Discom debt surge poses fiscal risk, Maharashtra in high stress group, says Finance Commission
The commission notes that “mounting debt, short-term borrowing, and accumulated losses have been a perpetual burden on Discom finances”, adding that fiscal stress in the sector is now heavily concentrated in a small number of states.
The commission cautions that in a small group of eight states, including Maharashtra, borrowings by Discoms have grown faster than revenues and assets, making repayment from operations “unlikely”. (Source: File)
Maharashtra has emerged as one of the states facing the sharpest deterioration in the finances of state-run power distribution companies, with Discom debt in the state more than doubling over the past five years, prompting a strong warning from the Sixteenth Finance Commission on the fiscal risks posed by mounting power sector liabilities.
In its report for the 2026–31 award period, the commission cautions that in a small group of eight states, including Maharashtra, borrowings by Discoms have grown faster than revenues and assets, making repayment from operations “unlikely”. At the all-India level, outstanding Discom debt rose from about Rs 4.7 lakh crore in 2018–19 to Rs 7.42 lakh crore in 2023–24, with more than three-fourths of this debt concentrated in these eight states which includes Maharashtra.
“For eight states, the growth in debt between 2018–19 and 2023–24 has outpaced their growth in revenues and assets, making the self-liquidating of debt unlikely,” the commission states.
Maharashtra figures prominently in this warning. According to the commission’s data, the state’s Discom debt increased from Rs 35,197 crore in 2018–19 to Rs 84,171 crore in 2023–24, a rise of nearly Rs 49,000 crore or about 139 per cent in five years. This places Maharashtra among the eight states where power sector liabilities have become structurally unsustainable.
The commission notes that “mounting debt, short-term borrowing, and accumulated losses have been a perpetual burden on Discom finances”, adding that fiscal stress in the sector is now heavily concentrated in a small number of states.
Its analysis shows that 83 per cent of the accumulated losses of state sector Discoms, amounting to Rs 5.86 lakh crore in 2023–24, are concentrated in just eight states. These states also account for 78 per cent of the total outstanding Discom debt.
A key concern highlighted by the commission is the pace at which debt has accumulated in recent years. In Maharashtra, Discom borrowings rose by 32 per cent in 2022–23 and by a further 44 per cent in 2023–24, pointing to a sharp acceleration rather than a gradual build-up of liabilities.
While Maharashtra is not the single largest loss-making state, the data shows that it accounted for nearly 5 per cent of India’s total accumulated Discom losses in 2023–24, placing it firmly within the high stress category identified by the commission.
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Beyond debt levels, the commission flags persistent operational weaknesses that have prevented a sustained turnaround in the power distribution sector. These include gaps between the average cost of supply and the average revenue realised, high transmission and billing losses, delays in tariff revisions and weak billing and collection efficiency.
As the report notes, “persistent inefficiencies in operations continue to add to the financial stress of Discoms”, despite repeated restructuring efforts and bailout packages by states and the Centre.
At the all India level, the commission observes that total Discom debt rose by over 57 per cent between 2018–19 and 2023–24, underlining the limited impact of past reform measures. It cautions that continued accumulation of power sector liabilities could significantly constrain states’ fiscal space over the medium term, particularly as spending pressures rise in areas such as infrastructure, health, education and social welfare.
Vallabh Ozarkar is a Senior Correspondent with The Indian Express' Mumbai bureau, recognized as an authoritative and deeply knowledgeable voice on the politics, governance, and infrastructure of Maharashtra. With more than nine years of experience in major news organizations, his reporting delivers high standards of Expertise and Trustworthiness.
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Current Role: Senior Correspondent, The Indian Express, Mumbai bureau.
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