India's Power Distribution Utilities Report Historic ₹2,701 Crore Profit in FY25
India's power distribution utilities achieved a historic collective profit of ₹2,701.00 crore in FY 2024-25, reversing years of losses and marking a significant sector turnaround. The government has established a Group of Ministers under Shripad Naik to further strengthen discom financial viability. Operational improvements include AT&C losses declining to 15.04% and the ACS-ARR gap narrowing to ₹0.06/kWh, while outstanding dues to generators fell by 96% through comprehensive reform initiatives.
*this image is generated using AI for illustrative purposes only.
India's power distribution utilities have achieved a historic financial milestone, reporting their first collective profit in years and prompting the government to establish new measures for sector strengthening. Minister of State for Power and New & Renewable Energy Shripad Naik will chair a Group of Ministers (GoM) focused on improving the financial viability of discoms, with plans to review the Finance Commission's report and discuss possibilities for states to assume certain liabilities.
Historic Financial Turnaround
India's power distribution utilities—discoms and power departments—have collectively reported a positive Profit After Tax (PAT) of ₹2,701.00 crore in FY 2024-25, marking a significant turning point for the sector. This achievement represents the first collective profit after years of sustained losses following the unbundling and corporatization of State Electricity Boards.
| Financial Performance: | Amount (₹ Crore) |
|---|---|
| FY 2024-25 Profit: | ₹2,701.00 |
| FY 2023-24 Loss: | ₹25,553.00 |
| FY 2013-14 Loss: | ₹67,962.00 |
Power Minister Manohar Lal Khattar described this development as a "new chapter" for the distribution sector, acknowledging that the government has implemented multiple steps to address longstanding sector concerns.
Operational Efficiency Improvements
The sector's financial recovery has been accompanied by substantial improvements in operational metrics. Speaking at the inauguration of the Centre of Excellence for Regulatory Affairs in the Power Sector at IIT Delhi, Minister Khattar noted that while some of the 50-odd discoms remain loss-making, overall performance has improved significantly through initiatives like the Revamped Distribution Sector Scheme (RDSS) and smart metering.
| Key Performance Indicators: | FY 2013-14 | FY 2024-25 | Improvement |
|---|---|---|---|
| AT&C Losses: | 22.62% | 15.04% | -7.58% |
| ACS-ARR Gap: | ₹0.78/kWh | ₹0.06/kWh | -₹0.72/kWh |
Aggregate Technical & Commercial (AT&C) losses have declined significantly from 22.62% in FY 2013-14 to 15.04% in FY 2024-25, signaling substantial sector transformation. Cost recovery has also improved dramatically, with the Average Cost of Supply–Average Revenue Realized (ACS–ARR) gap narrowing from ₹0.78 per kWh in FY 2013-14 to ₹0.06 per kWh in FY 2024-25.
Payment Performance Enhancement
The Power Ministry highlighted significant improvements in payment cycles and outstanding dues. Reforms such as the Electricity (Late Payment Surcharge) Rules have reduced outstanding dues to generating companies by 96.00%, from ₹1,39,947.00 crore in 2022 to ₹4,927.00 crore by January 2026. Payment cycles for distribution utilities have also improved substantially, falling from 178 days in FY 2020-21 to 113 days in FY 2024-25.
Government Reform Initiatives
The government has implemented comprehensive initiatives aimed at improving efficiency in the distribution sector:
- Revamped Distribution Sector Scheme (RDSS): Modernizing infrastructure and accelerating smart metering to ensure financial viability
- Additional Prudential Norms: Linking access to finance for utilities to performance benchmarks to promote fiscal and operational discipline
- Amendments to Electricity Rules: Enforcing timely cost adjustments, prudent tariff structures, and transparent subsidy accounting for full cost recovery
- Electricity Distribution Rules, 2025: Standardizing accounting and enhancing transparency across distribution utilities for improved financial governance
- Late Payment Surcharge Rules: Ensuring timely payments to support investments in new renewable energy projects
- Incentivizing State Reforms: Tying borrowing limits to performance metrics under the Additional Borrowing Scheme to encourage adoption of critical power sector reforms
Minister Khattar emphasized that consumer behavior has contributed to persistent losses and noted that power distribution is a financial, not social, sector—highlighting that states cannot sustain long-term losses in this critical infrastructure segment.
15
