- Why in news
- On 23 July 2026 the Consultative Committee of the Ministry of Power, chaired by Union Power Minister Manohar Lal, discussed a proposed framework for parallel distribution licensing (reported 24 July 2026).
- What it is
- Parallel distribution licensing means more than one distribution licensee supplies electricity in the same area. Under the Electricity Act, 2003, a second licensee must build its own network. The new proposal would let it use the incumbent's network by paying regulated wheeling charges.
- Current legal position
- The law already allows more than one distribution licensee in an area, but each must build its own network. This duplicates poles, lines and substations.
- Proposed access model
- Incumbents keep owning and running their networks. New licensees pay regulated wheeling charges to use them, or build their own network where the State Commission permits.
- Role of State Commissions
- State Electricity Regulatory Commissions will frame the detailed implementation rules for fair, transparent, non-discriminatory access.
- Universal service obligation
- All distribution licensees stay bound by the universal service obligation, so supply cannot be limited to profitable consumers.
- Existing precedent
- The Minister cited Mumbai, where supplier choice has worked for several years under State Commission supervision.
Don’t confuse with Parallel licensing vs open access: Open access lets large consumers buy power from a chosen source using the distribution network. Parallel licensing creates a second distribution licensee supplying consumers in the same area.
Don’t confuse with Wheeling charges vs transmission charges: Wheeling charges are paid for using the distribution network. Transmission charges are paid for using the high-voltage transmission grid.
Laws, judgments and statutory bodies: 30 Prelims questions since 2013 (what the law says, who chairs, legal basis). In Mains, 44 news-triggered questions, most in GS2, asking for provisions and challenges.
Why it matters
- Gives consumers a choice of supplier and may improve service quality and reliability.
- Avoids duplicate networks, saving capital expenditure and using existing assets better.
Problems
- Incumbent discoms may lose profitable consumers, and their finances and employees may be affected.
- Risk of cherry-picking of profitable consumers; State Commissions must enforce the universal service obligation and fair wheeling charges.
Way forward
- State Commissions should set transparent, non-discriminatory wheeling charges and access rules.
- Safeguard incumbent licensees, employees and universal supply through clear regulation.
Put in your answer
Mumbai example: Supplier choice has operated in Mumbai for several years under State Commission supervision, as a precedent for the reform.
- 2006Prelims Q65Statements on Appellate Tribunal for Electricity and APDRP distribution upgradation components.
- 2016Prelims Q7Purpose of UDAY scheme: financial turnaround of power distribution companies.
UPSC’s own questions that come close to this issue, from our Prelims and Mains banks.
No practice question for this one; the card may still help an answer. Why: Proposed reform on competition in power distribution. Still a proposal under discussion; no provisions to test yet.
Worth revising until Prelims 2028: most news questions come within two years of the event.