How Can India’s Energy Sector Recover Sustainably from COVID-19? Part 3 – Social Sustainability: Energy affordability and pricing reform in India

This briefing, produced by the International Institute for Sustainable Development (IISD) and the Council on Energy, Environment and Water (CEEW), examines the intersection of energy affordability and electricity pricing reform in India following the COVID-19 pandemic. It discusses the financial instability of electricity distribution companies (DISCOMs), the socio-economic impact of lockdowns on low-income households, and potential strategies for rationalizing tariffs and subsidies to ensure social sustainability during economic recovery.

• The COVID-19 pandemic caused severe socio-economic distress in India, with unemployment reaching 26% in early April and a 23.9% economic contraction in the last quarter. A Dalberg survey of 47,000 households across 15 states indicated that over half of low-income households lost their primary income earners, leaving approximately 23% of households without any income and reducing average total household incomes to 40% of pre-lockdown levels.
• Electricity distribution companies (DISCOMs) are facing critical solvency issues due to decreased power sales between late March and July 2020 and a decline in 'cross-subsidies.' Because industrial and commercial entities suffered financial losses during the pandemic, their capacity to subsidize agricultural and certain residential consumers diminished. To mitigate this, a loan package of INR 90,000 crore (~USD 12.1 billion) was announced for DISCOMs.
• The document proposes three principles to balance DISCOM financial recovery with social affordability: targeting tariff increases only at better-off households who currently capture a large share of subsidies; shifting from energy subsidies to direct cash transfers via a Direct Benefits Transfer for Power (DBT-P) scheme; and focusing on planning and data collection while the economy recovers.
• Research indicates that consumer willingness to pay for electricity is linked to service quality. An IISD study in Uttar Pradesh found that 60% of urban and 70% of rural households were willing to pay more if DISCOM services—such as stable voltage and reduced blackouts—improved. Similarly, a TERI study found high willingness to pay for basic lighting, but noted that regulators do not currently use willingness-to-pay assessments when setting tariffs.
• India's electricity tariff systems are described as highly complex, sometimes featuring up to 90 distinct consumer categories and subcategories. The central government has proposed amendments to the National Tariff Policy, 2016 and the Electricity Act to simplify structures based on sanctioned load and volume, limit cross-subsidies to within +/-20% of the cost of supply, and encourage states to implement DBT-P in at least one district.
• Political challenges at the state level hinder tariff reforms, with annual adjustments likely to be minor in 2020. Proposed solutions include shifting some control to the central government via the 2020 draft amendments to the Electricity Act and launching a voluntary 'opt-out' campaign for subsidies for wealthy households, modeled after the 2015 Give Up LPG Subsidy campaign.

APA

Viswamohanan,, C. B. (2020). How Can India’s Energy Sector Recover Sustainably from COVID-19? Part 3 – Social Sustainability: Energy affordability and pricing reform in India. International Institute for Sustainable Development. https://www.iisd.org/articles/how-can-indias-energy-sector-recover-sustainably-covid-19-part-3

Chicago

Viswamohanan,, Christopher Beaton,Anjali. How Can India’s Energy Sector Recover Sustainably from COVID-19? Part 3 – Social Sustainability: Energy affordability and pricing reform in India. International Institute for Sustainable Development, 2020. https://www.iisd.org/articles/how-can-indias-energy-sector-recover-sustainably-covid-19-part-3.

Wikipedia

{{cite report |last1=Viswamohanan, |first1=Christopher Beaton,Anjali |title=How Can India’s Energy Sector Recover Sustainably from COVID-19? Part 3 – Social Sustainability: Energy affordability and pricing reform in India |publisher=International Institute for Sustainable Development |date=29 September 2020 |url=https://www.iisd.org/articles/how-can-indias-energy-sector-recover-sustainably-covid-19-part-3 |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{viswamohanan2020how, author = {Viswamohanan,, Christopher Beaton,Anjali}, title = {{How Can India’s Energy Sector Recover Sustainably from COVID-19? Part 3 – Social Sustainability: Energy affordability and pricing reform in India}}, institution = {International Institute for Sustainable Development}, year = {2020}, month = sep, url = {https://www.iisd.org/articles/how-can-indias-energy-sector-recover-sustainably-covid-19-part-3}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }