SDG 7: Affordable and Clean Energy | SDG 8: Decent Work and Economic Growth
Ministry of Power | Power Finance Corporation
India’s power distribution utilities (DISCOMs and power departments) have achieved a historic financial milestone, collectively recording a positive Profit After Tax (PAT) of ₹2,701 crore in FY 2024-25. This marks the first time the sector as a whole has reported a profit since the unbundling and corporatization of State Electricity Boards, representing a massive recovery from a loss of ₹25,553 crore in FY 2023-24 and ₹67,962 crore in FY 2013-14. Union Minister of Power, Shri Manohar Lal, attributed this “new chapter” to a decade of concerted reforms and extensive engagement with States and Union Territories to redress structural inefficiencies.
Key Performance Indicators and Operational Efficiency
Reduction in AT&C Losses: Aggregate Technical & Commercial (AT&C) losses have dropped significantly from 22.62% in FY 2013-14 to 15.04% in FY 2024-25, signaling enhanced operational efficiency.
Narrowing the ACS-ARR Gap: The gap between the Average Cost of Supply and Average Revenue Realized has narrowed from ₹0.78/kWh in FY 2013-14 to just ₹0.06/kWh in FY 2024-25, reflecting improved cost recovery.
Clearing Legacy Dues: Reforms under the Late Payment Surcharge Rules have led to a 96% reduction in outstanding dues to generating companies, falling from ₹1,39,947 crore in 2022 to ₹4,927 crore by January 2026.
Shortened Payment Cycles: The average payment cycle for distribution utilities has been reduced from 178 days in FY 2020-21 to 113 days in FY 2024-25.
Transformative Reform Initiatives
Revamped Distribution Sector Scheme (RDSS): Focused on infrastructure modernization and the acceleration of smart metering to enhance financial viability.
Uniform Accounting Standards: The Electricity Distribution (Accounts and Additional Disclosure) Rules, 2025, were introduced to ensure enhanced transparency and uniform financial governance across all DISCOMs.
Additional Prudential Norms: Access to finance is now strictly linked to utilities meeting specific performance benchmarks, promoting fiscal and operational discipline.
Rule Amendments: Enforced timely cost adjustments and prudent tariff structures to ensure full cost recovery and transparent subsidy accounting.
What is the ‘ACS-ARR Gap’ and why is its narrowing critical for DISCOM profitability? It is the difference between the Average Cost of Supply (ACS)—the total cost incurred to deliver one unit of electricity—and the Average Revenue Realized (ARR)—the actual revenue collected per unit sold. For decades, Indian DISCOMs faced a high “gap” where the cost of supply far exceeded revenue due to technical losses, theft, and inadequate tariffs. The narrowing of this gap to ₹0.06/kWh in 2025 is critical because it indicates that utilities are finally recovering nearly the full cost of their operations. This near-parity is the primary driver behind the sector’s shift from chronic losses to its current profitable state, enabling DISCOMs to invest in modernizing the grid rather than just servicing debt.
Policy Relevance
The turnaround of DISCOMs is a cornerstone of India’s “Viksit Bharat” journey, ensuring that the power sector can sustainably support a growing economy.
Strategic Impact:
Sustainable Energy Transition: By reducing outstanding dues to GenCos by 96%, DISCOMs have created a stable financial environment that encourages new investments in Renewable Energy (RE) projects.
Fiscal Discipline: Tying state borrowing limits to power sector performance metrics under the Additional Borrowing Scheme has institutionalized accountability at the state level.
Infrastructure Modernization: Profitability allows for the scaled deployment of smart metering and AI-driven grid management, which are essential for managing high-variable solar and wind power.
Regional Convergence: Regular interactions through Regional Conferences of Energy Ministers have ensured that reform momentum is synchronized across different geographical clusters.
Relevant Question for Policy Stakeholders: How can DISCOMs leverage their new-found profitability to create ‘Green Energy Subsidies’ that specifically incentivize MSMEs to adopt rooftop solar and battery storage solutions?
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