India's electricity reforms are sparking alarm across the countryside. The Centre's push to privatise power distribution companies (DISCOMs) has drawn sharp opposition from state governments and power engineers, who warn that the move could destabilise the rural economy by driving up irrigation costs and weakening farm subsidies - the lifeline of India's agricultural sector.
At the centre of the controversy is a Group of Ministers (GoM) meeting held on October 10, 2025, where, according to the All India Power Engineers Federation (AIPEF), the Centre warned states that continued financial support would depend on adopting one of three privatisation models. Energy ministers from Uttar Pradesh, Andhra Pradesh, Madhya Pradesh, Maharashtra, Rajasthan, and Tamil Nadu attended the meeting.
"The message is blunt - privatise or lose funds," said AIPEF Chairman Shailendra Dubey. "This is blackmail disguised as reform. Farmers and rural consumers will be the ultimate victims."
Farm Power in the Crosshairs
Agriculture consumes nearly 18% of India's total electricity, most of it supplied either free or at subsidised flat rates. In agrarian states such as Punjab, Andhra Pradesh, Karnataka, and Tamil Nadu, these subsidies cost governments between Rs 8,000 crore and Rs 10,000 crore annually, forming a key pillar of rural welfare spending.
But under the Centre's proposed model, states must choose between:
- Selling 51% equity in their DISCOMs to private firms with management control;
- Handing over management contracts to private operators for five years with central funding; or
- Listing utilities on stock exchanges, conditional on profitability and an 'A' credit rating.
- States refusing these options will forfeit central aid, including capex grants and debt relief.
Economists warn that the move could upend the delicate structure of India's farm power economy. "Privatisation means tariffs will have to be 'cost-reflective' - ending the cross-subsidies that keep farm electricity cheap," said an energy policy analyst. "If implemented, irrigation costs could rise by 30-40%, hitting small and marginal farmers hardest."
The Centre's Assurances
In its official FAQs on the Electricity (Amendment) Bill, 2025, released on October 30, the Union Power Ministry described the reform as "a progressive step" toward a "future-ready power sector aligned with Viksit Bharat @ 2047." The ministry insists that the Bill protects subsidised tariffs for farmers and allows states to continue offering aid under Section 65 of the Act.
"Competition will reduce technical and commercial losses, making subsidies more efficient," the ministry said. "Consumers, including farmers, will continue to pay subsidised tariffs, while inefficiencies and theft that inflate subsidy burdens will be curbed."
The FAQs argue that cost-reflective tariffs will help break the DISCOM debt cycle, enabling reliable service and better infrastructure, while "hidden cross-subsidies" will be replaced by transparent, budgeted subsidies for farmers and poor consumers.
Rural Reality vs Reform Narrative
Farmer groups and state officials, however, remain sceptical. They point out that the shift from free power to Direct Benefit Transfer (DBT)-based subsidies could disrupt the timing of irrigation cycles. "Farmers can't wait for bank transfers to start their pumps," an analyst said, adding that "even a week's delay in DBT payments can mean crop loss."
In many states, free electricity is not just a welfare measure but a political contract between government and the agrarian vote base. Punjab alone spends over Rs 9,000 crore annually on farm power subsidies; Andhra Pradesh, Tamil Nadu, and Rajasthan together spend over Rs 25,000 crore.
Economists estimate that a Rs 1 per unit increase in farm tariffs could raise irrigation costs by Rs 1,000-Rs 1,200 per hectare per year, cutting into already thin farm margins. For small farmers cultivating two hectares, that's nearly a month's household income lost to higher electricity costs.
"Private companies won't run rural feeders at a loss," warned Dubey. "When profit replaces public obligation, rural lines will go dark first."
The Debt Argument
The Centre contends that reform is essential to rescue loss-making utilities. According to Power Finance Corporation (PFC) data, state-run DISCOMs owe Rs 7.42 lakh crore as of FY2023-24, of which Rs 2.74 lakh crore is unsustainable. Despite successive bailouts - UDAY (2015) and RDSS (2021) - state utilities posted combined losses of Rs 28,484 crore last fiscal, while private utilities turned in profits of Rs 2,931 crore.
The ministry maintains that only financial discipline and competition can break this cycle. It points to the Inter-State Transmission System (ISTS) model, where shared infrastructure between public and private entities has reduced costs and improved reliability.
Federal Flashpoint
States, however, see a creeping centralisation of power. Although the ministry says electricity remains in the Concurrent List, with State Electricity Regulatory Commissions (SERCs) retaining control over tariffs and licences, several chief ministers have called the approach "a coercive reform" that undermines state autonomy.
Punjab, Tamil Nadu, and Rajasthan have already written to the Centre warning that forcing tariff alignment and privatisation could "trigger social unrest in rural areas."
Growing Resistance
The AIPEF, supported by farmer unions and state power employees' associations, plans to escalate its protest. A meeting of the National Coordination Committee of Electricity Employees & Engineers (NCCOEEE) in Mumbai on November 3 will finalise plans for a nationwide agitation.
"Privatisation will hit not only workers but also farmers and the very idea of affordable public electricity," Dubey said. "We will resist it in every state."
The Political Undercurrent
With elections due in several agrarian states next year, the power reform debate has moved from policy circles to paddy fields. For the Centre, the Bill represents a test of reform credibility; for states, it is a fight for political survival.
Analysts say the outcome could define the future of rural India's most vital input - electricity. As one senior official put it: "In India, electricity is not just about power supply - it's about the pulse of the farm. And that pulse is now under strain."