Govt Plans To List 5 State-Owned Power Firms, Considers Discom Privatisation

The secretary stated that the govt has established a group of ministers to address the financial challenges faced by discoms but ruled out the possibility of a financial bailout, as per the report

In addition, the government is exploring the possibility of facilitating the privatisation of state-owned distribution companies

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The government has selected five state-owned power generation and transmission companies for listing on the stock market to secure the investment required for capacity expansion. According to a report by Financial Express, Power Secretary Pankaj Agarwal stated that two of these companies, Andhra Pradesh Power Generation Corporation and Gujarat Energy Transmission Corporation, are currently in the process of appointing merchant bankers for the listing.

Privatisation Of State-owned Distribution Companies

In addition, the government is exploring the possibility of facilitating the privatisation of state-owned distribution companies (discoms), which are struggling to raise tariffs while facing challenges such as rising power-purchase costs, high transmission and distribution losses, and delays in customer payments. During a recent regional meeting, states have called on the Centre to provide support for the privatisation of distribution utilities to improve service delivery to consumers and enhance operational efficiency, reveals the report.

The secretary stated that the government has established a group of ministers to address the financial challenges faced by discoms but ruled out the possibility of a financial bailout, as per the report.

He also mentioned that the option of listing some discoms on the stock market remains open; however, for this to happen, their accumulated losses must first be reduced. According to government data, the accumulated losses of the country’s discoms reached Rs 6.92 lakh crore as of 2023-24, with total debt stands at Rs 7.53 lakh crore by the end of FY24.

While subsidy payments to discoms have improved from states, and the gap between the average cost of supply (ACS) and the average revenue realised (ARR) has decreased to Rs 0.19 per kWh in 2023-24, down from Rs 0.45 in 2022-23, there remains an outstanding balance in government dues to discoms. By January 2025, this ACS-ARR gap had further reduced to Rs 0.10 per kWh.

Pressure On Discoms

A report by ICRA noted that although coal prices have softened from the peak levels of FY23, short-term tariffs remain elevated, continuing to exert upward pressure on discoms' power purchase costs. "Amidst this, the discoms’ ability to optimise power procurement through higher sourcing of cheaper renewable power along with storage and reducing dependence on costlier sources remains important," the report stated.

The performance of state-owned discoms continues to be hampered by insufficient tariffs that do not align with the cost of supply, high AT&C losses exceeding regulator-approved levels, and a substantial debt burden.