The Government of India has called on state governments to implement urgent reforms aimed at reducing the mounting debt burden of power distribution utilities (discoms). At a high-level meeting chaired by Union Power Minister Manohar Lal in New Delhi, the Centre emphasized the need for collaborative efforts between the central and state governments, regulatory commissions, and power sector stakeholders to restore the financial viability of discoms and ensure reliable electricity supply to consumers.
The meeting, attended by power ministers from several states and senior officials from the Ministry of Power, focused on identifying actionable measures to address operational inefficiencies, delayed tariff revisions, and unpaid government dues that have contributed to discom losses. The Centre highlighted that the total outstanding debt of discoms has crossed ₹7.5 lakh crore, posing a serious threat to the sustainability of the sector.
- Recognition of Discom Debt as State Liability: The Centre proposed that state governments formally acknowledge the debt of their distribution utilities as part of their fiscal responsibility, enabling structured debt restructuring plans.
- Cost-Reflective Tariffs: State Electricity Regulatory Commissions (SERCs) were urged to issue full-cost tariff orders. States may provide subsidies transparently if needed, but tariffs must reflect actual supply costs to prevent revenue gaps.
- Smart Metering and Data Analytics: States were asked to expedite the installation of prepaid smart meters in government establishments and leverage data analytics for power purchase optimization and demand forecasting.
- Regulatory Reforms and Dispute Resolution: The Centre recommended mechanisms to resolve regulatory disputes swiftly and discourage prolonged litigation, which hampers financial recovery.
- Electricity (Amendment) Bill Provisions: Officials presented key features of the proposed Electricity (Amendment) Bill, aimed at strengthening the regulatory framework, promoting energy transition, and improving ease of doing business in the power sector.
The Group of Ministers (GoM), constituted to oversee the reform process, is drafting a new scheme for debt restructuring of discoms. The scheme will require states to commit to reform milestones in exchange for financial relief.
Minister of State for Power Shripad Yesso Naik reiterated the importance of restoring investor confidence and making improvements irreversible. He noted that high cross-subsidies and delayed payments have made industrial power expensive, affecting competitiveness and deterring private investment.
The Centre reaffirmed its commitment to the national goal of “Power for All, at All Times,” and urged states to act swiftly to prevent a recurrence of the debt trap and ensure long-term sustainability of the power distribution sector.
