The turnaround in distribution utilities is matched by improvements in other critical performance indicators, highlighting the depth of reforms.
It’s good news that was long‑awaited. India’s power distribution utilities have collectively recorded a positive profit after tax (PAT) of ₹27.01 billion in FY2024‑25, marking a turnaround for the sector. The world’s third‑largest energy consumer’s distribution companies (discoms) and power departments had been reporting PAT losses since the unbundling and corporatisation of State Electricity Boards for the past several years.
The positive PAT compares to a loss of ₹255.53 billion in FY2023‑24 and a loss of ₹679.62 billion in FY2013‑14.
While commenting on this, Manohar Lal, Union Minister of Power, said, “This marks a new chapter for the distribution sector and is a result of several steps that have been taken to redress the concerns of the distribution sector.”
Quoting Prime Minister Narendra Modi, Lal added, “India is driving not only its growth but also the growth of the world, with the energy sector playing a significant role in this.”
He said the Centre is committed to the required reforms in the sector so that the power sector can support the growing economy and play its part in the journey towards Viksit Bharat (developed India).
In the last ten years, the Government has taken several steps to improve the situation. The Revamped Distribution Sector Scheme (RDSS) has enhanced financial viability through infrastructure modernisation and accelerated smart metering. Additional prudential norms have linked access to finance for power sector utilities to performance benchmarks to promote fiscal and operational discipline. Amendments to electricity rules have enforced timely cost adjustments, prudent tariff structures, and transparent subsidy accounting to ensure full cost recovery.
The Electricity Distribution (Accounts and Additional Disclosure) Rules, 2025, have introduced uniform accounting and enhanced transparency across distribution utilities to improve financial governance. Late payment surcharge rules have enforced legal contracts through timely payments in the power sector, thereby supporting investment in new renewable energy projects. States have been incentivised to implement critical power sector reforms, with borrowing limits tied to performance metrics as part of the Additional Borrowing Scheme.
Gains Beyond Profit
The result of power sector reforms is evident not just in the positive PAT posted by the distribution utilities, but also in other performance indicators.
Aggregate technical & commercial (AT&C) losses have reduced over the years, signalling a transformation. The AT&C losses have reduced from 22.62 per cent in FY2013‑14 to 15.04 per cent in FY2024‑25. Further, signalling much improved cost recovery, the average cost of supply-average revenue realised (ACS-ARR) gap has narrowed from ₹0.78/kWh in FY2013‑14 to ₹0.06/kWh in FY2024‑25.
Reforms such as the Electricity (Late Payment Surcharge) Rules have led to a 96 per cent reduction in outstanding dues to generating companies, from ₹1.399 trillion in 2022 to just ₹49.27 billion by January 2026. They have also helped in reducing distribution utility payment cycles from 178 days in FY2020‑21 to 113 days in FY2024‑25.
In addition to the different policy initiatives, the Ministry of Power has extensively engaged with states and union territories on reforms in the distribution sector. This momentum is expected to be sustained as a result of the deliberations underway in the Group of Ministers constituted by Lal under the chairmanship of Shripad Naik, Union Minister of State for Power and New & Renewable Energy, on improving the financial viability of discoms.