Power Sector: Issues with DISCOMS

  • IASbaba
  • June 24, 2021
  • 0
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  • GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development 
  • GS-3: Infrastructure: Energy

Power Sector: Issues with DISCOMS

Context: There was a sharp decline in the dues owed by power distribution companies, discoms, to power generating companies as they made use of liquidity facility arranged by the Centre.


  • Sustenance Issues: Improvement in DISCOM’s financial and operational indicators not being sustained calling for another rescue package from centre.
  • High AT&C (Aggregate Technical and Commercial) losses, at 21.7%, due to poor or inadequate infrastructure or on account of theft or bills not being generated or honoured. 
  • Profitability: The gap between discoms’ costs (average cost of supply) and revenues (average revenue realised), supposed to have been eliminated by now, stands at Rs 0.49 per unit due to lack of regular and commensurate tariff hikes.
  • Pandemic Impact: With demand from industrial and commercial users falling, revenue from this stream, which is used to cross-subsidise other consumers, has declined, leading to build up of stress on DISCOMS.
  • Lack of Data: Even six years after UDAY was launched, various levels in the distribution chain — the feeder, the distribution transformer (DT) and the consumer — have not been fully metered. This lack of data makes it difficult to ascertain the level in the chain where losses are occurring.

Some of the suggestions put forward to alter the status quo are:

  • National power distribution company.
  • Privatisation of distribution chain.
  • Deduct discom dues, owed to both public and private power generating companies, from state balances with the RBI forcing states to take the necessary steps to fix discom finances.
  • Linking additional state borrowings to the completion of distribution reforms can incentivise states to act.

Connecting the dots:

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