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Priya Singh
New Delhi: Several states are looking at restructuring electricity distribution companies (DISCOMs) by separating agricultural consumers from existing utilities, as mounting losses, unpaid subsidies and farm power costs continue to put pressure on the power distribution sector.
Telangana and Maharashtra have already created separate entities for agricultural power consumers, although both are yet to become fully operational. Haryana has also proposed a dedicated agriculture DISCOM, but the plan has faced opposition from power sector employees.
Agriculture accounts for nearly one-fifth of India's electricity consumption and remains the most heavily subsidised consumer category. Farm electricity tariffs are often below the actual cost of supply, leaving DISCOMs dependent on government subsidies and cross-subsidies from commercial and industrial consumers. Delays in subsidy payments can further affect the finances and investment capacity of utilities.
According to data cited in the report, state governments spent nearly Rs 1.9 lakh crore on energy subsidies in 2024-25, with a major share going towards subsidised electricity for farmers and households. The 13 major agrarian states, which account for about 99 per cent of India's agricultural electricity sales, incurred more than Rs 1.3 lakh crore in farm power subsidies during FY25.
State-owned DISCOMs are also carrying significant financial liabilities, with accumulated losses of Rs 6.77 lakh crore and borrowings of Rs 7.11 lakh crore, according to the report.
Telangana created the Telangana Rythu Power Distribution Company Ltd after citing the deteriorating financial position of its two existing DISCOMs.
The two utilities had combined accumulated losses of Rs 69,741 crore against borrowings of Rs 59,230 crore. The new entity was created to supply electricity to agriculture, lift irrigation schemes and several water supply-related connections.
More than 29 lakh agricultural consumers were subsequently transferred to the new utility. The entity also took on Rs 26,950 crore in payables to state-owned power generators and a working capital loan of Rs 9,032 crore.
Maharashtra has created MSEB Solar Agro Power Ltd as a subsidiary to function as a distribution licensee and retail supplier for agricultural consumers.
Under a restructuring scheme notified in May, Rs 32,679 crore of Maharashtra State Electricity Distribution Company Ltd's pending agricultural dues of Rs 59,527 crore will be written down, with the state government assuming an equivalent liability through government securities.
The remaining Rs 26,848 crore in agricultural dues will be transferred to the new agriculture-focused entity, along with subsidy receivables and security deposits.
The restructuring has also raised concerns among power sector employees and engineers over whether separating agricultural consumers could eventually make profitable parts of the distribution business more attractive for private participation.
In Haryana, the proposed agriculture DISCOM has faced opposition from employees. At the same time, a private company has applied for a distribution licence covering Gurugram and Nuh, adding to concerns over the future structure of electricity distribution.
The broader debate now centres on whether separate agriculture DISCOMs can improve the financial health of state utilities while continuing to provide affordable electricity to farmers, or whether the restructuring could simply shift existing liabilities and subsidy dependence into new entities.
