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India’s power distribution companies have reported a rare consolidated profit after decades of losses
The government credits tighter enforcement and accounting reforms rather than tariff or subsidy changes
Analysts warn the turnaround may be fragile without deeper political and structural reforms
India’s power distribution companies have reported a consolidated profit after tax of Rs 2,701 crore for the 2024-25 financial year (FY25), marking a rare turnaround for a sector that has remained structurally loss-making since the unbundling of State Electricity Boards more than two decades ago.
The government has projected the figure as a milestone, contrasting it with losses of Rs 25,553 crore in FY24 and Rs 67,962 crore in FY14, according to a statement issued by the Union Ministry of Power on January 18, 2026.
However, a closer examination suggests the improvement owes as much to tighter fiscal controls, accounting changes and strict payment enforcement as to any deep correction of the distribution sector’s underlying political and economic challenges.
Union Power Minister Manohar Lal described the development as the start of a “new chapter” for distribution utilities, crediting a series of reforms and the Prime Minister’s broader economic vision. Yet the scale of the profit — less than 0.1 per cent of annual power sector turnover — has raised questions about whether this reflects a durable recovery or a one-off convergence of administrative measures.
The government attributes the turnaround to initiatives including the Revamped Distribution Sector Scheme, smart metering, tighter prudential norms, amendments to electricity rules, and stricter enforcement of late payment surcharge regulations.
These measures have improved cash flows, particularly for power generation companies, by compelling distribution utilities to clear dues and shortening payment cycles. Outstanding dues to generators have fallen sharply, from nearly Rs 1.4 trillion in 2022 to under Rs 5,000 crore by January 2026.
But analysts note that much of this reduction has been achieved through payment prioritisation and borrowing constraints, rather than politically difficult steps such as tariff rationalisation or subsidy reform.
Several states continue to delay tariff revisions, while subsidies remain heavily dependent on state budget support that is often released late or in part. Although the Average Cost of Supply- Average Revenue Realised gap has narrowed to Rs 0.06 per unit, this convergence has been aided by accounting adjustments and deferred cost recognition under amended electricity rules, rather than full recovery of costs from consumers.
Aggregate Technical and Commercial (AT&C) losses have declined from 22.6 per cent in FY14 to around 15 per cent in FY25. While this represents progress, losses remain well above global benchmarks for utilities operating under comparable conditions.
Much of the reduction has been driven by urban-focused interventions such as smart-meter deployment and stricter disconnection protocols. This has raised concerns about uneven impacts across consumer groups.
Rural and agricultural consumers — who account for a large share of subsidised electricity use — remain largely insulated from tariff signals. Meanwhile, urban and industrial users continue to cross-subsidise the system. The longer-term implications for affordability, service quality and energy access, particularly in poorer states, remain insufficiently examined.
A key factor behind the reported improvement has been the Centre’s increasing use of conditional financing. Access to loans, grants and even additional state borrowing has been linked to compliance with centrally defined performance benchmarks.
While this approach has enforced greater fiscal discipline, it has also narrowed states’ policy autonomy in a sector that falls under the Concurrent List of the Constitution.
The introduction of uniform accounting standards and additional disclosure norms in 2025 has improved transparency, but it has also enabled tighter central oversight — without necessarily addressing the political constraints that prevent states from passing on costs to consumers.
The government says momentum will be sustained through the ongoing deliberations of a Group of Ministers on distribution utility finances. However, experts warn that without durable solutions to tariff politics, subsidy targeting, agricultural power reform and state-level accountability, the return to profit may prove short-lived.
For now, the Rs 2,701 crore profit appears less a sign of structural health than a reflection of how far enforcement, accounting discipline and fiscal pressure can go in stabilising a politically constrained system.