Financial Woes Persist for State Power Distributors Despite Loss Improvements

State-owned power distribution companies in India, despite reducing their technical and commercial losses, continue to face financial constraints. Delays in payments from state government departments and inadequate tariffs relative to supply costs are key challenges. The outlook for the segment remains negative due to these persistent issues.

State-owned power distribution companies in India are struggling financially despite making strides in reducing their aggregate technical and commercial (AT&C) losses, according to an Icra report.

The report highlights that delays in receiving payments from state government departments and inadequate tariffs compared to supply costs are significantly straining the financial health of discoms. These challenges have led to a negative outlook for the power distribution segment.

Although AT&C losses for discoms have declined from 23% in FY2021 to 15.8% in FY2023, losses remain high in states like Bihar and Uttar Pradesh. The tariff-determination process has improved post-General Elections, but tariff hikes remain modest, contributing to continued financial losses, the report noted.