State-Run Discoms Follow Private Peers In Financial Turnaround

India’s power distribution utilities posted a rare collective profit in fiscal 2025, marking a sharp turnaround for a segment that has been loss-making for more than a decade despite repeated reform efforts.

State-owned distribution companies (discoms) and power departments recorded a combined profit after tax of 27.01 billion rupees ($325 million) in the year ended March 2025, compared with a loss of 255.53 billion rupees a year earlier, government data showed on Saturday.

However, the latest figures offer some encouragement. Government data show that while privately owned distribution companies have reported improved financial performance in recent years, the turnaround has been more pronounced among state-owned utilities, many of which had been posting sustained losses.

In many cities and states in India, the discoms have been privatised. For example, the whole electricity business in Odisha is handled by the Tatas, Adani Group, which also handles the power distribution network in Mumbai, similar is the fate of Delhi, Kolkata and Ahmedabad. 

After Persistent Losses

The result contrasts with persistent losses since the unbundling of State Electricity Boards, including a deficit of nearly 680 billion rupees in FY2014, underscoring what the government described as a structural improvement in the sector’s finances.

Power Minister Manohar Lal said the return to profitability marked a “new chapter” for distribution utilities, attributing the improvement to tighter financial discipline, tariff reforms and faster adoption of smart metering under federal schemes.

The government has pushed a series of measures aimed at restoring the financial health of DISCOMs, including the Revamped Distribution Sector Scheme (RDSS), amendments to electricity rules to ensure timely tariff revisions, and stricter accounting and disclosure norms introduced in 2025.

Access To Finance 

Access to financing has also been linked to operational performance benchmarks, while states have been incentivised to implement reforms through borrowing limits tied to sector outcomes, officials said.

Key operating indicators have shown steady improvement. Aggregate technical and commercial losses, a critical measure of inefficiency, declined to 15.04% in FY2025 from 22.62% in FY2014, while the gap between average cost of supply and average revenue realised narrowed to 6 paise per unit from 78 paise over the same period.

Outstanding dues owed by distribution utilities to power generators fell sharply following the enforcement of late payment surcharge rules, dropping 96% to 49.27 billion rupees by January 2026, from nearly 1.4 trillion rupees in 2022, according to the power ministry.

The government said it expects the gains to be sustained as a ministerial panel continues discussions on further steps to improve the long-term financial viability of state-run power distributors.