‘A New Chapter for the Distribution Sector’
Union Power Minister Shri Manohar Lal described the achievement as a defining moment for the power distribution sector. He said the return to profitability reflects the success of sustained policy interventions aimed at correcting long-standing structural and financial weaknesses.
According to the Minister, the turnaround aligns with Prime Minister Narendra Modi’s broader vision for the energy sector as a driver of national and global growth. He noted that reliable and financially viable power distribution is essential for supporting India’s expanding economy and advancing the goal of a developed nation, or Viksit Bharat.
Key Reforms Driving the Turnaround
The Ministry of Power attributed the improved financial performance to a series of transformative initiatives implemented over the past decade. Central to these efforts is the Revamped Distribution Sector Scheme (RDSS), which focuses on modernising infrastructure, reducing losses, and accelerating the rollout of smart prepaid meters.
Additional prudential norms have also been introduced, linking access to finance for power utilities with measurable improvements in operational and financial performance. This approach has encouraged greater fiscal discipline and accountability across states.
Amendments to the Electricity Rules have strengthened mechanisms for timely tariff revisions, transparent subsidy accounting, and full cost recovery. These changes have reduced revenue gaps and improved cash flows for distribution utilities.
Transparency and Payment Discipline
The introduction of the Electricity Distribution (Accounts and Additional Disclosure) Rules, 2025 has standardised accounting practices and enhanced financial transparency across DISCOMs. This has enabled more accurate assessment of utility performance and improved governance.
Meanwhile, the Electricity (Late Payment Surcharge) Rules have enforced contractual discipline across the power sector. Outstanding dues payable by distribution utilities to generating companies have fallen by 96 percent, from ₹1.39 lakh crore in 2022 to just ₹4,927 crore by January 2026.
Improved Operational Indicators
The financial recovery is mirrored by significant gains in operational performance. Aggregate Technical and Commercial (AT&C) losses have declined steadily, falling from 22.62 percent in FY 2013–14 to 15.04 percent in FY 2024–25.
Cost recovery has also improved substantially. The gap between Average Cost of Supply and Average Revenue Realised (ACS–ARR) has narrowed sharply from ₹0.78 per unit in FY 2013–14 to just ₹0.06 per unit in FY 2024–25, indicating near-complete recovery of supply costs.
Distribution utilities have also reduced payment cycles, bringing them down from 178 days in FY 2020–21 to 113 days in FY 2024–25, improving liquidity across the power value chain.
Centre–State Coordination Key to Success
The Ministry of Power highlighted that close coordination with states and Union Territories has been crucial in achieving this turnaround. A series of regional conferences of Energy Ministers held in 2025 across Gangtok, Mumbai, Bengaluru, Chandigarh, and Patna helped align reform priorities and monitor progress.
Regular reviews and sustained engagement have encouraged states to implement difficult but necessary reforms, including performance-linked borrowing limits under the Additional Borrowing Scheme.
