Think big: Power distributors must drastically slash their billing losses

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Subscribe to enjoy similar stories. Aggregate technical and commercial (AT&C) losses pose India’s electricity distribution sector a persistent challenge. These losses are often identified as one of the critical factors contributing to the financial distress of distribution companies (discoms).

However, recent data indicates a downward trend in AT&C losses, prompting a closer examination of these figures to determine whether these improvements are sustainable and how they could alleviate the financial burden of Indian discoms. The impact of AT&C losses is significant. While regulators allowed certain loss levels, discoms have lost a lot more, and although AT&C losses fell from 30.5% of energy in 2006-07 to 15.8% in 2022-23, they remain a concern.

Public-sector discoms suffered a cumulative loss of more than ₹4 trillion on account of excessive AT&C losses over 17 years till 2022-23. These losses comprise technical (or billing) losses and collection losses. In a recent study, the Centre for Social and Economic Progress (CSEP) focused on billing losses to observe a significant improvement from 26.2% in 2006-07 to 13.3% in 2022-23, but, barring two years, they exceeded the regulatory limit.

Reducing billing losses is vital. It directly facilitates a reduction in power purchase costs (which constitute 80% of power tariffs), lowers pressure on working capital requirements and offers relief on the revenue front. Discom finances reveal that this leakage was estimated at over ₹4,500 crore in 2022-23, based on average billing losses of 13.3% against their average target of 12.6%.