India's power discoms see financial turnaround amid policy reforms

India's power distribution companies (discoms) are witnessing an improvement in their financial health, recording a profit in FY25 after decades of losses. The turnaround is supported by policy reforms and investments in smart metering.

India's power distribution companies (discoms) are witnessing an improvement in their financial health, supported by policy reforms proposed under the Draft National Electricity Policy 2026, the Electricity (Amendment) Bill 2026 and the Digital India Energy Stack, according to a report by Macquarie.

The report said India's power sector is undergoing a dual-track transition, with coal continuing to provide baseload power at plant load factors (PLFs) of over 65 per cent, while new reforms are aimed at making the sector more market-driven and financially stronger. Peak power demand reached a record high of around 271 GW in May 2026, highlighting pressure on the grid despite adequate base generation capacity.

Financial Turnaround and Key Initiatives

The report also noted that India's power sector recorded a profit of about Rs 25 billion in FY25 after remaining loss-making for decades. According to the report, the financial performance of discoms has improved with support from investments under the Revamped Distribution Sector Scheme (RDSS) and the rollout of smart meters.

The RDSS aims to reduce aggregate technical and commercial (AT&C) losses to 12-15 per cent and bridge the gap between average cost of supply (ACS) and average revenue realised (ARR) to zero. Under the scheme, projects worth Rs 1.53 trillion have been sanctioned to strengthen distribution infrastructure, while projects worth Rs 1.3 trillion have been approved for smart metering.

"Power distribution companies (discoms) financial health has improved while AT&C losses have narrowed over the years, with FY25 profits at about Rs 25 bn after decades of loss-making previously," the report noted.

The report said that as of March 2026, 59.7 million smart meters had been installed across the country. It added that AT&C losses declined to 16 per cent in FY25 from 21.9 per cent in FY21, moving closer to the national target of 12-15 per cent.

Ongoing Regulatory Reforms

The report also highlighted ongoing regulatory reforms across the power sector.

Draft National Electricity Policy 2026

It said the Draft National Electricity Policy 2026 proposes a shift towards market-based power systems instead of relying on long-term coal power purchase agreements (PPAs). "The Draft National Electricity Policy 2026 signals a clear pivot toward market-based power systems, moving away from rigid, long-term coal PPAs," the report said.

Electricity (Amendment) Bill 2026

The report added that the Electricity (Amendment) Bill 2026 seeks to improve the efficiency of state discoms by mandating cost-reflective tariffs. This is expected to reduce cross-subsidies and strengthen the sector's credit profile.

Digital Infrastructure: India Energy Stack

It further said the India Energy Stack will provide a digital backbone for the power sector by standardising data exchange and identity systems.

Overall, "Improved billing, reduced leakages, and LPS-driven decline in overdue payables indicate materially stronger financial health versus historical levels," the report said. (ANI)

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