For Net Zero, Fix India’s Dying DISCOMs

The Distribution Company or DISCOM, the last-mile electricity utility in the power supply chain, has been in a terminal coma. The way out depends on how structurally the root causes are addressed.

India’s state distribution utilities carry accumulated losses approaching ₹7 lakh crore and, separately, an outstanding debt pile of ₹7.26 lakh crore (as of 31 March 2025), as per the latest official count available, placed on record by the Minister of State for Power, Shripad Yesso Naik, in the Rajya Sabha on 9 February 2026 (Unstarred Question No. 1113).

Put the two together, and the distribution sector sits under a combined burden of around ₹14 lakh crore. That is not a rounding error in a growing economy. It is a sum larger than the annual budgets of most Indian states. 

Cash Flow Trail

Fixing the financial crisis plaguing DISCOMs has a direct impact on the Net Zero vision. A closer look into the cash flow trail validates it.

A solar developer or a nuclear station sells to a DISCOM under a long-term power purchase agreement. The DISCOM sells to households, farms, and factories; the DISCOM also collects the bill. 

The distribution company is, in plain terms, the cash register of the entire power economy. Every rupee that flows back to a generator, a transmission utility, a lender or an equipment maker passes through that register first.

Now imagine the register is broken. When a DISCOM cannot pay, the generator does not get paid; when the generator is not paid, its own lenders take fright; and when lenders take fright, the cost of capital for the next power plant climbs. 

This is not hypothetical. Renewable developers already factor the risk of delayed or defaulted payments by DISCOMs into their tariffs, which means India pays a premium on green power precisely because the buyer is unreliable. 

A 2050 pathway needs trillions of rupees of fresh generation investment. No rational financier commits that capital if the only customer is chronically bankrupt. This is the uncomfortable truth the generation story must swallow: you can commission 500 GW of non-fossil capacity, but if the distribution sector remains in a coma, the power it produces cannot be monetised, the investment cannot be serviced, and the build-out will choke on unpaid bills. Generation and distribution rise or fall together. There is no net zero through insolvent wires.

In FY2024-25, India’s DISCOMs together posted a profit after tax of ₹2,701 crore. This was the first positive result in more than a decade. Aggregate technical and commercial (AT&C) losses — the share of power that is distributed but never billed or never paid for — fell to 15.04%, the lowest since 2008-09 and down from nearly 22% at the start of this decade. Collection efficiency climbed to around 97%. On paper, the gap between the average cost of supply and the average revenue realised narrowed to a sliver.

State-Owned Utilities Still In Red

Even the flicker is unevenly shared. In the Power Finance Corporation’s (PFC’s) latest ratings, every private distribution company turned a profit, while nearly half the state-owned utilities - the ones that actually carry the crisis - still closed the year in the red. Tamil Nadu’s DISCOM kept its head above the water only because the state government absorbed its losses.

Read the fine print and the recovery dissolves. That maiden profit is a wafer-thin ₹2,701 crore sitting atop ₹14 lakh crore of legacy losses and debt. 

The narrowed cost-revenue gap is an accounting artefact: it closes only because state subsidies are booked as revenue, whether or not the cash actually arrives. And often it does not. By mid-2025, delayed subsidy payments owed by state governments to their own utilities had piled up to around ₹75,000 crore. 

Moreover, of the ₹7.26 lakh crore in outstanding debt, the PFC has flagged some ₹2.74 lakh crore as unsustainable — debt so far beyond the utilities’ capacity to service that it cannot even be recovered through tariffs. Three states alone (Tamil Nadu, Rajasthan and Maharashtra) account for close to ₹3 lakh crore of the total.

Root Causes Of The Crisis

This is a financing crisis that has been in the making for decades. Some factors have contributed to this financial distress.

First, the culture of free and near-free power. Farm power is free or nominally priced in state after state; Punjab and Telangana are the emblematic cases, but the practice is nationwide and expanding with each election cycle. Free power is not free; someone pays for it, and the bill lands on the utility. States are meant to reimburse it as subsidy, and the subsidy burden reached roughly ₹1.6 lakh crore in FY2024-25, with states shouldering more than 85% of the national total. When the reimbursement is late or short, as it routinely is, the DISCOM simply bleeds.

The second is aggregate technical and commercial losses that, even at a record-low 15%, remain nearly double the 6-8% norm of well-run global utilities. 

The third is tariffs that do not reflect cost. Regulators, meant to be independent, set prices under intense political pressure, and revisions lag stubbornly behind rising input costs. The distortion runs deeper than the budget shows: while the explicit power subsidies run to roughly ₹2.1 lakh crore, the true economic subsidy, counting all the below-cost supply, is estimated at nearly ₹4 lakh crore, or about 1.4% of the GDP. The shortfall is patched by cross-subsidy: industry and commerce are charged well above cost, often 25-50% higher, to underwrite cheap household and farm power. That hidden tax makes Indian industrial electricity dearer than in China or Vietnam, blunting the very “China plus one” manufacturing ambition the country is chasing.

The fourth is delayed and unfunded state subsidies, the accounting fiction that lets a utility declare revenue it has not received, then borrow to cover the hole.

The fifth is the weak balance sheet and governance deficit that ties it all together: DISCOMs carry regulatory assets (costs regulators permit them to recover “later,” which often means never), legacy debt on which interest compounds, and state ownership that blurs the line between commercial utility and political instrument.

The DISCOM is the hinge on which both the growth story and the net-zero story swing. Revive it — with honest tariffs, transparent subsidies, hard payment discipline and, eventually, real structural reform — and every rupee poured into clean generation earns its return. Leave it in the coma, and the grandest generation pledge Bharat can make will die quietly at the meter, unpaid.

(The writer is a former civil servant. Views expressed are personal.)