Governance framework for an integrated energy policy

Authored by - Rakesh Kacker, advisory board member, Ashoka Centre for People Centric Energy Transition (ACPET) and Nidhi Srivastav, independent consultant.

India’s economic growth needs reliable, secure and sustainable access to energy. Rapid urbanisation and growing demand for infrastructure and technology require a robust energy sector to achieve the country’s economic and social goals. The Union Budget 2024–25 identified energy security as a priority, with policies aimed at balancing growth, job creation, and environmental goals.

Law (Pic for representation)

An Integrated Energy Policy (IEP) for India is a long-overdue necessity to achieve these goals. These reforms require a strong governance framework that encourages optimal inter-fuel choices and an institutional mechanism for effective Centre-state coordination.

In August, India’s Supreme Court recognised electricity as a public good. It urged Regulatory Commissions to collaborate with other authorities and make electricity affordable across regions. While the Electricity Act envisions a wide range of stakeholders working together, including the central and state Governments, Regulatory Commissions, the Appellate Tribunal, statutory policymakers, and utilities, no single institution deals with the intertwined issues of energy policy on a continuous basis.

An IEP will need to be implemented by a dedicated body, ensuring compliance with the principles enumerated and approve requests where a deviation may be justifiably sought.

A national IEP requires a full-fledged administrative set-up with powers to issue orders, ensure implementation by the Government of India (GOI’s) line departments, and liaise with state governments to obtain their cooperation. The GOI, where the major energy ministries and other relevant ministries are located, can coordinate such an initiative.

The GOI can examine administrative issues related to housing the agency and defining its role and scope in consultation with state governments, relevant government agencies, and other energy sector stakeholders. Based on inter-ministerial and Centre-state coordination, a secretariat can implement the objectives of India’s energy policy in an integrated manner, considering all sectoral aspects as well as cross-cutting issues.

The body should not be restricted to an advisory role; rather, it should be an implementing and oversight agency that can be institutionalised, upholding the tenets of good governance while ensuring transparency, public participation, and regular flow of information.

Similarly, energy policy can be coordinated at the state government level, dovetailing it with the environmental policies required to achieve India’s national goals. States’ involvement will be critical as resource-rich states rely heavily on fossil-based resources for revenue. State government policies can be aligned with the decisions of the IEP’s implementing agency. States can also suggest new policies for India by creating a similar body to coordinate actions across state government departments. This may be easier as states have only one energy department. This nodal point can then coordinate with the corresponding agency in GOI. A notable feature of post-liberalisation reforms in the 1990s was the establishment of independent regulatory authorities (IRAs). As in several other developing countries, IRAs in India were introduced in the electricity sector, alongside unbundling and privatisation of the sector. Regulatory changes were also introduced in other energy domains, such as upstream oil and gas.

Over time, the IRAs were restructured in the electricity and telecom sectors. Now the standard template has a regulatory body headed by a non-judicial member and an appellate body headed by a judicial member.

Despite criticism, IRAs have continued at the Central and state levels. IRAs are believed to enhance regulatory efficiency, be independent of interest groups, and unbound by government obligations, offering a level playing field to public and private entities for sectoral development and overall public interest. However, while expected to be independent from the government, regulators are not completely disconnected from the political economy of the sector.

Despite years of existence of delegated and independent statutory authorities, regulatory capacity remains a challenge across sectors in India. Many IRAs struggle with inadequate staff, vacant expert member positions or a lack of subject-matter expertise. Only a few regulators, such as SEBI, have succeeded in building a pool of their own expert staff over time. Given the technical nature of decisions in the energy sector, the government can invest in and institutionalise continued capacity enhancement of regulatory institutions.

Operational and financial autonomy are crucial to provide regulators the freedom to appoint personnel independent of industry or government. This is more challenging in the energy sector due to the presence of government entities in the industry. The Supreme Court of India also highlighted these concerns in its judgment in early 2025, which gave directions on liquidating regulatory assets in the case of BSES, which had filed the writ petition. However, the Court went beyond the BSES case and laid down ten principles on the general obligations of the Regulatory Commissions and the Appellate Tribunal for Electricity (APTEL).

Constraints such as the need for government approval in staff recruitment, rigid salary scales, or even remuneration linked to industry contributions have been noted in State Electricity Regulatory Commissions and the Petroleum and Natural Gas Regulatory Board. Dependence on the executive is even more pronounced in agencies under the administrative and budgetary control of the ministry/ department, such as the Directorate General of Hydrocarbons or the Atomic Energy Regulatory Board.

The crucial question is whether India needs an independent statutory regulator for the IEP. At present, India has a full-fledged regulatory system in the power sector, no independent regulator in the coal sector, and a partial regulator for oil and gas. Independent statutory regulators for coal, oil and gas could strengthen oversight, efficiency, and transparency.

Alternatively, India could have a single multisectoral regulator with technical and market-based experience. While this comes into place, it is important to share cross-sectoral learnings and improve the understanding of States, the Centre and different energy sectors by establishing a National Institute for Regulatory Research and Practice that cuts across all regulators and sectors.

In areas such as coal, where the nodal ministry performs the regulatory functions, having a regulator will be time-intensive and complex. As an interim arrangement, a standing committee of independent professionals, located in the ministry concerned, to review draft decisions and give advice could be helpful. Such an arrangement can be mandated by law through an amendment to the relevant Act.

An integrated energy policy can only succeed with strong governance structures to implement these policies at all levels, complemented by a sound regulatory system that draws on the past and international experiences.

(The views expressed are personal)

This article is authored by Rakesh Kacker, advisory board member, Ashoka Centre for People Centric Energy Transition (ACPET) and Nidhi Srivastav, independent consultant.