The power sector is facing deep structural uncertainties arising from unstable policy directions, aggressive privatisation trends, and inadequately planned energy transitions. The engineers oppose any provision permitting privatization and fragmentation of the power sector. Any reform in the power sector must prioritize affordability, accessibility, reliability and public accountability rather than privatization and profit maximization.
The promise behind parallel distribution licensing is that it would open power distribution competition using the existing network of state discoms by paying only wheeling charges. Engineers and employees oppose all provisions that facilitate privatization, cherry-picking of consumers, weakening of public utilities and transfer of public assets to private interests. The parallel licensing to private companies is nothing but a backdoor route to privatization. When more than one entity is licensed to distribute electricity in the same area, the new entrant is called a parallel licensee.
The electricity distribution system is not merely a commercial utility. State-owned discoms are vital instruments of employment generation, social justice and inclusive development. Any policy allowing private companies to cherry-pick profitable consumers must therefore be reconsidered in the larger interest of states, consumers and the financial stability of public power utilities.
This method of granting parallel distribution licences in Karnataka, Haryana, Maharashtra and other states is being tried. Karnataka and Haryana have given directions to the state regulatory commissions under Section 108 of the Electricity Act, 2003, to oppose such proposals. This proposal poses a grave threat to the public electricity distribution system, consumer welfare, rural electrification and the financial sustainability of state-owned distribution utilities.
The Electricity Act, 2003, technically already allows more than one distribution licensee to operate in the same area, and each licensee was required to build and maintain its own physical network. A draft Electricity (Amendment) Bill floated in 2025 has proposed changing this by amending Sections 14 and 42 of the Act to let licensees share an existing network instead of duplicating it by paying a regulated wheeling charge.
The future of the power sector must be determined by prioritising the interests of farmers, consumers, employees and the public electricity distribution system, and not the profit motives of private companies. In an agriculture-dominated state like Haryana, such an arrangement could weaken the revenue base of public distribution utilities and adversely affect farmers and ordinary consumers.
The policy initiatives being pursued in certain states for the creation of separate agriculture discoms in Maharashtra, Telangana, Andhra Pradesh, Haryana and other states are the beginning of the end of free electricity for the agriculture sector in the coming years. This restructuring is neither technically justified, nor commercially viable, nor financially sustainable.
Power engineers and employees strongly oppose the indiscriminate use of Section 14 for granting parallel licences, alleging that private companies may exploit the existing distribution infrastructure without making comparable investments. The electricity distribution network has been built over nearly 70 years through public funds, Central Government support and loans guaranteed by state governments. Allowing private firms to use this vast network by merely paying wheeling charges may not even ensure recovery of the interest on the original investment of thousands of crores.
State-owned power utilities are responsible for supplying electricity to all categories of consumers, agricultural, domestic, industrial and commercial, irrespective of their load or profitability. High-value urban, industrial and commercial consumers cross-subsidise small, rural and agricultural consumers. Private licensees will cherry-pick lucrative consumers and dense urban areas, leaving state discoms with a disproportionate share of subsidised and loss-making consumers.
The proposed National Electricity Policy, circulated by the Union Power Ministry, has also raised concerns among power sector employees. Its provisions relating to shared distribution networks and the unbundling of state transmission utilities are seen as laying the foundation for greater private participation and eventual privatisation of power distribution. Once approved, the policy could open the floodgates for extensive privatisation of the sector.
The loss of high-paying consumers to private licensees would have serious financial consequences for state discoms. State governments spend thousands of crores annually on agricultural power subsidies and support for domestic consumers. While these subsidy obligations would continue, state revenues could decline substantially if profitable consumers shift to private companies. Financially weakened discoms may struggle to pay generators regularly, maintain and upgrade existing networks, and provide universal electricity services.
Under the current cost-plus regulatory system, approved costs are recovered from consumers through tariffs, along with a fixed return on capital investment. Parallel licensees could therefore recover their network costs through tariffs and earn substantial returns on equity. This raises concerns about overinvestment and “gold plating”, problems commonly associated with cost-plus regulation.
Experience in different states shows that privatisation and parallel licensing do not automatically guarantee lower tariffs or improved consumer welfare.
(The author is a Power Sector Expert and Media Advisor, All India Power Engineers Federation (AIPEF). Views expressed are personal.)