Driving Financial Stability: Ministers Meet To Tackle Challenges In India’s Distribution Sector

Union Minister of State for Power and New and Renewable Energy, Shri Shripad Yesso Naik, chaired the first meeting of the Group of Ministers focused on addressing the viability challenges of distribution utilities in India. The virtual meeting, aimed at finding solutions for improving the financial health of DISCOMs, was attended by key energy ministers from Uttar Pradesh, Andhra Pradesh, Madhya Pradesh, Tamil Nadu, Maharashtra, and Rajasthan, along with senior officials from both Central and State Governments and the Power Finance Corporation Ltd.

The Energy Minister of Uttar Pradesh, Shri Arvind Kumar Sharma, who is the convenor of the group, praised the Government of India’s proactive efforts in improving the operational efficiency of distribution utilities. He emphasized the importance of adopting and investing in new technology in the sector and called for timely payments of government department dues and subsidies by the state governments. Additionally, he highlighted the need for effective consumer grievance redressal mechanisms.

In his address, Shri Naik stressed that the financial viability of DISCOMs is critical for the energy sector as these utilities connect power generation to homes, businesses, and industries. However, they face significant challenges that undermine their financial stability. He pointed out the growing gap between the average cost of supply (ACS) and average revenue realized (ARR), which has been eroding the financial health of these utilities. This gap is mainly due to under-recovery of costs, especially power purchase costs, non-cost reflective tariffs, and distribution losses. Naik also expressed concerns about AT&C losses, which are much higher than the global average, and emphasized the need to adopt new technologies, improve networks, and enhance billing and collection efficiency.

The meeting also saw contributions from several state energy ministers. Shri Gottipati Ravi Kumar, the Energy Minister of Andhra Pradesh, spoke about the state government’s focus on renewable energy development, including the progress of PM KUSUM and PM Surya Ghar schemes. Shri Pradyuman Singh Tomar from Madhya Pradesh highlighted the importance of accurate energy accounting and auditing to reduce line losses, along with the need for a better consumer grievance redressal system.

Thiru V. Senthil Balaji, the Electricity Minister of Tamil Nadu, emphasized the role of smart metering in improving the revenues of distribution utilities. In Maharashtra, Smt. Meghana Deepak Sakore Bordikar discussed the Mukhyamantri Saur Krushi Vahini Yojana, which aims to improve power quality for farmers and lower power purchase costs for utilities. Shri Heeralal Nagar, the Minister of State for Energy in Rajasthan, spoke about the state’s renewable energy potential and projects under the Hybrid Annuity Model that offer low-cost daytime power supply for agricultural purposes.

The ministers agreed to explore innovative, out-of-the-box solutions to help steer the distribution sector toward financial viability. They also decided to hold future meetings in the participating states to continue their collaborative efforts.