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Despite financial headwinds, PSU discoms clear power dues faster than pvt utilities

Public sector discoms struggle with recovering the cost of supply: Report

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The report indicates that public sector discoms continue to struggle with recovering the cost of supply, adding to their financial stress.

Written by: Pratyush Deep

4 min readNew DelhiJan 25, 2026 06:50 AM IST First published on: Jan 25, 2026 at 04:44 AM IST

Public sector electricity distribution companies (discoms) take less time to clear dues to suppliers such as power generators than their private sector counterparts, despite the former facing significantly higher financial stress.

On the days payable parameter — which measures the average time taken by discoms to settle payments to suppliers — public sector utilities recorded 112 days, marginally lower than the all-India average of 113 days.

Also read | PSPCL upgraded to A plus in national power utilities ranking, Punjab second among state utilities

In contrast, private sector discoms reported higher days payable of 133 days, the 14th Integrated Rating and Ranking of Power Distribution Utilities for 2024–25, released by the Union Ministry of Power on Friday, showed.

This relatively better performance by public sector discoms on days payable stands in sharp contrast to their overall financial position, especially as private sector discoms outperform them on most other key metrics, including revenue collection, cost recovery, and aggregate technical and commercial (AT&C) losses. The findings come amid growing concerns over the financial health of public sector discoms in India’s power sector. A majority of state-owned utilities continue to incur losses and rely heavily on borrowings to finance their operating shortfalls and accumulated liabilities. At present, the total accumulated losses of public sector discoms stand at Rs 6.77 lakh crore, while their total borrowings amount to Rs 7.11 lakh crore. These structural challenges have been acknowledged in the recently released draft National Electricity Policy 2026, which proposes a range of measures to address the persistent financial stress faced by discoms.

Private firms top ranks

The report assessed the financial and operational performance of 65 power distribution utilities, including 42 public sector discoms, 12 private sector discoms, and 11 power departments. Of these, 31 utilities received top ratings of A+ or A. These included 14 public sector discoms, eight private sector discoms, and nine power departments. An A+ rating denotes “exceptionally strong financial and operational performance,” while an A rating indicates “very high financial and operational performance,” said the report.

The top three positions were secured by private sector players — Torrent Power Ahmedabad, Torrent Power Surat, and Adani Electricity Mumbai Ltd (AEML), respectively.

The three lowest-ranked utilities were all state-owned: Telangana’s TGNPDCL, Jharkhand’s JBVNL, and Telangana’s TGSPDCL. All three were assigned a C– grade, indicating low financial and operational performance.

Cost recovery

The report indicates that public sector discoms continue to struggle with recovering the cost of supply, adding to their financial stress. Private sector discoms, by contrast, generally achieve better cost realisation, with average tariffs exceeding their cost of supply.

This divergence is reflected in the ACS–ARR (cash adjustment) gap — a key indicator of the financial health of power distribution utilities.

The ACS (Average Cost of Supply)–ARR (Average Revenue Realised) gap measures the financial shortfall that arises when a discom’s cost of supplying electricity exceeds the revenue it recovers through tariffs and subsidies. When calculated on a cash adjustment basis, the metric offers a sharper picture of operational viability by accounting only for actual cash inflows and outflows, excluding accounting deferrals and non-cash adjustments.

As per the report, the all-India ACS–ARR (cash adjustment) gap in 2024–25 stood at Rs 0.07/Kilowatt-hour, marking a major improvement from the previous year, when the figure stood at Rs 0.32/kWh.