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News Topical, Digital Desk : The operating condition of the country's state-owned power distribution companies (DISCOMs) is improving. According to a CRISIL report, their losses are expected to reduce by a third to ₹8,000-10,000 crore in the current financial year. Last year, the losses were ₹12,000-15,000 crore. This improvement is due to tariff increases, reduced power purchase costs, and operational efficiency. However, DISCOMs remain heavily indebted and dependent on government subsidies.
The financial health of the country's power distribution companies, or discoms, is gradually improving. A recent report from CRISIL Ratings indicates that their operating losses could be reduced by a third to ₹8,000-10,000 crore this fiscal year (FY26). Last year, these losses had reached ₹12,000-15,000 crore.
The report notes that this improvement has been driven by increased power tariffs in some states, reduced power purchase costs, and increased operational efficiency. The average cost of power purchase (APPC) is expected to decrease by 4-6 paise per unit. This has directly impacted discoms' losses. However, the picture is not entirely rosy due to their dependence on debt and subsidies . The report acknowledges that discoms remain heavily dependent on state government subsidies. This year, they are expected to receive ₹2.3 lakh crore in subsidies, double the amount received in 2019-20. Moreover, the total debt of these companies will also increase to ₹6.7-6.8 lakh crore.
Efficiency Improvements
Discoms have also succeeded in reducing technical and commercial losses (AT&C losses). While these losses were 19% in 2019-20, they fell to 15% last year. This is due to ongoing infrastructure investments, replacement of new conductors and transformers, feeder segregation, and underground cabling.
Improving Credit Profiles
According to CRISIL, the reduction in losses is gradually reducing the debt burden on discoms. Their interest coverage ratio, which was 0.2 in 2019-20, is now expected to increase to 1.3 times. This means that the companies are in a better position to pay their interest.
Challenges Ahead -
Nevertheless, challenges remain for discoms. Increasing average revenue (ARR) is essential to improve cash flow to service debt. Additionally, the increasing trend of industrial and commercial consumers opting for cheaper renewable energy through open access is also a major risk for discoms.
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