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State Utilities Drive Discom Turnaround as Power Sector Reports Rs 2,700 Crore Profit

Power distribution companies across both the public and private sectors recorded a combined profit of over Rs 2,700 crore in FY 2024–25, marking a sharp turnaround from losses of Rs 25,553 crore reported in the previous financial year, according to the government. The improvement was largely driven by stronger financial performance among state-owned distribution utilities.

Officials from the Ministry of Power attributed the positive outcome to sustained reforms and operational improvements undertaken by state-run discoms. A senior ministry official noted that private distribution companies have been consistently profitable over the past three financial years, and the overall profit reported in FY25 was primarily due to a significant reduction in losses among public-sector utilities.

The Centre highlighted that infrastructure upgrades, faster deployment of smart meters, rational tariff frameworks, and transparent accounting of subsidies have played a crucial role in strengthening discom finances. These measures have gained added importance as several states continue to offer free electricity up to specified consumption limits. In cases where subsidies are not adequately budgeted, discoms are required to absorb the financial burden.

Additional steps contributing to the turnaround include the adoption of uniform accounting practices, enhanced transparency to improve financial governance, and stricter enforcement of contractual obligations through timely payments. The government also pointed to incentives for states to implement key power sector reforms by linking borrowing limits to performance-based benchmarks under the additional borrowing scheme.

According to the ministry, the impact of these reforms is reflected not only in profitability but also in operational efficiency indicators. Aggregate technical and commercial (AT&C) losses have steadily declined, while the gap between the average cost of supply and the average revenue realised has narrowed.

Official data shows that AT&C losses have fallen from 22.6 percent in FY 2013–14 to 15 percent in FY 2024–25. Measures such as the late payment surcharge rules have also resulted in a 96 percent reduction in outstanding dues to power generation companies—from around Rs 1.4 lakh crore in 2022 to Rs 4,927 crore by January 2026. During the same period, average payment cycles improved from 178 days in FY 2020–21 to 113 days in FY 2024–25.

Sambitosh Mohapatra, Partner at PwC India, said the return of several state discoms to profitability should be viewed as a structural shift rather than a one-time accounting adjustment. He attributed the improvement to better billing efficiency, lower AT&C losses, improved subsidy discipline, and selective tariff rationalisation.

Despite the progress, sector experts cautioned that significant challenges remain. Discoms had accumulated losses of nearly Rs 6.8 lakh crore as of FY 2022–23, while regulatory assets—arising from incomplete cost pass-through—were estimated at over Rs 3 lakh crore. These are concentrated largely in states such as Tamil Nadu, Rajasthan, Uttar Pradesh, Maharashtra, Delhi, and West Bengal.

Anujwsh Dwivedi, Partner at Deloitte India, noted that from a financial sustainability perspective, addressing the outstanding debt burden of more than Rs 7 lakh crore carried by state-owned discoms remains the most critical issue facing the power distribution segment.