Public Sector Discoms Outperform Private Counterparts in Payment Timeliness Despite Financial Challenges
In a surprising revelation from the power sector, public sector electricity distribution companies (discoms) are clearing dues to power suppliers more quickly than their private sector counterparts, despite facing significantly greater financial stress. This finding emerges from the 14th Integrated Rating and Ranking of Power Distribution Utilities for 2024–25, released by the Union Ministry of Power.
Days Payable Parameter Shows Public Sector Edge
The report highlights that on the days payable parameter — which measures the average time taken by discoms to settle payments to suppliers — public sector utilities recorded 112 days. This is marginally lower than the all-India average of 113 days and notably better than private sector discoms, which reported higher days payable of 133 days.
This relatively better performance by public sector discoms in payment timeliness stands in stark contrast to their overall financial position. Private sector discoms consistently outperform them on most other key metrics, including:
- Revenue collection efficiency
- Cost recovery mechanisms
- Aggregate technical and commercial (AT&C) losses
Mounting Financial Stress in Public Sector Discoms
The findings come amid growing concerns over the financial health of public sector discoms across India. A majority of state-owned utilities continue to incur substantial losses and rely heavily on borrowings to finance their operating shortfalls and accumulated liabilities.
Current financial data reveals alarming figures:
- Total accumulated losses of public sector discoms: Rs 6.77 lakh crore
- Total borrowings of public sector discoms: Rs 7.11 lakh crore
These structural challenges have been acknowledged in the recently released draft National Electricity Policy 2026, which proposes a comprehensive range of measures to address the persistent financial stress faced by distribution utilities.
Private Firms Dominate Top Rankings
The comprehensive report assessed the financial and operational performance of 65 power distribution utilities, including:
- 42 public sector discoms
- 12 private sector discoms
- 11 power departments
Among these, 31 utilities received top ratings of A+ or A, including 14 public sector discoms, eight private sector discoms, and nine power departments. The rating system defines:
- A+ rating: Exceptionally strong financial and operational performance
- A rating: Very high financial and operational performance
The top three positions were secured exclusively by private sector players:
- Torrent Power Ahmedabad
- Torrent Power Surat
- Adani Electricity Mumbai Ltd (AEML)
Conversely, the three lowest-ranked utilities were all state-owned:
- Telangana's TGNPDCL
- Jharkhand's JBVNL
- Telangana's TGSPDCL
All three received a C– grade, indicating low financial and operational performance.
Cost Recovery Challenges Persist
The report indicates that public sector discoms continue to struggle with recovering the cost of supply, significantly adding to their financial stress. In contrast, private sector discoms generally achieve better cost realisation, with average tariffs exceeding their cost of supply.
This divergence is clearly reflected in the ACS–ARR (cash adjustment) gap — a crucial 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 occurs when a discom's cost of supplying electricity exceeds the revenue it recovers through tariffs and subsidies.
When calculated on a cash adjustment basis, this metric offers a sharper picture of operational viability by accounting only for actual cash inflows and outflows, excluding accounting deferrals and non-cash adjustments.
According to the report, the all-India ACS–ARR (cash adjustment) gap in 2024–25 stood at Rs 0.07/Kilowatt-hour, marking a substantial improvement from the previous year when the figure was Rs 0.32/kWh.
The report underscores the complex financial landscape of India's power distribution sector, where public sector utilities demonstrate better payment discipline to suppliers despite facing more severe financial constraints and operational challenges compared to their private sector counterparts.
