Reducing discom losses: How India can strengthen its Reformed Distribution Sector scheme

India’s Minister for Power and New and Renewable Energy, R.K. Singh, has emphasised that reliable, quality power supply and consumer satisfaction are prerequisites for the country’s accelerated economic growth.

This, in turn, requires power distribution companies (discoms) to be financially sustainable and operationally efficient. But despite eight reform programs and financial restructuring packages (FRPs) over the past two decades, aggregate discom losses in India worsened by 14.55 per cent in FY20 compared to FY17 levels (in real terms). The COVID-19 pandemic has only made matters worse.

The Revamped Distribution Sector (RDS) Scheme aims to bring down discom losses within the 12-15 per cent range and align supply costs and revenue realised by FY25. Its budgetary outlay is INR 3 lakh crore spread over five years, of which 32 per cent will be centrally funded.