DISCOMs and the road ahead | Explained

DISCOMs record a decisive turnaround, with reduced AT&C losses, a sharply narrowed ACS-ARR gap and improved cost recovery following reforms and rule changes.

Better days seem to be ahead for the country’s electricity sector, especially power distribution utilities, including power departments, commonly known as DISCOMs.

For long, DISCOMs, now numbering 72 across the country (44 State-owned, 16 private-sector entities, and 12 power departments), had presented a grim picture with never-declining line losses, also called Aggregate Technical and Commercial (AT&C) losses, and the consequent widening gap between the Average Cost of Supply (ACS) and the Average Revenue Realised (ARR). Between 2020-21 and 2024-25, accumulated losses rose from ₹5.5 lakh crore to ₹6.47 lakh crore, with outstanding debt increasing to ₹7.26 lakh crore. Non-cost-reflective tariffs and delayed payment of State subsidies were among the factors that contributed to this state of affairs.

As far as India is concerned, DISCOMs and losses have become synonymous, forcing specialists to use the prefix “minus” whenever a power utility’s ARR exceeds its ACS. One may argue that loss-making is a legacy matter, as these power utilities — in their previous ‘avatar’, State Electricity Boards (SEBs), formed under the Electricity (Supply) Act, 1948 — were mostly in the red. But what was overlooked, even then and now, was that Section 59 of the law had originally required SEBs to make a profit of three or more per cent, as specified by State governments.

Even though many DISCOMs are struggling to cope with chronic issues, several others have begun improving their performance perceptibly in the wake of steps taken by various stakeholders, including those of the Union government. A Survey revealed that DISCOMs recorded a positive Profit After Tax (PAT) of ₹ 2,701 crore in the financial year 2024-25, marking “a decisive turnaround” from a loss of ₹67,962 crore in 2013-14. This improvement was accompanied by a reduction in AT&C losses from 22.62% to 15.04 % during the years in question. Further, the ACS-ARR gap (on an accrual basis) came down from 78 paise per unit (kilowatt-hour) to 0.06 paise per unit, signalling much improved cost recovery.

In mid-January, the Union government also made public the performance details of DISCOMs for the financial year that ended March 31, 2025. Claiming credit for the financial turnaround, the government attributed it to several measures, including the implementation of the Revamped Distribution Sector Scheme (RDSS), amendments to the Electricity Rules, and the introduction of the Late Payment Surcharge Rules.

The RDSS’s objective is to improve the quality and reliability of power through a financially sustainable and operationally efficient distribution sector, with the release of funds linked to the execution of necessary measures. The effective implementation of the Rules has helped utilities arrest the mounting surcharges on legacy dues, as it allows DISCOMs to clear their dues through a maximum of 48 equated monthly instalments (EMIs).