The distribution segment is a critical infrastructure component in the power sector as it is the last-mile link that transmits electricity from the grid to residential, commercial and industrial consumers. With the increase in electric vehicles, data centres and cooling demand, India’s power demand is projected to increase significantly in the coming years. In this regard, a robust electricity distribution system is deemed necessary to meet the growing demand for dependable and reasonably priced electricity, while supporting ambitious energy transition goals. As the power sector evolves, the arrival of new complexities and obstacles has compelled discoms to undertake new strategies in areas of technology, operations, finance and infrastructure modernisation to ensure reliable and efficient electricity distribution to end-consumers.
Key trends
The electricity distribution network has grown significantly from 8.79 million ckt km in FY 2013-14 to 14.01 million ckt km in FY 2023-24 and stood at 14.53 million ckt km as of FY 2024-25 (January 2025). Likewise, distribution substations have grown in number from 26,928 in FY 2013-14 to 44,385 in FY 2023-24 and stood at 46,826 in FY 2024-25 (January 2025).
Likewise, the year-wise energy sales (gross) stood at 1,252.6 billion units in FY 2024, an increase of about 3.7 per cent from that in the previous year. The top states that noted the highest gross energy sales in FY 2023-24 were Maharashtra by 11.92 per cent, Uttar Pradesh by 9.31 per cent, Gujarat by 8.72 per cent, Tamil Nadu by 7.4 per cent and Rajasthan by 6.95 per cent.
Operational and financial performance
In FY 2024-25, the state-owned discoms had accumulated losses of Rs 6.88 trillion (provisional), which appeared to be moderate in comparison to Rs 6.92 trillion in FY 2023-24, owing to an increase in tariffs, subsidy and revenue grants. Furthermore, their accumulated outstanding debt climbed up to Rs 8.05 trillion (provisional) in FY 2024-25 from Rs 7.52 trillion in FY 2023-24, owing to the debt availed for generators, working capital funds and capex. Likewise, the profit after tax (PAT) for discoms (including power departments) stood at Rs 27 billion and emerged positive for FY 2024-25, as compared to a loss of Rs 255.5 billion in FY 2023-24 and Rs 679.62 billion in FY 2013-14.
Measures such as late payment surcharge have resulted in a decline of 96 per cent in outstanding dues to generation companies to Rs 49.27 billion by January 2026, from Rs 1,399.47 billion in 2022. This significantly improved the discoms’ payment cycle to 113 days in FY 2024-25 from 178 days in FY 2020-21. Further, the reform measures implemented under the Revamped Distribution Sector Scheme (RDSS) have helped in lowering the aggregate technical and commercial (AT&C) losses to 15.04 per cent in FY 2024-25 from 22.62 per cent in FY 2013-14, whereas the average cost of supply-average revenue realised (ACS-ARR) gap declined to Re 0.06 per kWh in FY 2024-25 from Re 0.78 per kWh in FY 2013-14.
According to ICRA, as of November 2025, the median tariff hikes across 26 of the 28 state discoms in FY 2026 remain minimal at 1.8 per cent lower, owing to numerous states not approving any hike, tariff reductions, or very minor hikes, despite the continued disparity between tariffs and cost of supply.
Policy support and other initiatives
In India, state distribution utilities are supported by multiple initiatives for improving performance metrics such as AT&C losses and the ACS-ARR gap. The first initiative is the RDSS, which intends to improve the quality and reliability of power by making discoms financially stable and operationally efficient.
The RDSS has sanctioned projects worth Rs 2.83 trillion for works encompassing smart metering, distribution management systems, replacement of old conductors and cables, upgradation/augmentation of distribution substations/transformers, among others. Other initiatives include additional borrowing consent of 0.5 per cent of the gross state domestic product allowed to state governments and additional prudential norms mandated for sanctioning of loans to state-owned power utilities.
The late payment surcharge rules were introduced to uphold contractual obligations through prompt payments within the power sector to facilitate investment in new clean energy projects. Further, rules to apply fuel and power purchase cost adjustment and cost-reflective tariffs and rules, and standard operating procedures for subsidy accounting and disbursal have been issued in recent years.
In October 2025, the Ministry of Power (MoP) published the Draft Electricity (Amendment) Bill, 2025, which attempts to accelerate the privatisation of electricity distribution and centralise power sector decision-making away from states. The draft amendment highlights the setting up of an Electric Line Authority to enable private players to utilise the infrastructure of public sector discoms. Former state energy boards and discoms could build electrical lines and gain access to the permanent electricity distribution infrastructure. Hence, with the emergence of such authority, private discoms are likely to leverage powers. The draft amendment of the bill proposes to reduce or restrict cross-subsidy for specified consumer categories. Additionally, it suggests that tariffs be cost-reflective in order to safeguard consumer interests and contribute to financial viability.
Likewise, in September 2025, the MoP notified the Electricity (Amendment) Rules, 2025, which emphasised development, own, lease and operation of energy storage systems (ESSs) by gencos, transcos and discoms, system operators or any other consumers. This is expected to benefit power distribution in a number of ways.
The lease/rent option will allow discoms to contract storage to reduce peak consumption and manage buy costs/peak power procurement exposure, with ESS legally usable “as part of distribution”. Moreover, since the rules have given a legal status to ESSs as a distribution element, this could allow discoms to operate storage (including non-co-located ESSs) to accommodate local feeder/DT restrictions and improve electricity supply quality.
Renewable energy
India’s clean power target is achieving 500 GW of non‑fossil electricity capacity by 2030, reducing GDP’s emissions intensity by 45 per cent by 2030 from the 2005 levels and aiming for net zero by 2070. As load-serving entities, discoms are central to renewable energy integration. Under the renewable purchase obligation framework, discoms procure clean electricity through power purchase agreements and/or by purchasing renewable energy certificates to serve the retail demand.
Additionally, the Energy Conservation (Amendment) Act, 2022 mandates distribution licensees to meet the renewable consumption obligation (RCO) to guarantee that a minimum portion of their overall energy consumption originates from renewable (non-fossil) sources. The draft operational procedures for the RCO compliance mechanism, notified by the Bureau of Energy Efficiency in January 2026, classify distribution licensees as designated consumers, where the RCO has to be complied with by them. The RCO trajectory for distribution licensees is mandated from FY 2024-25 to FY 2029-30. The distributed renewable energy (DRE) component is 75 per cent of the required amount for licensees that serve only urban customers (including some considered licensees such as special economic zones), with the remaining component being transferred to “other RCOs”. For hilly and the north-eastern states, the DRE component is halved, with the balance shifted to “other RCOs”. Such frameworks are likely to support discoms’ role in accelerating renewable energy integration in India.
Provisions pertaining to net metering for eligible consumers in their area of supply on a non-discriminatory basis have increased the penetration of rooftop solar in the power distribution network in India. These frameworks also require discoms to use more granular distribution planning (DT-wise capacity availability disclosures, meter standards and interconnection procedures) to address rooftop PV penetration.
In October 2025, the Rajasthan Electricity Regulatory Commission rolled out the third amendment to the Grid-Interactive DRE Generating Systems Regulations, 2025 that introduced virtual or group net metering for DER projects falling between 1 kW and 1 MW. Likewise, in November 2025, the Telangana Electricity Regulatory Commission notified the Rooftop Solar PV Grid Interactive Systems Regulation, 2025, which brought in net metering, group net metering, gross metering and virtual net metering mechanisms to cater to different consumer demands.
Future outlook
New load centres, such as electric vehicle charging infrastructure and data centres, will require a stronger power distribution network due to their high capacity, location-concentrated and fast-ramping demand, which strains local feeders, DTs and substations beyond the “average” load growth.
Unlike numerous consumer sectors, data centres operate with near-continuous power consumption, generating persistent high demand that may place a greater strain on power distribution networks compared to seasonal fluctuations. In India, Mumbai dominates the Indian data centre business, with substantial clusters in Navi Mumbai (for example, the Mahape/Rabale/Panvel area) and central Mumbai. In October 2025, Maharashtra’s state electricity department rolled out an order that enables data centre parks and data centre units to establish captive generation and distribution facilities.
Rooftop solar peer-to-peer (P2P) energy trading has shown promise in recent blockchain-based experimental projects in India. While such models have been feasible in making clean energy more accessible, they may also require a revamp or modification of the Indian power distribution network.
Going forward, the power distribution segment is likely to witness a structural shift as state-owned discoms transition towards privatisation. With Uttar Pradesh leading the effort, parallel licensees in regions such as Gautam Buddha Nagar, Mundra, Thane and Navi Mumbai are expected to bring operational and financial efficiencies, provide better customer experience and greater investments in the power distribution segment.
Such trends are expected to shape India’s distribution segment to cater to not only power-intensive nodes but also bring affordable and reliable electricity to last-mile consumers.
