India Plans to Open Power Retail Market to Private Companies, Draft Bill Shows

India is set to take a major step towards liberalising its electricity sector, with the federal power ministry proposing a draft bill to open the retail electricity market to private companies across the country. The move aims to increase competition, improve service quality, and ease the financial burden on state-run distribution companies (discoms) that currently dominate the sector.

New Draft Bill to Reshape Power Distribution

According to the draft bill, private players such as Adani Enterprises, Tata Power, Torrent Power, and CESC could soon expand their retail operations nationwide. This marks a shift from the existing model where most power distribution zones remain under state control. At present, only select regions like the National Capital Region, Odisha, Maharashtra, and Gujarat have privatised distribution networks.

Reducing Financial Stress on State Utilities

State-run power utilities have long struggled with rising debts and operational inefficiencies. As of June 2025, these utilities owed power generators nearly $6.78 billion, creating liquidity challenges for independent power producers. 

This financial strain has limited investment and slowed modernisation in the sector. The government’s proposed reform aims to address these issues by encouraging private participation and promoting financial discipline.

Encouraging Competition in the Power Market

The draft bill also proposes allowing multiple private distributors to operate within the same geographical area, which the current Electricity Act does not permit. This could provide consumers with the freedom to choose their electricity provider, potentially improving service quality and pricing. However, similar efforts in 2022 faced resistance from state discoms, which feared losing their monopoly and revenue base.

Privatisation Efforts Gaining Momentum

Several states are already exploring privatisation. Earlier this year, Uttar Pradesh, India’s most populous state, invited bids to privatise two of its four distribution companies. This reflects a growing acceptance of private participation as a solution to persistent inefficiencies in state-run systems.

Read more: India's Manufacturing PMI Slips to 57.7 in September Amid Rising Selling Prices

Conclusion

The draft proposal aligns with New Delhi’s broader goal of reforming the energy sector by reducing losses, improving infrastructure, and ensuring reliable electricity access. If implemented, it could pave the way for a more competitive and financially sustainable electricity market in India, offering consumers greater choice and fostering operational efficiency across the power value chain.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.