasized | Market-based BESS/PSP; VGF; consumer-level deployment |
| Nuclear | Increase share | 100 GW by 2047; modular reactors; brownfield expansion |
In Conclusion
The Draft NEP 2026 aims to restore the financial sustainability of distribution companies by addressing accumulated losses exceeding ₹5 lakh crore, while advancing India’s clean energy transition in line with its Nationally Determined Contributions (NDCs), including achieving 50% non-fossil fuel capacity by 2030. The policy also seeks to rationalise tariffs and reduce cross-subsidies, particularly easing the burden on industrial consumers to enhance global competitiveness.
Looking ahead to 2047, the reforms envision reliable 24×7 power supply, a renewable-led generation mix, advanced and competitive electricity markets, and strengthened domestic manufacturing capabilities. Together, these measures are expected to support higher GDP growth, generate over 50 million green jobs, and help India progress toward its net-zero emissions target by 2070, transforming the power sector from a fiscal liability into a key driver of economic growth.
Sources
For the National Electricity Policy page (2005):
Press Information Bureau. “National Electricity Policy.” Cabinet approval statement, February 2, 2005. Press Information Bureau, Government of India. https://www.pib.gov.in/newsite/erelcontent.aspx?relid=6867®=3&lang=2.
For the Draft National Electricity Policy 2026 press release:
Press Information Bureau. “Draft National Electricity Policy (NEP), 2026 Released for Public Consultation with Stakeholders.” Ministry of Power press release, January 21, 2026. Press Information Bureau, Government of India. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2216661®=3&lang=2
Joy Correa, Analyst; Harsh Shah, Analyst.