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MSEDCL Plans Operational Split, Carves Out Farm Power Arm Ahead of Proposed IPO

Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL) is set to restructure its operations by splitting the utility into two separate entities as part of a broader effort to manage debt and strengthen its investment proposition ahead of a planned initial public offering (IPO) in the next financial year, according to the company’s top executive.

Also known as Mahavitaran, the state-owned power distributor will create a separate entity dedicated to supplying electricity to the agricultural sector. This arm will absorb unpaid dues from farm consumers amounting to around Rs 1.75 lakh crore, Lokesh Chandra, Chairman and Managing Director of MSEDCL, said.

The agricultural distribution business will remain unlisted, while a second entity—retaining the more profitable residential, commercial, and industrial power supply operations—will be taken to the stock exchanges. Chandra, a 1993-batch Indian Administrative Service officer, said the move is aimed at improving financial transparency and positioning the core business as an attractive investment opportunity.

To bolster its investor pitch, MSEDCL is banking on Maharashtra’s growth trajectory, as the state targets becoming a $1 trillion economy by the end of the decade, up from a projected Rs 49.3 trillion ($549 billion) in FY26. “We are the largest power distribution company in the country, with annual revenues of around Rs 1.3 lakh crore, which are expected to nearly double over the next five years,” Chandra said.

The company also plans to capitalise on rising industrial demand by competing with independent power producers to supply electricity to large consumers such as data centres.

At the same time, MSEDCL is seeking capital support from the Maharashtra government to manage its total debt burden of about Rs 1.98 lakh crore. The remaining debt will be apportioned between the agricultural entity and the listed company in a manner that ensures the financial viability of both, Chandra said, without disclosing specific allocations or the quantum of state infusion.

Once the agricultural business is separated, MSEDCL expects tariff collection efficiency to rise above 99%. Shifting the Rs 1.75 lakh crore of unpaid agricultural tariffs to the new entity will significantly clean up the balance sheet of the listed business, he added. The restructuring is also expected to lower power procurement costs and eliminate cross-subsidisation, under which commercial and industrial consumers currently offset losses from farm power supply.

“From a loss-making utility, we intend to turn this into a dividend-paying company,” Chandra said.

To reduce the long-term cost of subsidised electricity for agriculture, MSEDCL has floated tenders for 16 GW of decentralised solar power capacity to be deployed near existing substations. These smaller, distributed solar projects will not require additional transmission infrastructure and are expected to deliver power at costs well below current procurement rates.

The solar power will be supplied to agricultural consumers during the daytime, while surplus generation will be stored in energy storage systems and sold on power exchanges during evening peak hours. This model is expected to reduce the state’s subsidy burden while removing the cross-subsidy pressure on other consumer categories.

Solar power is seen as particularly suited for agricultural use, as the sector does not require round-the-clock electricity. Daytime supply during solar generation hours is expected to meet most farming needs, policymakers believe.

MSEDCL will be the first power distribution company in India to implement this model and also the first to pursue a public listing. Of the planned 16 GW solar capacity, about 3.5 GW is already operational, with the balance expected to be commissioned within the next 18 months, Chandra said.