Published Feb 07, 2026 | 11:15 AM ⚊ Updated Feb 07, 2026 | 11:15 AM
Electricity. (Representative image)
Synopsis: If this policy is notified as written, we can expect selective implementation. States will cherry-pick provisions, cost-reflective tariffs will be shelved where free power wins elections, competition provisions will spawn litigation, investment will stall due to regulatory uncertainty, and the DISCOM crisis will continue. As it goes, by 2035, we’ll need another policy for the same problems.
With electricity distribution companies drowning in ₹6.9 lakh crore of losses, India’s Draft National Electricity Policy 2026 was meant to fix the power sector. Instead, it offers contradictions wrapped in jargon—claiming “least-cost” while mandating technologies four times more expensive, promising competitive pricing while adding ₹3.7 per unit to bills, and repeating prescriptions that failed for two decades.
Union government has notified a revised draft National Electricity Policy, 2026, after a gap of 21 years. Laudably, it is seeking comments on the policy.
However, the long gap and a longer period of vision, do not get integrated with each other, going by parameters of a SMART policy – Specific, Measurable, Attainable, Realistic, Tangible. The transition of energy, and electricity, as mandated by climate action and climate action related agreements, remains unplanned and bogged by the economics and impossible trade-offs.
The policy’s Section 5.1.1 boldly declares that “CEA will develop a least-cost generation mix.” Yet the same document mandates some of the world’s most expensive power technologies.
NEP 2026 pushes for 100 GW of nuclear power by 2047—twelve times today’s capacity. International reality check informs us that UK’s Hinkley Point costs ₹9.60/kWh, America’s Vogtle came in at ₹1.32 lakh per MW, France’s Flamanville hit ₹74 crore per MW. India’s own Kudankulam cost ₹86 crore per MW. In comparison, solar power cost with storage is a mere ₹7 crore per MW, generating power at ₹2-4/kWh. Nuclear is four times more capital intensive and produces electricity at double to triple the cost.
Waste-to-energy (WTE) tells a similar story. The technology costs ₹20 crore per MW and produces power at ₹8-10/kWh—four times solar’s cost. India’s WTE track record speaks volumes: only 138 MW installed against 5,690 MW potential, with most projects running at 30-50 percent capacity instead of designed 70 percent plant load factor. European WTE works because of mandatory waste segregation and tipping fees of €80-150 per tonne. India has neither.
Then there’s retrofitting coal plants for “flexibility”, which can cost upto ₹18-28 crore per MW. Plant load factor drops from 60 percent to 35 percent. As a result, cost per kWh nearly doubles from ₹4.5 to ₹7.8. At that price, new renewable capacity with storage is cheaper.
The bottom line is the policy-mandated generation mix costs ₹41.3 lakh crore annually versus ₹29.5 lakh crore for genuinely optimized renewables. The ₹11.8 lakh crore annual difference—₹3.7 per kWh—will land on consumer bills. This is the hidden cost of a “least-cost” policy.
NEP 2026 attempts four simultaneous goals: universal electricity access, full cost recovery, market competition, and DISCOM viability. Mathematically, it is impossible to have all the four.
As part of universal access, to connect a remote village household costs ₹50,000-₹2,00,000. With an estimated annual revenue from that household being ₹8,000, cost recovery time could be anywhere between 6 to 25 years, not including maintenance. Who pays? If the remote consumer pays actual cost, tariffs have to hit ₹50-200/kWh, which is politically impossible. If urban consumers subsidize them, the goal of cost-reflective pricing gets abandoned. The policy mandates both universal access and cost-reflective tariff, from FY 2026-27 but provides no resolution mechanism.
The legacy debt creates another trap. DISCOMs carry ₹6.9 lakh crore in losses and ₹7.18 lakh crore in debt. The policy demands “full cost recovery without regulatory assets” starting next year. But who pays for past losses? The prescription is to load it on tariffs. By adding ₹1.5-2/kWh, tariffs go upto ₹9-10 when current realization is ₹6-7. If there is a write off, taxpayers have to absorb the loss. It is explicitly forbidden to keep it as regulatory asset. The policy offers no answer.
The competition provision creates a death spiral. Section 4.5 exempts consumers above 1 MW from Universal Service Obligation and removes their cross-subsidies. These large consumers contribute 40-50 percent of DISCOM revenue. If these consumers are removed, remaining customers must pay more to cover fixed costs—contradicting promised cost-reflective tariffs and triggering consumer exodus.
NEP 2005 prescribed cost-reflective tariffs and cross-subsidy reduction for financial viability. Twenty years and five bailout packages later, DISCOMs have ₹6.9 lakh crore in losses.
NEP 2026 prescribes, among others, cost-reflective tariffs and cross-subsidy reduction. There’s no analysis of why 2005 failed, why bailouts didn’t work, or what’s different this time.
It proposes “automatic tariff indexation”—as if the problems were procedural, not political.
This policy hides these costs through linguistic sleight of hand. Nuclear is “eligible for Green Bond funding”—providing maybe 1-1.5 percent lower interest but doing nothing about 300 percent higher capital costs. Coal retrofit costs “recovered through tariffs or ancillary services”—both ultimately paid by consumers. WTE “will be encouraged”—no mention of subsidies required, currently hidden in state budgets and high tariffs.
Most revealing is Section 7.2’s “capacity markets” to “ensure required capacity addition.” Translation: pay expensive plants for availability, not generation. For 100 GW nuclear, 50 GW flexible coal, 50 GW hydro storage, this could reach ₹7.5 lakh crore annually—₹1-2/kWh added to every bill.
All prescriptions lead to consumer tariffs. In that context, the claim of “competitive prices for Viksit Bharat @ 2047” rings hollow.
A transparent policy would have stated: “Pure optimization favors 70 percent solar with storage, 15 percent wind with storage, 10 percent hydro, 5 percent gas—delivering power at ₹2.8/kWh. But India will pursue 100 GW nuclear (₹6/kWh) for strategic autonomy, WTE (₹8/kWh) for waste management, and coal retrofitting (₹7/kWh) to protect investments. A unit price of ₹3.7/kWh premium above least-cost is an economic cost, with a 132 percent surcharge.”
That would be honest. Citizens could debate if strategic benefits justify costs. Instead, we get claims of both least-cost and strategic mandates without acknowledging the inherent tension.
An actual CEA least-cost optimization would likely show: 70 percent solar+storage, 15 percent wind+storage, 10 percent hydro, 3 percent gas peaking, 2 percent agricultural biomass—delivering 5,000 billion units annually at ₹2.8/kWh. This means a total investment of ₹121 lakh crore. The policy-mandated mix needs ₹165 lakh crore and delivers power at ₹4.8/kWh. The ₹44 lakh crore excess capital and ₹11.8 lakh crore annual excess operating costs are the price of strategic choices presented as economic optimization.
These strategic choices might have a rationale from a different perspective. Nuclear provides energy security and defense capabilities. Coal flexibility protects mining communities. Some WTE serves waste management beyond power generation. But hiding the tradeoffs in the policy erodes institutional trust.
If this policy is notified as written, we can expect selective implementation. States will cherry-pick provisions, cost-reflective tariffs will be shelved where free power wins elections, competition provisions will spawn litigation, investment will stall due to regulatory uncertainty, and the DISCOM crisis will continue. As it goes, by 2035, we’ll need another policy for the same problems.
The alternative is withdrawing the draft policy for fundamental rework. Government should conduct an honest NEP 2005 review. It should run and publish CEA optimization results. Economic optimization should be separated from strategic overlays with transparent costing. State-by-state impacts have to be modelled. Transitions have to be designed to protect vulnerable consumers and DISCOM viability.
Above all, a honest policy is required. India’s power sector challenges require hard political choices, not linguistic acrobatics promising the impossible. Our 1.4 billion citizens deserve policy that treats them as adults capable of understanding tradeoffs, not children to be placated with contradictory promises.
The Draft NEP 2026 could have charted India’s energy future for a quarter century. Instead, it offers a mirage—comprehensive planning that dissolves into unresolved contradictions upon examination. The question is whether anyone will say so before another opportunity for genuine reform is lost.
Primary Source: Ministry of Power, Government of India. (2026). Draft National Electricity Policy, 2026. 40 pages. [Document under public consultation]
Key Data Points from Draft NEP 2026:
Technology Cost Estimates:
Note: Specific cost figures for nuclear (Hinkley Point, Vogtle, Flamanville, Kudankulam), renewable energy technologies, and WTE economics are based on publicly available government reports, regulatory filings, and industry data.
Analysis based on the 40-page Draft National Electricity Policy 2026 and public power sector data.
(Views expressed here are personal, edited by Sumavarsha)
