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

The document examines the tension between the need for electricity tariff reforms to save insolvent distribution companies (DISCOMs) and the decreased ability of low-income Indian households to pay for energy following the COVID-19 lockdown. It proposes shifting subsidies away from better-off households, implementing direct cash transfers (DBT-P), and improving data collection on consumer willingness to pay. The briefing highlights that while technical solutions like simplifying tariff slabs exist, political hurdles at the state level remain a primary barrier to reform.

• The COVID-19 lockdown caused severe economic distress for low-income Indians, 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 found that over half of low-income households lost their primary income earner, and average household incomes dropped to 40% of pre-lockdown levels.
• India's electricity distribution companies (DISCOMs) are facing a solvency crisis because the pandemic reduced power sales and weakened the 'cross-subsidies' system, where industrial and commercial users—now facing financial losses—subsidize agricultural and residential consumers. To mitigate this, a loan package of approximately USD 12.1 billion (INR 90,000 crore) was announced.
• To balance financial sustainability with social affordability, the document suggests three principles: targeting tariff increases only at better-off households who currently capture a large share of subsidies, replacing energy subsidies with cash transfers via a Direct Benefits Transfer for Power (DBT-P) scheme, and preparing policy options for the economic recovery phase.
• Research indicates that consumers are more willing to pay higher tariffs if service quality improves. An IISD study in Uttar Pradesh found that 60% of urban and 70% of rural households would pay more if DISCOM services—such as billing, payment options, and voltage stability—improved. A TERI study noted a high willingness to pay for basic lighting, but a decrease for higher service levels.
• Current electricity tariff systems in India are overly complex, sometimes featuring up to 90 distinct consumer categories. Proposed reforms include simplifying these into five main categories (agricultural, residential, commercial, industrial, and institutional), adjusting rates based on voltage costs, and varying tariffs by geography to reflect regional poverty clusters.
• Political resistance at the state level hinders tariff adjustments. The central government has attempted to shift control toward the center through draft amendments to the Electricity Act to reduce cross-subsidies and appoint state electricity commission members. Another suggestion is a voluntary 'opt-out' campaign for subsidies for wealthy households, similar to 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} }