In today’s Finshots, we talk about why electricity distribution companies have suddenly turned profitable ahead of the Electricity Amendment Act.

The Story

Picture this: Summer is just around the corner. While you’re scrolling through Reddit (😉) on your computer, the power runs out.

Electricity, like air and water, is something you only notice when it disappears. Until then, we treat it as a given — a right, a necessity, something we’re all entitled to. And to an extent, that’s fair. The modern world simply doesn’t run without it. We wouldn’t be writing this story, and you wouldn’t be reading it, without electricity flowing quietly through our devices every day.

And because of how essential it is, you’d assume regulation, policy, and groundwork would move in tandem — building a future where power cuts are rare, electricity distribution companies aren’t constantly asking for handouts, and the system runs like a well-coiled machine. If only.

But the central government looked like it had enough of the constant losses, piling debt, and just the irregularities overall with the system. The DISCOMs (short for distribution companies) had a loss mountain that kept rising up and there seemed to be no end to the pile. To give you a clearer idea, the country's power distribution utilities recorded a net loss of ₹67,900 crores way back in 2014. This was a period when India’s electricity demand was significantly lower than it is today, and the system was under far less strain. Things didn’t look any better 2 fiscal years ago, when losses were still ₹25,500 crores. It was significantly lower, sure, but definitely big enough to cause a dent to the government’s coffers.

That’s why, back in October last year, the central government was considering another bailout for DISCOMs. It wasn’t the first, and given the state of DISCOMs in India, it also didn’t look like the last. Only this bailout was an eye-watering ₹1 lakh crore. But it wasn’t going to come for free and it came with a lot of tough conditions. Conditions that state DISCOMs had to meet if they wanted the bailout to clear piling losses. Some of them being privatisation, handing over control or listing them on exchanges. Also, with the upcoming Electricity Amendment Bill, the decoupling of IEX and multiple bailouts, it looked like the government grew tired of saving DISCOMs from debt. We even did an explainer why India keeps having power cuts despite exporting electricity.

We’ve covered at length why India still has power cuts, why DISCOMs keep losing money, and why the way electricity is transmitted and distributed leaves these companies structurally disadvantaged. Which is why what happened next is so hard to ignore.

A couple of days ago, out of nowhere, these utility companies collectively posted a net positive profit after a decade. In a press release by the government, India’s collective DISCOMs put together recorded a net profit of ₹2,701 crores. That’s a rare sight. This result seems to clash with everything we know about India’s power sector. So what changed?

If you’ve read our previous story, you’d understand that power cuts in India aren’t about generating electricity. They’re about how it’s distributed.

For every kilowatt of electricity generated, it has to be moved, priced, billed, collected and accounted for. And in India, that entire chain is handled by state-run electricity distribution companies — DISCOMs. Losses, in some form, are built into the system: electricity lost in transmission, power sold below cost, subsidies that arrive late, and bills that are never fully collected.

Which is why DISCOMs turning profitable doesn’t suddenly mean power cuts have vanished or distribution losses have been solved. Those problems still exist. What’s changed is something else.

Now it’s time to read between the lines when the announcement says ‘profit’. If you look closely, it clearly shows that it’s the collective profit after tax (PAT) of all the DISCOMs, meaning they look good as a group overall. But there are still about 50 DISCOMs that are still in loss, so it’s not all green.

Now we know you’re probably thinking, ‘Hey, but power prices and in turn my electricity bills have gone up over the years. So why are they still under loss?’. And you’d be right partially, but the truth is retail consumers are just one part of the power story. Every major industry needs electricity ― agriculture, construction, IT, manufacturing. Every single one of them. Some of them were heavily subsidised, which meant that utilities distributors had to sell electricity to them at a discount or expect delays in payments albeit with no consequences.

And that delay wasn’t just at the consumer level. When money didn’t come on time, DISCOMs didn’t receive payments, so they delayed it towards power generators. For years, this was allowed. Basically customers could afford to delay payments because the DISCOMs could, and that number crept up to a worrying number ― over ₹1,39,000 crores of unpaid dues in 2022. To make matters worse, there weren’t even late payment fees imposed.

Observing the industry operate like this, the central government brought down the hammer and the storm came with it. In October, a document by the Ministry of Power came out stating that DISCOMs would have to shed control to the private sector, or have themselves listed on the stock exchange in three years time. Meet these requirements, you’d get the bailout. The timing wasn’t coincidental. Around the same time, the draft Electricity Amendment Bill was being floated around the country, open for public opinion. Something had to change and it had to happen fast.

And that ‘something’ for starters was closing long-ignored leaks, the biggest one being late payments.

For a long time, delayed payments were treated as an inconvenience, not a problem. And penalties existed on paper, but were rarely enforced. This meant that payment delays became routine.

That’s when Late Payment Surcharges stopped being optional.

Under the new rules, delayed payments automatically attracted penalties. Chronic defaulters risked losing access to fresh power. Old dues could no longer be endlessly rolled over. Once delay became expensive, behaviour began to change. Outstanding dues to the power generating companies fell steadily to ₹49,400 crore by FY24, and further down to just ₹4,927 crore as of this month (January 2026).

But penalties alone weren’t enough. The real question was why DISCOMs suddenly cared about enforcing them when late payments were the norm.

That’s where the Revamped Distribution Sector Scheme (RDSS) came in.

Introduced back in 2022, the RDSS tied the future of DISCOMs to their present behaviour. Access to nearly ₹3 lakh crore in central funding for infrastructure upgrades, smart metering, and network improvements was no longer guaranteed. It depended on meeting performance targets — reducing losses, narrowing the gap between costs and revenue, improving billing and collection, and maintaining payment discipline.

In other words, enforcing late payments wasn’t just about avoiding penalties anymore. It became a prerequisite for survival.

Once future funding depended on clean books, DISCOMs could no longer afford to tolerate delay — whether from consumers, government departments, or state agencies. Subsidies had to be accounted for transparently. Bills had to be collected. And money had to move through the system on time. That’s when enforcement stopped being selective and started becoming systemic.

The Average Cost of Supply–Average Revenue Realized (ACS–ARR) losses declined steadily. This simply tells you how much money DISCOMs lose between buying power and getting paid for it. That number shrank to ₹0.06 per kWh from ₹0.78 per kWh. 

And once all these initiatives started moving together, the numbers finally reflected it. Cash flows stabilised. Losses stopped compounding. And for the first time in over a decade, profits appeared.

But this is where the anomaly becomes clear. None of this automatically means that DISCOMs have become structurally efficient. Instead, it shows that with incentives, enforcement, and accounting rules combined, the bleeding slowed enough for profits to appear.

Now with talks that the upcoming Budget session would bring up the Electricity Amendment Bill, we’ll know soon if the recent reform of utilities distributors can alter some rules, or if the old rulebook will be completely replaced by the new one. And who knows, India might finally have summers with power supply that’s less fragile.

Until then…

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