With state-level electricity subsidies on the rise, the government is revising how it calculates inflation for power consumption. In a major methodological shift, the new Consumer Price Index (CPI)—scheduled for release in Q1 FY26—will move away from using per-unit electricity rates and instead assess total electricity bills, Moneycontrol has learnt.
“The new calculation will also take into account user charges and slab-wise billing data,” said a person aware of the development.
The change is expected to improve the accuracy and robustness of CPI estimates, particularly in light of the increasing complexity of electricity billing structures across states. Many state governments now offer free or heavily subsidised power up to a certain number of units, meaning actual household costs vary significantly despite official tariffs.
For instance, in Delhi, electricity is free for consumption up to 200 units.
Revamp of Housing Index Also Underway
The Ministry of Statistics and Programme Implementation (MoSPI) is also working on revising the housing component of the inflation basket, Moneycontrol has learnt.
For the first time, the rural housing market will be included in the CPI. The current series (base year 2011–12) tracks only urban housing, and within that, includes employer-provided and government housing—a practice the ministry plans to discontinue to better reflect actual rent dynamics.
Recent data shows that rent’s share in rural consumption has increased to 0.56 percent, up from 0.45 percent in 2011–12. In urban areas, rent now accounts for 6.58 percent, up from 6.24 percent.
Digitisation and E-Commerce to Play a Bigger Role
As previously reported by Moneycontrol, the ministry is incorporating digital consumption patterns more extensively in the new CPI series. For instance, online price tracking will be introduced across 12 cities with populations above 2.5 million.
Additionally, the index will now include spending on OTT platforms, as well as online portals used for rail and air travel bookings, reflecting the changing landscape of consumer expenditure.
According to findings from the Household Consumption Expenditure Survey, online spending now constitutes around 10 percent of total consumption in urban areas, and about 3 percent in rural regions.
These revisions are part of MoSPI’s broader push to modernise the CPI methodology in line with evolving consumption patterns and pricing mechanisms across the country.
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