The Draft National Electricity Policy 2026 signals cheaper and more predictable industrial self-procurement, but it does not itself create a present right to surcharge exemption, a 1 MW discom exit, storage-based banking replacement or a new net-metering limit.
Key Takeaways
- The Ministry of Power document is a draft policy for consultation, intended to replace the 2005 policy only after finalisation and Gazette publication.
- It proposes relief from cross-subsidy and surcharges for manufacturing, railways and metro rail, plus more predictable long-term open-access charges. These are not current automatic exemptions.
- It proposes that regulators may exempt distribution licensees from universal-service obligations for consumers with contracted load of 1 MW and above that can self-procure. It does not grant those consumers an immediate exit right.
- The draft favours consumer-owned storage over electricity banking as costs fall and discourages net metering beyond 5 kW. Existing state regulations continue until lawfully changed.
- Industrial buyers can use the draft for scenarios and advocacy, but base-case procurement must use current central and state rules. This is general information, not legal advice.
What is the status of the National Electricity Policy 2026?
The Ministry’s PDF is headed Draft National Electricity Policy, 2026. It was circulated for comments under Section 3 of the Electricity Act, 2003. The Ministry’s announcements page also lists an extension of the timeline for comments, reinforcing that the document was in consultation.
The draft envisages the revised policy becoming effective upon Gazette publication. Until then, describe its measures as proposals rather than current rules.
What does the draft propose for manufacturing surcharges?
The draft links high industrial tariffs and cross-subsidisation to the competitiveness of Indian industry. It proposes exemption of manufacturing industry, railways and metro railways from cross-subsidies and surcharges. It also proposes a progressively reducing trajectory for cross-subsidy and additional surcharge and seeks predictable charges for long-term open access.
| Draft proposal | What it could mean | What applies today |
|---|---|---|
| Manufacturing surcharge exemption | Lower delivered open-access cost | Current state regulations and tariff orders |
| Predictable, declining OA charges | Better long-term budgeting | Rates may change through regulatory orders |
| 1 MW-plus USO exemption | More self-procurement options | No automatic exit solely from the draft |
| Storage instead of banking | More behind-the-meter control | State banking rules remain operative |
| Discourage net metering above 5 kW | Shift toward self-consumption/storage | Current state metering rules remain operative |
A factory evaluating a project now should therefore price the current surcharge, not zero. It can add an upside scenario showing proposed relief. The open-access state comparison and open-access guide help structure that current-law baseline.
What is the proposed 1 MW self-procurement change?
The draft suggests that regulatory commissions, in consultation with appropriate governments, may exempt distribution licensees from the Universal Service Obligation for consumers with contracted load of 1 MW and above that are capable of self-procurement. The stated policy logic is to reduce fixed-cost burdens on discoms, enable competitively priced industrial procurement and avoid shifting costs to smaller consumers.
This does not mean every 1 MW consumer may immediately terminate discom supply. The discretionary proposal concerns the licensee’s obligation and would need an implementation framework.
How does the draft approach open access and captive procurement?
The draft supports seamless open access and renewable procurement by commercial and industrial consumers. It proposes long-term open access with stable, predictable charges and a unidirectional reduction in cross-subsidy and additional surcharge. It also promotes captive renewable capacity and simpler captive verification.
Those proposals could reduce two persistent risks: uncertainty in delivered cost and annual captive-compliance administration. However, current ownership and consumption requirements, state approval processes, scheduling rules and charge orders continue. A project cannot claim captive surcharge treatment merely because the draft favours captive generation.
Compare physical structures using current rules through our capex, opex and open-access guide and group captive guide. Put possible policy reform in a separate sensitivity, with no value assigned until the implementation route is clear.
Why does the draft prefer storage to banking?
Electricity banking lets a consumer inject excess renewable energy and draw an adjusted quantity later, subject to state rules, losses, charges and time limits. The draft proposes moving away from reliance on banking as storage costs decline and promoting storage by consumers. It also supports distributed renewable energy with storage, peer-to-peer trading and aggregation.
The policy rationale is physical: batteries can shift actual energy and provide controllability, while banking is an accounting arrangement that leaves the grid and discom to manage temporal mismatch. The Ministry’s proposal is direction, not an immediate cancellation of banked-energy rights.
For a factory, storage economics depend on time-of-day spreads, demand-charge reduction, backup value, cycling, degradation, efficiency and financing. The solar BESS business-case guide provides a framework. Storage should not be purchased solely because a draft policy prefers it; it should solve a measured load, reliability or tariff problem.
What is proposed for net metering?
The draft discourages net metering beyond 5 kW and favours rooftop solar combined with storage and self-consumption. That is a proposed national policy direction. It does not replace state net-metering, gross-metering or net-billing regulations currently applicable to a consumer.
Industrial rooftop projects are often far larger than 5 kW, but many already optimise self-consumption rather than export because daytime load is substantial. The possible policy shift makes export assumptions more important: project models should separate avoided retail energy, exported energy, curtailed energy and stored energy.
Our net metering policy guide explains the current state-driven structure. Before approving a rooftop system, obtain the distribution licensee’s applicable regulation, capacity limit, transformer cap, settlement method and approval status. Do not cite the draft’s 5 kW direction as a current rejection rule.
How should industrial buyers use the draft today?
What belongs in the base case?
Use current state tariff orders, open-access regulations, approved surcharges, losses, banking provisions and metering rules. Include current central transmission and scheduling treatment where relevant. Record the effective date of every input.
What belongs in the policy-upside case?
Model manufacturing surcharge relief, declining open-access charges and easier self-procurement only as proposed upside. State the assumed implementation date and probability. Do not capitalise speculative savings into a bid ceiling without board-approved risk treatment.
What belongs in downside cases?
Test banking withdrawal, tighter export compensation, higher standby costs, demand-charge changes and delay in promised reform. If storage is the mitigation, include capex, augmentation and replacement rather than assuming a perfect battery.
Which contracts need flexibility?
PPAs and EPC-linked operating models should include change-in-law, metering changes, banking changes, storage addition and curtailment procedures. A broad clause is not enough unless it states how savings and costs are measured and shared. Our solar EPC contract clauses guide covers related project protections.
What implementation signals should companies monitor?
Watch for Gazette publication of a final policy; Ministry rules or guidelines; CERC changes for inter-state access; state-commission amendments on surcharge, banking and net metering; and discom procedures for large self-procuring consumers. The Ministry’s What’s New page and announcements page are useful primary-source starting points, but state regulator websites remain essential.
Refresh project models only when a directly applicable operative instrument actually appears publicly.
Frequently Asked Questions
Is manufacturing exempt from cross-subsidy surcharge today under the draft?
No. The document proposes an exemption. Current liability follows operative central and state law and the project’s structure.
Can every 1 MW factory leave discom supply now?
No. The draft proposes that regulators may relieve licensees of universal-service obligations in specified circumstances. It is not an immediate consumer exit right.
Has electricity banking been abolished?
No. The draft prefers storage over banking as costs decline, but current state banking regulations continue until amended.
Is net metering now capped at 5 kW nationwide?
No. The draft discourages net metering beyond 5 kW; current state rules still determine eligibility and settlement.
Should buyers assume zero surcharge in new PPAs?
No. Use the current approved surcharge in the base case and proposed relief only in a transparent sensitivity.
What would make a proposal operational?
Depending on the topic, final policy publication plus rules, regulations, tariff orders and implementation procedures may be required.
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