4 min readFeb 13, 2026 06:45 PM IST
First published on: Feb 13, 2026 at 07:49 AM IST
For decades, India planned for an energy-deficient economy. Today, however, the central challenge is no longer scarcity. Driven by renewables and aligned with India’s net-zero target for 2070, the country’s energy sector must now navigate surpluses.
Prime Minister Narendra Modi made power-sector reform a core of the government’s development strategy a decade ago. The task of expanding capacity, strengthening grids, and cutting costs is largely complete. India now produces some of the world’s cheapest electricity. The focus has now shifted from supply to demand.
The Union Budget signals this turn. It anchors growth in electricity-intensive sectors and sustained power demand. Tax incentives for data centres, support for green manufacturing, expansion of digital and electric mobility infrastructure, and incentives for clean energy systems led the charge.
The Budget also proposed restructuring the Power Finance Corporation and Rural Electrification Corporation. Strengthening their balance sheets and operational efficiency would improve capital flows into grid expansion, storage, and energy transition.
There is also renewed emphasis on nuclear power, with India’s installed nuclear capacity—just over 8 GW today. This is targeted to rise to about 22 GW by 2031–32, with a longer-term ambition of 100 GW by 2047.
Globally, renewables registered record growth in 2024. India has entered this green transition faster than anticipated, adding over 40 GW of renewable capacity annually. Solar tariffs in the Rs 2-3 per unit range have transformed the economics of power-intensive activities. Nearly one-fourth of new renewable capacity is driven by commercial and industrial consumers through open-access and captive arrangements.
However, structural hurdles remain. A large share of electricity procurement by state discoms is locked into legacy contracts. Industry estimates suggest around 85-90 per cent of power procured by discoms is tied to long-term power purchase agreements, many signed years ago with fossil-fuel generators at fixed tariffs. This leaves limited flexibility to absorb cheaper renewable power even when available. Financial stress and contractual rigidity have made discoms cautious about signing new renewable PPAs.
Recognising this constraint, the 15th Finance Commission allowed states an additional 0.5 per cent of GSDP in borrowing, explicitly linked to measurable discom reforms. The 16th FC has gone further, advocating structural solutions like privatisation, ring-fencing of legacy debt through SPVs, and deeper governance reform. Batteries and pumped storage are essential to manage variability and ensure round-the-clock supply, but costs remain significant during this transition.
The IEA shows India’s pace of urbanisation means a new city the size of Los Angeles every year. By 2047, a Viksit Bharat will require electricity not only for households, but for data, transport, industry, and fuels.
Energy is in the concurrent list. However, state-level commitment and execution matter. Assam’s experience offers useful pointers. Under CM Himanta Biswa Sarma, it has pursued power-sector reform focused on distribution efficiency, financial discipline, and capacity creation. Seventy-five per cent of consumers have smart meters. Distribution losses fell from 24 per cent in 2021 to 15.4 per cent in 2024–25. Billing efficiency improved from 77 per cent to 86 per cent in this period and collection efficiency reached 100 per cent. Assam’s discom has been rated A-category for the past two years. Electricity tariffs have been reduced by Re 1 per unit for domestic consumers. Demand has grown at over 7 per cent annually for five consecutive years. Rooftop solar has made daytime power nearly free for many households.
India has also begun unlocking the hydropower potential of the Brahmaputra basin. Arunachal Pradesh alone holds over 50 GW of untapped capacity. As these projects come online, the Northeast can move from chronic deficit to structural surplus, with Assam functioning as a balancing hub.
The key lesson from Assam is this: Fix distribution first, restore financial discipline, and then scale generation and storage. Cheap, clean power is not a subsidy. It is a strategy. The challenge is harnessing our energy surpluses efficiently.
The writer is Chief Secretary, Assam
