The power distribution segment showed a mixed performance last year. While aggregate technical and commercial (AT&C) losses increased to 16.12 per cent in FY 2024 from 15.36 per cent in FY 2023 due to a decline in collection efficiency, the revenue gap decreased by Re 0.20 per unit during this period, reducing the absolute cash gap to Rs 580 billion in FY 2024. On the smart metering front, the segment reported record annual installations of 14.7 million in FY 2025 and 16.03 million in FY 2026 (till September 2025).
The year also saw major policy announcements aimed at addressing key issues in the segment. In the Union Budget 2025-26, the central government allowed an additional borrowing of 0.5 per cent of gross state domestic product for states implementing electricity distribution reforms and augmenting intra-state transmission capacity. Another significant announcement for the segment was the Supreme Court’s order on the dissolution of regulatory assets. Further, the launch of the India Energy Stack initiative by the Ministry of Power (MoP) marked an important step in the sector’s digital transformation.
Power Line presents a round-up of the key trends and developments in the power distribution segment over the past year…
Operational performance highlights
According to the 13th Integrated Ratings and Rankings Report by Power Finance Corporation Limited, AT&C losses at the national level rose marginally from 15.36 per cent in 2022-23 to 16.12 per cent in 2023-24, driven largely by a 1.05 percentage point decline in collection efficiency.
During 2023-24, some discoms reported reductions in AT&C losses. Purvanchal Vidyut Vitaran Nigam Limited (PuVVNL) in Uttar Pradesh led the improvement, with a 9.94 percentage point decline, bringing losses down to 17.33 per cent, supported by 100 per cent collection efficiency. Following closely were Gulbarga Electricity Supply Company Limited (Karnataka) and the Goa Power Department, which reduced AT&C losses to 9.64 per cent and 8.79 per cent respectively and achieved full collection efficiency. Meanwhile, several discoms showed a deterioration in AT&C loss performance during 2023-24. The Mizoram PD reported an increase in AT&C losses to 34.85 per cent, marking an 8.32 percentage point increase over the previous year. Jodhpur Vidyut Vitran Nigam Limited (Rajasthan) followed with a 7.73 percentage point increase, reporting AT&C losses of 28.72 per cent.
Overall, among the top 10 discoms that were ranked in the 13th Integrated Ratings report, there were five private discoms, Adani Electricity Mumbai Limited (Maharashtra), Noida Power Company Limited (Uttar Pradesh), TP Central Odisha Distribution Limited, TP Western Odisha Distribution Limited and TP Northern Odisha Distribution Limited (Odisha), which secured A+ grades. The remaining five discoms were state owned, namely, Dakshin Gujarat Vij Company Limited, Madhya Gujarat Vij Company Limited, Uttar Gujarat Vij Company Limited, Uttar Haryana Bijli Vitran Nigam Limited and Paschim Gujarat Vij Company Limited, with A+ ratings and high scores above 90.
Collection efficiency declined from 97.56 per cent in 2022-23 to 96.51 per cent in 2023-24. However, despite the dip, over 22 utilities achieved a collection efficiency of 99.5 per cent or more, with 15 utilities reaching a perfect 100 per cent. Meanwhile, at least three utilities failed to meet even the minimum threshold of 91 per cent for discoms, highlighting structural weaknesses. From a grading perspective, private utilities continue to outperform their state-owned counterparts in terms of collection efficiency, with 6 out of the 10 private discoms rated A+ while no state-owned discom secured that grade.
Billing efficiency was below the 90 per cent mark. Notably, private discoms improved their billing efficiency from 87.68 per cent to 88.22 per cent, while power departments increased their efficiency from 86.54 per cent to 87.27 per cent.
Financial performance
The sector saw some progress in terms of cost recovery during 2023-24 as the average cost of supply-average revenue realised (ACS-ARR gap) narrowed by 20 paise per unit, from Re 0.59 per kWh in 2022-23 to Re 0.39 per kWh in 2023-24. This led to a decline in the absolute cash gap, from Rs 826.65 billion in 2022-23 to Rs 578.54 billion in 2023-24. In addition, several state/union territory discoms reported improvements, including those in Delhi, Maharashtra, Uttar Pradesh, Ladakh, Assam, Karnataka, Bihar, Puducherry, Manipur, Uttarakhand, Gujarat, West Bengal and Tamil Nadu, where ACS-ARR gap reductions exceeded Re 0.50 per kWh.
In 2023-24, the overall outstanding loan of power discoms rose by over 12 per cent, increasing from Rs 6,730 billion as of March 31, 2023 to Rs 7,530 billion as of March 31, 2024. The debt service coverage ratio, which highlights the ability of discoms to meet their debt obligations, remained well below the benchmark of 1. It fell from 0.43 in 2021-22 to 0.23 in 2022-23, before it marginally recovered to 0.41 in 2023-24. Notably, much of this debt was concentrated in a few states such as Maharashtra (29 per cent), Tamil Nadu (26 per cent), Andhra Pradesh (16 per cent) and Rajasthan (14 per cent). These states altogether accounted for nearly 85 per cent of the total increase in debt.
As of March 31, 2024, the total accumulated losses were reported at Rs 6.92 trillion, a 5 per cent rise from Rs 6.59 trillion in 2022-23. Some of the structural issues that have been identified as key contributing factors were inefficiencies in metering, billing and collection processes; non-cost-reflective tariffs due to persistent gaps between the ACS and ARR; and delays in clearing government dues and subsidy payments. Collectively, these factors have strained the financial health of discoms, leading to an increased dependence on short-term borrowing.
Key developments
The power distribution segment has seen several regulatory interventions over the past year, which were aimed at strengthening operational accountability, modernising metering frameworks and improving digital infrastructure.
In August 2025, the Supreme Court directed state electricity regulatory commissions (SERCs) to ensure the timely liquidation of mounting regulatory assets that distorted tariff structures and weakened discom balance sheets. In line with the amended electricity rules, the court mandated that regulatory assets be capped at 3 per cent of the ARR and cleared within a three- to four-year time frame through structured cost recovery mechanisms and regular tariff true-ups.
In August 2025, the MoP issued the revised draft renewable consumption obligation targets for designated consumers, including discoms, under the Energy Conservation Act, 2001. The revised draft framework mandates year-wise renewable energy consumption targets for discoms, open access consumers and captive power users between 2024-25 and 2029-30, with targets ranging from 29.91 per cent to 43.33 per cent by 2030.
In June 2025, the MoP also issued important amendments to the Guidelines for Tariff-Based Competitive Bidding Process for Power Procurement. As per the amendment, if power is bought through an intermediary procurer and the end buyer is a distribution licensee, then that distribution licensee must apply to the relevant electricity commission for approval of the power sale agreement within 30 days of signing it, in case this approval was not taken earlier.
In May 2025, the MoP amended the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022, by extending their applicability beyond interstate licensees. The revised guidelines clarify that the rules now apply to all transmission licensees, replacing the earlier reference to only “generating companies and interstate transmission licensees” with “generating companies and transmission licensees”.
In March 2025, the Central Electricity Authority (CEA) released the draft CEA (Installation and Operation of Meters) (Fifth Amendment) Regulations, 2025. These amendments seek to align smart metering and open access frameworks with evolving industry norms. A key revision is the updated definition of “interface meters”, which now explicitly covers metering at interconnection points across generating companies, transmission licensees, distribution licensees and consumers, including those permitted open access.
In January 2025, the CEA issued benchmarking guidelines to evaluate the efficiency of operations and maintenance practices across discoms. These guidelines are aimed at promoting cost optimisation, improving reliability and supporting the adoption of best practices across discoms. In the digital space, the MoP launched the India Energy Stack, in June 2025, which will serve as an open, secure and interoperable digital public infrastructure system designed to address long-standing issues related to data fragmentation and poor system integration.
In April 2025, the CEA launched STELLAR (State-of-the-art Totally Indigenously Developed Resource Adequacy Model), a comprehensive power system planning tool that integrates generation, transmission, storage and demand response features.
Another key development was the launch of the privatisation process for two Uttar Pradesh discoms, Dakshinanchal Vidyut Vitran Nigam Limited and PuVVNL, which serve 42 of the 75 districts of Uttar Pradesh. Drawing from successful experiences in Delhi and Odisha, this move was aimed at addressing the persistent financial troubles faced by the state’s discoms.
Smart metering progress
The Revamped Distribution Sector Scheme (RDSS), which was launched by the MoP in July 2021, continued to make progress. In the Union Budget 2025-26, the RDSS received a dedicated allocation of Rs 160.21 billion to support ongoing infrastructure upgrades and metering deployments. To further support the adoption of smart meters, the basic customs duty was reduced from 25 per cent to 20 per cent to ease the cost burden on both discoms and manufacturers.
As of mid-2025, over 224 million smart consumer meters have been sanctioned nationwide, of which 143.9 million meters have been awarded. Further, 5.3 million distribution transformer (DT) meters and 206,929 feeder meters have been sanctioned, of which 4.72 million DT meters and 182,156 feeder meters have been awarded.
While actual deployments remain behind schedule, considerable progress is being made. Across India, 39.9 million smart consumer meters, 838,288 DT meters and 134,560 feeder meters have been installed, which takes the total number of deployed smart meters to over 40.87 million.
State-wise, the key states leading consumer meter installation are Bihar with 7.76 million, Maharashtra with 6.01 million, Uttar Pradesh with 5.18 million and Assam with 4.62 million meters installed.
Demand response, energy efficiency and EV charging
States have been working to improve their demand response and flexibility. As per the newly released State Energy Efficiency Index 2024 report, SERCs in seven states approved demand-side management (DSM) action plans as part of the ARR. Additionally, nine states have conducted load research studies for three consecutive years, while eight states have implemented DSM action plans.
Meanwhile, 28 states have implemented time-of-day or time-of-use tariffs for industrial and commercial consumers, with some extending these tariffs to domestic and electric vehicle (EV) connections. Additionally, five states, Maharashtra, Telangana, Madhya Pradesh, Kerala and Tripura, have initiated or implemented pilot projects for automated or behavioural demand response programmes.
Rising electricity consumption at public charging stations underscores the growing role of discoms in EV enablement. As of June 2025, Delhi led the country in public charging station power consumption with 81.74 MUs (26.75 per cent), followed by Maharashtra at 75.64 MUs, or 24.75 per cent, Karnataka at 48.67 MUs, or 15.93 per cent, and Gujarat at 20.23 MUs, or 6.62 per cent. These figures highlight both the opportunity and operational challenges that EV growth presents for India’s discoms.
Challenges
While progress has been made under key schemes such as the RDSS and the smart metering roll-out, the distribution sector continues to face a complex mix of financial and operational issues.
As per ICRA’s estimates, based on tariff orders issued by SERCs, regulatory assets at an all-India level remain elevated at around Rs 3 trillion, mainly driven by states/union territories such as Tamil Nadu, Uttar Pradesh, Rajasthan, Maharashtra, Delhi, West Bengal and Karnataka, with the first three states accounting for a majority share. The Supreme Court has recently directed the liquidation of regulatory assets within four years, although implementation by state discoms remains to be seen. Further, ICRA notes that eliminating the ACS-ARR gap would require an all-India average hike of 4.5 per cent, and a reduction in AT&C losses below 15 per cent, amid wide variations across states. Improved operational efficiency and timely implementation of regulatory reforms remain critical to easing discoms’ financial stress.
Moreover, the distribution segment is likely to face additional challenges with the increasing penetration of decentralised renewable energy sources. Meanwhile, delayed subsidy reimbursements continue to affect discom liquidity, with many states yet to fully implement direct benefit transfer (DBT) mechanisms or rationalise cross-subsidy structures. In 2023-24, while total consumer subsidies booked stood at Rs 2.11 trillion, actual disbursements amounted to Rs 2.05 trillion, leaving a significant funding gap. Of 26 states and union territories providing power subsidies, only 16 managed to disburse the full or excess amount. This mismatch between commitments and cash flows highlights the need to strengthen subsidy frameworks through timely releases and a wider roll-out of DBT mechanisms. Additionally, discoms are underprepared for evolving demands such as flexible load management and cybersecurity. The adoption of time-of-day tariffs and resource adequacy frameworks will require grid-edge control and consumer engagement tools, which are still in early stages. On the digital front, increased automation and connectivity heighten cybersecurity risks, with many utilities lacking formal response protocols or strong OT-IT boundaries.
Outlook
Between April and July 2025, the country’s energy demand stood at 598 BUs, which is only marginally lower than the 601 BUs recorded during the same period in 2024. According to the Load Generation Balance Report, the CEA projects the all-India energy requirement to be 1,850 BUs. To meet this load growth, Rs 7.42 trillion would be required for the expansion and upgradation of distribution infrastructure through 2030.
The MoP recently convened the fifth meeting to review the viability of power discoms and proposed targeted reforms. The ministry highlighted the need for coordinated action by the centre, states and regulators to improve the operational and financial health of discoms. It urged state governments to accelerate the roll-out of prepaid smart meters, starting with government establishments, to improve revenue collection and energy accounting. The ministry also called for structural reforms to reduce discom debt and losses, including timely clearance of government dues, recognition of utility debt as a state liability and settlement of subsidy arrears. It recommended issuing cost-reflective tariffs, allowing states to provide targeted subsidies directly. Other proposals included using data analytics for demand forecasting and designing a new scheme for debt restructuring. Provisions under the Electricity (Amendment) Bill were also discussed to support regulatory reforms, energy transition and private sector participation.
Overall, the distribution sector stands at an inflection point. On the one hand, financial stress, legacy infrastructure, subsidy delays and grid-level vulnerabilities continue to constrain discoms. On the other, reforms under the RDSS, smart metering roll-outs, regulatory clarity and the integration of digital infrastructure are gradually creating a more efficient and accountable distribution ecosystem. Encouragingly, performance evaluations in 2023-24 showed progress, with the number of discoms rated in higher categories (A+/A/B+) having doubled compared to 2021-22, while the proportion in lower grades continued to decline. This shift reflects improvements in operational discipline even though significant scope for reform remains. Moving forward, sustained progress will require a sharper focus on financial sustainability, investments in workforce capacity, cybersecurity preparedness and flexible load management.
