The state’s industries, which buy cheaper power from sources other than the state-owned distribution company — Maharashtra State Electricity Distribution Company Limited MSEDCL — will have to pay the government a tax called electricity duty. Industry sources fear that this extra cost of production could be passed onto consumers in times of inflation.

On Tuesday, the State Cabinet scrapped the existing law because it did not provide for taxing transactions that are held in the open market through power exchanges, and through open access which allows large users of power to buy it for cheaper prices from sources other than its official distributor.