Abstract
Electricity is a significant component for economic and social wellbeing of every individual and nations. India is the third-ranking electricity generator in the world but ranks 106th in terms of per capita consumption. Distribution of electricity is the most vital element in the value chain of the power sector in particular and in the overall economic activity of the country in general. It is the primary source of revenue for the entire power sector which would be further distributed among all other stakeholders in the sector. In India, electricity is a concurrent subject shared between the Central and State Governments. The generation of power has largely been deregulated since the enactment of Electricity Act in 2003. However, the distribution of power to consumers is generally carried out by Government-owned power distribution companies (DISCOMs). The authors, in this study, analyses the financial health of the DISCOMs in India to elucidate the financial challenges faced by them by identifying the factors contributing to their profitability constraints. This is studied across different elements of cost including the cost of power purchase, employee benefit expenses, finance cost, depreciation etc., to propose strategies to enhance the financial viability of DISCOMs. The authors, rely on a study of fifteen DISCOMs supplying electricity in the concerned states or territories and propose policy recommendations for a turnaround of such DISCOMs. The results of the study could be rolled out with suitable modifications across India.
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