The Economic Survey of India 2025–26 notes continued expansion of the power sector, with installed capacity rising by 11.6 per cent year on year to 509.74 GW as of November 2025. Alongside generation capacity, the pace of transformation capacity addition also picked up during the year, reflecting ongoing investments across the transmission and distribution network.
Power sector reforms and distribution infrastructure
The survey reiterates that the Government of India has implemented multiple schemes to support states and distribution utilities in providing reliable and uninterrupted power supply. Under the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY), the Integrated Power Development Scheme (IPDS) and the Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya), an investment of about Rs 1.85 trillion has been made to strengthen distribution infrastructure across states. As a result, 18,374 villages were electrified under DDUGJY, while around 28.6 million households gained electricity access during the Saubhagya period.
To further address structural inefficiencies in distribution, the Revamped Distribution Sector Scheme was launched in 2021 with an outlay of Rs 3.03 trillion. As of the current survey period, projects worth Rs 2.8 trillion have been approved under the scheme, covering network strengthening and the roll-out of smart metering solutions.
Power availability and reliability
The survey highlights that the gap between energy demand and supply has declined sharply from 4.2 per cent in FY 2013–14 to zero by November 2025. The improvement reflects both infrastructure augmentation and targeted policy measures aimed at operational discipline in the distribution segment.
Proposed legislative reforms
To deepen structural reform, the survey notes that the Government has proposed the Electricity (Amendment) Bill, 2026. The Bill seeks to enhance efficiency, competition and financial discipline in the power sector by enabling regulated competition in electricity distribution, promoting cost-reflective tariffs, strengthening payment security mechanisms for generators and improving regulatory accountability, while continuing to protect subsidised supply for vulnerable consumers.
Improving discom finances
The survey underlines that distribution remains the most financially stressed segment of the power value chain. Between FY 2020–21 and FY 2024–25, accumulated losses of distribution utilities increased from Rs 5.5 trillion to Rs 6.47 trillion while outstanding debt rose to Rs 7.26 trillion largely due to non-cost-reflective tariffs, delayed subsidy payments and high aggregate technical and commercial (AT&C) losses.
To address these challenges, several reforms have been undertaken, including the Late Payment Surcharge Rules, automatic monthly fuel and power purchase cost adjustments, timely pass-through of prudent costs and change-in-law compensation, standardised subsidy accounting procedures, mandated AT&C loss reduction trajectories and alignment of return on equity norms with central benchmarks. The survey highlights that, for the first time, power distribution utilities recorded a positive profit after tax of Rs 27.01 billion in FY 2024–25 compared to a loss of Rs 679.62 billion in FY 2013–14. AT&C losses declined from 22.62 per cent to 15.04 per cent over the same period, while the average cost of supply–average revenue realised gap narrowed from Rs 0.78 per kWh to Rs 0.06 per kWh.
Digitalisation and India Energy Stack
The survey also introduces the India Energy Stack (IES) as a proposed digital public infrastructure for the power sector. Conceived to support a more distributed, digital and participatory energy system, IES aims to address fragmentation in data systems and enable scalable consumer participation. Under the leadership of the Ministry of Power, a task force has been set up with REC Limited as the nodal agency to drive the design and phased implementation of IES.
IES is envisioned as a consent-based, interoperable framework rather than a centralised database, with data remaining with its rightful owners. By standardising identity, data exchange, measurement and settlement processes, the platform seeks to enable consumer choice, monetisation of distributed assets such as rooftop solar and storage, and the emergence of new market models including peer-to-peer electricity trading, demand response and flexibility aggregation.
The survey concludes that, by combining digital infrastructure with regulatory safeguards, IES represents a shift in the power sector’s trajectory from a focus on energy access to one of energy agency, with the potential to improve system efficiency, strengthen discom operations and create new income opportunities for households, MSMEs and rural communities.