Govt Weighs Plan To Let New Discoms Use Existing Power Networks via Wheeling Charges

New Delhi, Jul 25 (KNN) The Consultative Committee of the Power Ministry deliberated a proposed framework to allow multiple power distribution companies (discoms) to supply electricity through existing distribution networks across states, an official statement said on Friday.

The current legal framework permits more than one distribution licensee to operate in the same area, but requires each licensee to build its own distribution network. 

According to the Ministry, this results in duplication of poles, lines and substations, raises capital expenditure, discourages fresh investment, and leads to inefficient utilisation of resources.

The Proposal

“The proposed framework seeking to enable competition in electricity supply without requiring duplication of the physical distribution network was discussed in detail. Under the proposal, existing distribution licensees will continue to own, operate and maintain their networks,” the statement noted, 

“New distribution licensees will be able to use the existing network by paying regulated wheeling charges, while retaining the option to develop their own network wherever permitted by the concerned State Electricity Regulatory Commission (SERC),” it added.

The move would open the door for private players to enter power distribution in states currently served only by public sector companies.

Safeguards Assured

Chairing the meeting, Union Power Minister Manohar Lal said a detailed implementation framework would be developed by SERCs "to ensure fairness, transparency and non-discriminatory access to the network," adding that the proposal "fully protects the interests of incumbent distribution licensees and their employees."

The Minister said all distribution licensees would continue to be bound by the universal service obligation under the Electricity Act, and that the regulatory framework would prevent selective supply only to profitable consumers. 

He added that consumers would have the freedom to choose their electricity supplier, drawing a parallel with existing consumer choice in telecommunications and aviation. 

Increased competition, he said, was expected to improve consumer service, reliability, innovation and operational efficiency, while ensuring optimal use of existing infrastructure. 

He cited Mumbai as an example where supplier choice has operated for several years under SERC supervision, alongside coordinated network development.

Background of Opposition

The question of multiple distribution licensees operating in a single service area has been contentious, with states, power sector employees and central trade unions opposing related amendments proposed in the draft Electricity Act, 2025. Their central objection is that allowing multiple licensees to use the same publicly funded network could let private firms selectively serve high-paying consumers, while public discoms are left serving lower-revenue rural and domestic consumers.

In October 2025, the Electricity Employees' Federation of India had said that Section 43(4) of the draft Bill empowers regulatory commissions to allow consumers with demand above 1 megawatt to shift to private suppliers, reducing public discom revenue and narrowing the scope for cross-subsidy, while state utilities would still need to maintain contract demand for such consumers as back-up, adding to their financial burden.

(KNN Bureau)