Why Discoms Lose Money

The reasons India's electricity distribution companies run up losses - underpricing, theft, poor billing and unpaid subsidies - and why it matters for everyone.

India’s state-owned discoms are the weakest link in the power chain. Together they have accumulated losses running into lakhs of crores of rupees.

Why they lose money

Below-cost tariffs for farmers and some households, set for political reasons.
Unpaid subsidies: states promise to pay discoms for cheap power but pay late or partly.
Theft and losses: power stolen through illegal hooks or lost in weak lines.
Poor billing and collection.
Government departments that don’t pay their bills.

AT&C losses

Aggregate Technical and Commercial (AT&C) losses measure power lost physically plus money not collected. They have been around 15 to 20 percent nationally in recent years, much higher in some states.

Consequences

Discoms delay payments to generators.
Generators struggle to repay banks.
Discoms buy less power, causing load-shedding.
Poor maintenance and weak grids.

Past bailouts

Schemes like UDAY (2015) had states take over discom debt, but losses rose again later. The Revamped Distribution Sector Scheme (2021) ties funding to reforms like smart meters.

The chain of unpaid bills

A state discom collects only 80 percent of what it bills. It then pays a generator late, the generator delays its bank loan repayment, and the bank becomes cautious about lending to power projects.

Thinking discom losses only hurt the discom

They ripple through generators, banks and customers facing power cuts.

Key takeaways

State discoms have large accumulated losses.
Causes include cheap tariffs, unpaid subsidies, theft and poor collection.
AT&C losses measure power and money lost.
Losses delay payments and weaken the whole power sector.