Electricity Costs: India’s Lowest and Most Expensive States, The Global Picture

A lot of factors influence the per unit electricity costs in a country. The prices are heavily influenced by factors that include the country’s geographical location, geological makeup, level of development and technological advancement, and whether it is a high-, middle-, or low-income nation. 

The rise of renewable power through the recent decades has also impacted the cost dynamics across the globe. Furthermore, world events like Russia’s 2022 invasion of Ukraine disrupted the export of fossil fuels from both Russia and Ukraine, causing a spike in the price of electricity throughout the world, and Europe in particular. Naturally, the price of electricity can vary widely from one country to the next.

During 2022, electricity prices surged amidst one of the worst energy crises in history, fueling widespread inflation and energy poverty. Europe’s energy system was hit hardest, with Italy witnessing a doubling of electricity prices. In contrast, energy rates in developing nations like China and India remained relatively lower. 

Electricity Rates Across India

The Central Electricity Authority of India, in its March 2023 report, provided insights into electricity rates across various states. Tamil Nadu emerged as the state offering the lowest electricity rates across all categories, while Rajasthan stood out as one of the states with comparatively higher electricity costs, despite some subsidy provisions. Surprised? Rajasthan costs are also higher due to the sise of the state, and higher transmission costs. 

Andhra Pradesh

Andhra Pradesh provides subsidies on both fixed and energy charges for slabs ranging from 0 to 100 units across all categories. Energy charge subsidies range from INR 1.9 to INR 9.05 per unit, while fixed charge subsidies are either INR 75 or INR 10 per month, depending on the category. The state ensures zero electricity costs for all categories up to 100 units.

Bihar

Bihar subsidises its Irrigation and Allied Services category by fully covering fixed charges for metered connections. Energy charge subsidies range from INR 4.1 to INR 5.25 per unit, reducing costs to as low as INR 0.65 per unit. Public service connections under Har Ghar Nal are charged at INR 2.6 per unit.

Chhattisgarh

Chhattisgarh offers subsidies for domestic consumers, including the BPL category, for slab ranges between 0 and 400 units. The subsidies cover half of the energy charges, which range from INR 1.85 to INR 2.65 per unit. Domestic electricity costs vary from INR 1.85 to INR 7.9 per unit. Agricultural users benefit from free electricity, with subsidies for up to 6,000 units per year for 3HP pumps and 7,500 units per year for 5HP pumps.

Delhi

Delhi pioneered free electricity programs, providing up to 200 units free for domestic consumers. Beyond this threshold, regular charges apply. Agricultural electricity is available at INR 1.5 per unit with no slabs.

Gujarat

Gujarat charges a fixed subsidised rate of INR 665/HP per year for unmetered agricultural connections. For metered connections, electricity costs are as low as INR 0.6 per unit, with fixed charges capped at INR 15 per month.

Madhya Pradesh

Madhya Pradesh provides affordable electricity for agriculture, with costs ranging from INR 0.47 to INR 2.72 per unit. Under the Atal Grih Jyoti Yojna, domestic consumers using up to 150 units receive subsidies, with charges capped at INR 100 for the first 100 units.

Maharashtra

Maharashtra subsidises energy for agriculture, with costs ranging from INR 1 to INR 2.28 per unit. The Powerloom and Textile sectors also benefit from subsidies, with energy costs capped at INR 4 per unit.

Tamil Nadu

Tamil Nadu offers 50 units of free electricity and some of the lowest electricity costs in the country. Domestic costs rise in phases and are capped at INR 6.6 per unit for consumption exceeding 250 units. Electricity for the agricultural sector is free, without any slabs.

Other Indian States

Himachal Pradesh provides free electricity for the first 60 units and 125 kWh per month for domestic consumers, ensuring affordable access for low-usage households. Similarly, Jharkhand offers free electricity for domestic consumers using up to 100 units, easing the financial burden on low-income families.

Kerala supports NPG and BPL consumers by providing free electricity. For other domestic categories, electricity costs are subsidised, ranging from INR 2.80 to INR 3.97 per unit. Puducherry’s subsidy programs focus on the agriculture sector, offering free electricity to farmers to support agricultural productivity.

West Bengal provides free electricity for the first 75 kWh of domestic consumption. Beyond this, subsidised rates apply, with rural domestic consumers paying as little as INR 4.59 per unit for the first 102 kWh. For higher consumption, costs rise to a maximum of INR 7.01 per unit for usage exceeding 300 kWh, ensuring a balanced structure that accommodates various consumption levels.

Electricity Rates: Worldwide Trend

India’s energy rates can be assessed in comparison to its peers to understand the prevailing price parity. Major natural gas and petroleum producers and exporters, including Russia, China, the United States, Qatar, and Iran, benefit from some of the lowest electricity prices globally.

Electricity prices in the United States and Russia differed by only about 25 percent through the crisis. Throughout 2021 and 2022, global power prices rose for both industrial and residential consumers, leading governments to adopt mitigation measures and accelerate efforts toward energy self-sufficiency.

Comparing Energy Costs

India was the third-largest electricity producer in the world in 2023, with an installed power generation capacity exceeding 426 GW as of November 2023. According to Statista, during the financial year 2023, the average cost of state-supplied electricity in India was INR 7.11 (USD 0.084) per unit (kilowatt-hour).

The North American country of Mexico boasts one of the lowest energy rates in the world. Household electricity prices in Mexico stood at USD 0.108 per kilowatt-hour in December 2023. As per one report, the country’s electricity consumption per capita was around 2500 kWh in 2023.  Natual gas is the top contributor to electricity in the country.

Russia is reported to have the lowest energy costs worldwide. Residential electricity rates in Russia are RUB 5.380 per kWh (USD 0.052), while businesses pay RUB 7.615 per kWh (USD 0.073). Neighboring China has seen a slight increase in its average industrial power rates, reaching USD 0.088 per kWh in 2024, up from USD 0.084 per kWh in 2019. As China moves up the value chain by manufacturing higher-technology products, it continues to implement measures to lower general industrial power rates.

Earlier this year, Bangladesh raised domestic natural gas tariffs for power plants and electricity tariffs for all consumer categories. Consequently, the country’s average electricity rate now stands at Taka 8.95/unit and the maximum tariff for using over 600 units is Taka 14.61 (USD 0.13)/unit. Comparatively, Vietnam has much lower rates. The country has about 2088 VND/unit (about USD 0.08/unit), comparable to India. 

The electricity rate in the United States was USD 0.13 per unit as of November 2024. In contrast, the United Kingdom has significantly higher rates, with an average power cost of USD 0.368 per kilowatt-hour. Heavy reliance on traditional fuels for electricity production makes the cost of electricity prone to extreme fluctuations. Bermuda, a British island territory in the North Atlantic Ocean, has USD 0.458/unit, the highest residential energy cost in the world. 

Italians pay about USD 0.457 per kilowatt hour for electricity. The European country generates roughly 50 percent of its electricity from the burning of natural gas. Because of this, the price of electricity can be quite volatile, impacted greatly by fluctuations in the price of natural gas.

 

The middle eastern world hosts countries with some of the lowest electricity rates. The major oil producing nation Qatar has a residential electricity price of QAR 0.115 per kWh or USD 0.032 while the businesses pay QAR 0.130 kWh (USD 0.036), as per Global Petrol Prices. Notably, Iran has the lowest energy cost for residential consumers – IRR 1,310.000 per kWh or USD 0.002. Several other nations including Ethiopia, Libya, Syria, Sudan, and a few other countries, have the lowest residential energy costs with one kWh of electricity costing less than USD 0.1. But ironically, the countries with the lowest power costs rarely have dependable electricity, as we can see from the list above. 

 

European nations, such as Denmark (USD 0.384/unit), Switzerland (USD 0.404/unit), Liechtenstein (USD 0.408/unit), Ireland (USD 0.439/unit), and Italy (USD 0.457/unit), and Cayman Islands (USD 0.433/unit), have the highest residential energy costs. 

Impact of Renewable Energy on Power Rates

Renewable power generation has become the default source of least-cost new power generation. The advent of renewable energy (RE) saw the high costs of installation but has led to the decline in overall energy costs worldwide in the long run. In 2023, the global weighted average levelised cost of electricity (LCOE) from newly commissioned utility-scale solar photovoltaic (PV), onshore wind, offshore wind and hydropower fell. As per IRENA Renewable Power Generation Costs in 2023, the most dramatic decline was seen for solar PV generation. The LCOE of solar PV was 56 percent less than the weighted average fossil fuel-fired alternatives in 2023, having been 414 percent more expensive in 2010.

In 2023, the global weighted average Levelized Cost of Electricity (LCOE) for new onshore wind projects was 67 percent lower than that of fossil fuel-fired alternatives, marking a significant improvement from 2010 when it was 23 percent higher than the weighted average cost of fossil fuel-fired equivalents.

Overall, the new RE capacity added since 2000 reduced electricity sector fuel costs in 2023 by at least USD 409 billion, showcasing the benefits renewable power can provide in terms of energy security.