In most states, electricity distribution remains a monopoly, with the state discom typically serving all consumers in a given area. However, operational inefficiencies, high technical and commercial losses, and persistent financial stress continue to weigh on the sector. In FY 2024-25, while discoms collectively reported a positive profit after tax of Rs 27.01 billion on an accrual basis at the all-India level, state-owned discoms reported losses of Rs 94.36 billion.
Greater competition in power distribution through parallel licensing can improve the efficiency and service quality of state discoms. Section 14 of the Electricity Act, 2003 permits state electricity regulators to grant distribution licenses to more than one licensee in the same area. However, each licensee had to establish its own distribution network, which could result in network duplication and avoidable costs. In October 2025, the government sought to address this through the draft Electricity (Amendment) Bill, 2025. The draft bill proposed allowing distribution licensees to operate in the same area by sharing the existing network of another discom, thereby enabling optimal utilisation of existing infrastructure and reducing capital expenditure. Meanwhile, Section 42 of the Electricity Act, 2003 requires a distribution licensee to provide non-discriminatory open access to its network to other licensees in its supply area upon payment of wheeling charges determined by the concerned state electricity regulatory commissions (SERCs).
In July 2026, the Consultative Committee for the Ministry of Power (MoP) discussed the proposed parallel licensing framework. It was highlighted that under the proposed framework, the existing distribution licensees will continue to own, operate and maintain their networks while new licensees can access existing networks upon payment of regulated wheeling charges. However, new licensees can retain the option of developing their own network wherever permitted by the concerned SERCs. It was also reiterated that all distribution licensees will remain bound by the universal service obligation under the Electricity Act to prevent selective supply only to profitable consumers.
In the past few months, parallel licensing has gained some momentum, although challenges and impediments to wide-scale adoption remain.
Recent developments
A major breakthrough came on March 11, 2026, when the Appellate Tribunal for Electricity (APTEL) upheld the Maharashtra Electricity Regulatory Commission’s (MERC) order approving Tata Power Company Limited’s phase-wise network development in parts of Mumbai where the Brihanmumbai Electric Supply and Transport Undertaking (BEST) was the incumbent licensee. The MERC had allowed Tata Power to develop its distribution network over seven years rather than building the entire network upfront, a decision challenged by BEST. In its judgment, APTEL clarified that prior ownership of a distribution network is not a statutory prerequisite for grant of a distribution license. It also observed that phased network roll-out is more conducive to competition than sporadic network extensions, as it is cost-effective and can enable faster coverage of a wider consumer base. The judgment provides important legal clarity on progressive network development within an existing licensee’s area.
In another notable development, Tata Power became the first private company to apply for a distribution license in Karnataka in May 2026. The company filed five petitions before the Karnataka Electricity Regulatory Commission, seeking parallel licenses across 19 districts falling under the jurisdictions of the state’s five discoms. According to the Prayas Energy Group, the proposed areas account for more than half of the discoms’ total sales. Tata Power proposed to supply around 11 per cent of the projected high tension sales and 4 per cent of the projected low tension sales in the targeted areas by FY 2029. However, the company withdrew the applications in July following strong opposition from the five state discoms, the Karnataka Electricity Consumers’ Association (KECA) and the All India Power Engineers Federation. A key concern of the stakeholders was the erosion of cross-subsidy revenues. According to the KECA, state discoms maintain tariffs of about Rs 5.80 per unit, while tariffs for high-end consumers can reach up to Rs 11-Rs 12 per unit, making the latter an attractive segment for private licensees.
In a separate development, Tata Power applied for a parallel license in Goa, where the state electricity department is currently the sole distribution licensee. In June 2026, the Joint Electricity Regulatory Commission (JERC) gave the company two months to comply with applicable requirements and file a compliance report. Amid political opposition and concerns over privatisation, the JERC, in July, clarified that the proposal would not involve privatisation or transfer of the state’s distribution network, as the Goa Electricity Department would remain the incumbent licensee.
Meanwhile, Haryana has also seen a parallel licensing proposal. Eleven Power has sought a license for Gurugram and Nuh districts, currently served exclusively by the Dakshin Haryana Bijli Vitran Nigam (DHBVN). The proposal has faced opposition from state discoms, engineers, and employees’ organisations. In July 2026, the Haryana Electricity Regulatory Commission constituted a three-member independent expert committee to examine the proposal’s legal, technical, financial, commercial and regulatory implications. Eleven Power has proposed an investment of around Rs 47 billion in the two districts and has also committed to providing round-the-clock supply, with 80 per cent of power sourced from renewables.
A recent development is Adani Energy Solutions Limited’s application for a data centre park in Sector 62, Noida. The park is being developed by DC Development Noida Limited, an Adani Group company, and currently falls within the supply area of Paschimanchal Vidyut Vitran Nigam Limited. In August 2026, the Uttar Pradesh Electricity Regulatory Commission moved the application to the public consultation stage.
The proposal highlights how parallel licensing is increasingly being considered for large new loads and high-revenue consumer segments such as data centres. Along similar lines, Google has secured a deemed distribution license in Andhra Pradesh, allowing it to directly source and distribute electricity for the 1 GW artificial intelligence data centre hub it is developing near Visakhapatnam.
Key challenges
Despite the momentum, the growing number of parallel licensing applications has triggered opposition from incumbent utilities, employees and power sector organisations. Even in Mumbai, where the framework has been operational for several years, operational challenges remain. Many of these are likely to persist even under the proposed framework for shared networks.
One of the biggest concerns is cherry-picking of profitable consumers and dense urban areas, which could erode the cross-subsidy framework and reduce revenues of the incumbent discom. In Haryana, Eleven Power’s proposal has become a major cause of contention. The loss of high-paying consumers could have serious financial implications, as discoms would continue to serve subsidised agricultural and domestic consumers.
Incumbent discoms have also made significant investments in distribution networks, substations and power procurement based on their existing consumer base. Consumer migration to new licensees could leave these assets and contracted power capacity underutilised. In addition, the incumbent could continue to face fixed charges under existing power purchase agreements (PPAs) even if some consumers migrate. The regulatory framework does not clarify the treatment of cross-subsidies among multiple licensees and the potential implications for incumbents of revenue loss, capacity underutilisation and recovery of existing regulatory assets. The burden of these costs could ultimately fall on consumers who do not migrate.
Multiple licensees could also complicate power procurement planning and resource adequacy assessment. Poor coordination could result in over-procurement or greater reliance on high-cost short-term purchases. Parallel licensing could also lead to network duplication if licensees continue to operate under a cost-plus framework, despite the draft bill’s proposal to address this issue through shared networks.
Importantly, competition can deliver cheaper tariffs and better service only if consumers can switch between suppliers with ease. The framework would require clear rules on procedures for switching, metering, billing, scheduling and settlement. Shared networks would also complicate loss estimation, joint metering, system operation and coordination among licensees.
The way forward
At present, parallel licensing is caught between two competing objectives: protecting the financial viability of incumbent state discoms and introducing competition to improve electricity supply for consumers.
The concerns of incumbent discoms around cherry-picking and revenue loss are legitimate. At the same time, the prospect of greater consumer choice and improved reliability has attracted support from some consumer and industry representatives. Meanwhile, private licensees could improve efficiency through greater adoption of advanced technologies.
Balancing these interests will require robust regulatory oversight, including fair wheeling charges and safeguards against selective supply to high-value consumers. Clear rules are also needed for existing PPAs, network augmentation, apportionment of losses, sharing of regulatory assets and cross-subsidy, and consumer switching. Without such rules, parallel licensing may not deliver the objectives it seeks to achieve.
Khushi Rohatgi
