India's power distribution companies (DISCOMs) have showcased a remarkable financial turnaround, reporting a combined profit of over ₹2,700 crore in the fiscal year 2024-25. This is a significant recovery from the ₹25,553 crore loss incurred in the previous year. The improved performance is largely attributed to the enhanced efficiency and reduced losses of state-run power utilities.
Officials from the Power Ministry have highlighted that private distribution companies have consistently posted profits over the last three financial years, with state-run DISCOMs significantly reducing their losses in the last financial year, contributing to the overall positive profit after tax. The Centre has pointed to several factors that have aided this turnaround, including infrastructure modernization, the adoption of smart metering, well-structured tariff systems, and transparent accounting practices for subsidies. Ensuring that subsidies are transparently accounted for is particularly important as numerous states are offering free power to consumers up to certain consumption levels. Without proper budgetary allocation for these subsidies, DISCOMs would have to shoulder the financial burden.
Additional measures implemented to bolster the financial health of DISCOMs include the introduction of uniform accounting practices, enhanced transparency across distribution utilities, and the enforcement of legal contracts through timely payments. These measures aim to support investment in new renewable energy projects. Furthermore, states are being incentivized to implement critical power sector reforms by linking their borrowing limits to performance metrics under the additional borrowing scheme.
The impact of these reforms is not only evident in the improved bottom lines of DISCOMs but also in other key performance indicators. There has been a reduction in aggregate technical and commercial (AT&C) losses, which is a key measure of efficiency. The gap between the average cost of power supply and the average revenue realized has also narrowed. AT&C losses have fallen from 22.6% in 2013-14 to approximately 15%.
Uttar Pradesh is one example of a state that has undergone significant development in recent years. Reforms in governance and infrastructure have helped to transform the state's economy. Digital governance initiatives, such as online citizen services and digital payments, are improving transparency and efficiency. The state has also created a strong investment ecosystem through single-window clearances and support for MSMEs.
The improved financial performance of India's power distribution companies marks a significant milestone after a decade of losses. This turnaround reflects the effectiveness of strategic reforms and improved financial governance in the power sector, setting the stage for further growth and sustainability.
