Union Power Minister Manohar Lal on Wednesday said a cost-reflective tariff concept to reduce discoms' losses has been introduced in the Electricity Amendment Bill, which is likely to come up for discussion and passage in the forthcoming Budget Session.
The cost-reflective tariff assumes significance in view of the long history of debt-ridden and loss-making power distribution companies (discoms) in the country.
Addressing the first annual conference of the All India Discoms Association (AIDA), “EDICON 2026”, Manohar Lal said discoms are an important component of the electricity supply value chain which involves generation, transmission and distribution.
He stated that discoms provide business to consumer (B2C) service and hence they are the first ones to receive the complaints of customers directly for quality of service as well as other issues.
"We are bringing a provision of cost-reflective tariff to reduce loss of discoms. This will factor in all expenses on power supply in the power tariff which will reduce the losses to discoms. The bill is likely to come up in this Budget session of Parliament. We will try to build consensus on this for smooth passage," he said.
He also talked about the draft National Electricity Policy 2026, which also provides for cost-reflective tariff for reducing losses and debt of discoms. The power ministry on Wednesday sought comments on the policy.
Lal suggested that cost-reflective tariff will help discoms make profits, which can be used for cross-subsidisation. However, he was of the view that cross-subsidisation should be done as per rules.
The minister pointed out that discoms collectively recorded a Profit After Tax (PAT) of Rs 2,701 crore in FY 2024-25 after reporting losses for the past several years since unbundling and corporatisation of state electricity boards.
According to the power ministry, the Aggregate Technical & Commercial (AT&C) losses have reduced over the years, signalling transformation. The AT&C losses reduced from 22.62 per cent in FY 2013-14 to 15.04 per cent in FY 2024-25.
Further, signalling much improved cost recovery, the Average Cost of Supply–Average Revenue Realised (ACS–ARR) gap has narrowed from Rs 0.78/kWh in FY 2013-14 to Rs 0.06/kWh in FY 2024-25.
The average across states (ACS) has come down to Rs 6.73 per unit this year from Rs 6.82 per unit, the minister said. He stressed on the need for installing pre-paid smart meters, especially in government buildings. He said that about 5 crore smart meters have already been installed and the target is 20 crore.
He was of the view that excess regulation by power regulators has resulted in more losses of discoms and that they need to relax those regulations to boost discoms.
"Regulators want to curb the loss of discoms. This is another thing that their excess regulations are causing more losses to discoms," he said.
He also pointed towards a recent memorandum of understanding of a power regulator with IIT Delhi for ascertaining whether the regulations should be more or less for ensuring good financial health of discoms.
Also read: Punjab farmers hold massive protest in Chandigarh
Follow us
