2026 for January 1970

India’s electricity distribution companies (DISCOMs) have recorded a notable financial and operational turnaround, though concerns remain over their long-term sustainability.

Power Distribution Companies, commonly known as DISCOMs, are responsible for the final stage of electricity delivery, distributing power to households, industries, and agricultural consumers.
India currently has 72 DISCOMs, comprising State-owned utilities, private-sector entities, and power departments.
Historically, DISCOMs have been the weakest link in India’s power sector, plagued by inefficiencies, mounting losses, and rising debt.
Two indicators define their financial health:
- Aggregate Technical and Commercial (AT&C) losses, which capture losses from theft, technical inefficiencies, and billing gaps.
- ACS-ARR gap, the difference between the Average Cost of Supply (ACS) and Average Revenue Realised (ARR).
For decades, high AT&C losses and non-cost-reflective tariffs resulted in persistent deficits, forcing State governments to periodically bail out DISCOMs.

The roots of DISCOM losses lie in the functioning of earlier State Electricity Boards under the Electricity (Supply) Act, 1948.
Although the law required utilities to earn modest profits, political interference, subsidised tariffs, and delayed subsidy payments weakened financial discipline.
Between 2020-21 and 2024-25, accumulated losses rose from Rs. 5.5 lakh crore to Rs. 6.47 lakh crore, while outstanding debt touched Rs. 7.26 lakh crore.
Non-payment of dues by consumers, delayed State subsidies, and rising power procurement costs worsened the situation.

Recent years have shown measurable improvement. According to official data, DISCOMs collectively recorded a Profit After Tax of Rs. 2,701 crore in 2024-25, a sharp contrast to losses exceeding Rs. 67,000 crore in 2013-14.
AT&C losses declined from 22.62% to 15.04%, while the ACS-ARR gap narrowed drastically to 0.06 paise per unit, indicating near cost recovery.
This turnaround reflects better billing efficiency, improved collections, and stronger enforcement of financial discipline.

The improvement has been driven by a series of reforms:
- Revamped Distribution Sector Scheme (RDSS): Links financial assistance to measurable performance outcomes such as feeder metering, loss reduction, and system modernisation.
- Electricity Rules and Late Payment Surcharge Rules: Enabled DISCOMs to clear legacy dues in instalments, preventing snowballing of unpaid liabilities.
- Debt Discipline Measures: Since 2022, legacy dues of nearly Rs. 1.4 lakh crore have been substantially reduced through structured repayments.
These reforms restored confidence among power generators and fuel suppliers, stabilising the electricity supply chain.

Despite improvements, financial sustainability remains fragile. Many DISCOMs have posted profits only after receiving tariff subsidies and loss takeovers from State governments.
For instance, utilities in States like Tamil Nadu and Rajasthan reported profits largely due to direct fiscal support rather than operational surplus.
This dependence raises concerns about the durability of the turnaround, especially when future liabilities such as employee pay revisions arise.

Unmetered Agricultural Supply: Lack of accurate data on farm power consumption distorts cost recovery.
Free or Highly Subsidised Power: Universal free electricity benefits wealthier consumers disproportionately and weakens utility finances.
Operational Inefficiencies: Not all States have adopted feeder segregation or smart metering at scale.
Without addressing these structural issues, improvements may prove temporary.

Long-term sustainability requires deeper reforms.
Expanding feeder segregation, promoting solar pumps in agriculture, improving metering, and ensuring cost-reflective tariffs are essential.
Political commitment and professional management must align to transform DISCOMs into consumer-friendly and financially viable utilities.

Source: TH

Distribution Companies FAQs

Q1: What are DISCOMs?

Ans: DISCOMs are electricity distribution companies responsible for supplying power to end consumers.

Q2: What is AT&C loss?

Ans: AT&C loss measures technical losses, power theft, and inefficiencies in billing and collection.

Q3: What is the ACS–ARR gap?

Ans: It is the difference between the cost of supplying electricity and the revenue earned per unit.

Q4: Which scheme supports DISCOM reforms?

Ans: The Revamped Distribution Sector Scheme (RDSS) supports financial and operational reforms.

Q5: What is the key challenge for DISCOM sustainability?

Ans: Overdependence on State subsidies and non-cost-reflective tariffs remains the biggest challenge.