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Relevance: GS Paper III — Infrastructure, Energy; GS-II Govt Policies Source: AP Govt policy, 2026

1 · What happened

Andhra Pradesh plans to give Deemed Distribution Licence (DDL) status to private data centre developers. This lets large facilities bypass local distribution companies (Discoms) and buy, manage and distribute their own power.

Until now, DDLs were reserved for public or strategic enclaves like SEZs, ports, airports and the Railways. Extending it to private developers is a major shift in India’s power sector.

2 · Why the licence matters

Indian tariffs use cross-subsidy — industry and commerce are charged extra to fund cheap power for farms and homes. A DDL lets a data centre escape this surcharge and source power directly.

The Problem
Cross-Subsidy Trap
On the open-access route, Discoms levy a heavy Cross-Subsidy Surcharge (CSS), making power-hungry data centres unviable.
The Solution
DDL Status
The centre acts as its own mini-utility — exempt from CSS, free to buy wholesale power and run its own micro-grid.
The Guardrail
300 MW Threshold
To stop misuse, only facilities with a minimum connected load of 300 MW qualify; loads may be aggregated across sites.
The Risk
Subsidy Burden Shift
As big users exit the pool, the subsidy load may shift onto homes and small businesses, hurting Discom finances.

  • Power, not servers: Modern hyper-scale centres are measured in megawatts (MW); a single one can match a medium city’s demand.
  • Scale of growth: India’s capacity is about 1.2 GW, set to quadruple by 2030; AP wants Visakhapatnam at 5 GW, anchored by Google’s 1 GW campus.
  • Going green: DDL lets operators sign direct PPAs with solar/wind and use liquid or sea-water cooling to push PUE toward the ideal 1.0.

UPSC Value Box
Deemed Distribution Licence Lets an entity act as its own power distributor within its boundary.
Cross-Subsidy Surcharge Charge on open-access users to protect Discom revenue; DDL units are exempt.
Open Access Rule letting large users buy power directly from any producer.
Electricity Act, 2003 Section 14 governs distribution licences and “Deemed Licensees”.
PUE Power Usage Effectiveness; efficiency ratio, ideal value is 1.0.
PPA Power Purchase Agreement; long-term contract to buy power, often renewable.
MeitY Policy National Data Centre framework; pushes “Infrastructure Status” and clean power.
Data Localisation Storing citizen data within the country; key to data sovereignty.

MCQ Practice Question
Q. With reference to power distribution and the Deemed Distribution Licence (DDL), consider the following statements:

  1. The Cross-Subsidy Surcharge is charged by Discoms to protect their revenue from open-access consumers.
  2. The Electricity Act of 2003 provides for the designation of “Deemed Licensees”.
  3. Andhra Pradesh has set a minimum connected load of 30 MW for a data centre to qualify for DDL status.

Which of the statements given above is/are correct?
(a) 1 and 2 only    (b) 2 and 3 only    (c) 1 and 3 only    (d) 1, 2 and 3

Answer: (a) 1 and 2 only

  • Statement 1 — Correct: The CSS is levied on open-access users to safeguard Discom revenues.
  • Statement 2 — Correct: The Electricity Act, 2003 (Section 14) allows certain entities to be treated as Deemed Licensees.
  • Statement 3 — Incorrect: The threshold is 300 MW, not 30 MW — a wrong-number trap.
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