How Can India’s Energy Sector Recover Sustainably from COVID-19?

This research paper, produced by the International Institute for Sustainable Development (IISD) and the Council on Energy, Environment and Water (CEEW), examines the financial instability of India's electricity distribution companies (DISCOMs) during the COVID-19 pandemic. It analyzes how the pandemic exacerbated pre-existing structural issues—such as poor billing, high procurement costs, and inadequate tariff structures—and evaluates the effectiveness of central government stimulus packages and regulatory reforms intended to stabilize the sector and support a sustainable energy transition.

• India's electricity distribution companies (DISCOMs) faced severe financial instability prior to the pandemic, characterized by significant outstanding dues to power generators. These dues rose from approximately INR 80,900 crore (USD 10.8 billion) in late 2019 to INR 1,26,000 crore (USD 16.8 billion) by May 2020, representing a 56% increase.
• Three primary factors contribute to the financial struggles of DISCOMs: high power procurement costs driven by surplus capacity and off-target forecasting; inaccurate or delayed billing, particularly following the 2017 SAUBHAGYA household electrification program; and tariff structures that fail to cover full costs, leaving residential and agricultural consumers paying below the average cost of supply.
• The COVID-19 lockdown caused a sharp decline in power demand—averaging 9% in March 2020 and 23% in May 2020—which severely reduced DISCOM revenues. However, costs remained high because DISCOMs are required to purchase all renewable energy due to its "must-run" status and must continue paying "fixed cost" payouts to coal power plants regardless of actual electricity usage.
• The central government implemented a stimulus package of INR 90,000 crore (~USD 12.1 billion) providing loans to DISCOMs to pay generators. This support is conditional on reforms, including state guarantees for the loans, monthly or quarterly subsidy payments to DISCOMs, and the installation of smart or prepaid meters in state government departments.
• The government linked the expansion of state borrowing limits to two specific conditions: the implementation of a Direct Benefit Transfer (DBT) cash transfer system for electricity subsidies in at least one district by the end of the year, and a reduction in DISCOM losses related to revenue collection and supply costs.
• To improve long-term sustainability, the document suggests several structural reforms: achieving universal metering for rural and agricultural consumers; depoliticizing electricity pricing to ensure tariffs cover costs; adjusting consumer billing to include a higher fixed-cost component to align with generator costs; and introducing force majeure clauses in Power Purchase Agreements (PPAs) to allow for cost renegotiation during crises.

APA

Aggarwal,, C. B. V. (2020). How Can India’s Energy Sector Recover Sustainably from COVID-19? International Institute for Sustainable Development. https://www.iisd.org/articles/how-can-indias-energy-sector-recover-sustainably-covid-19

Chicago

Aggarwal,, Christopher Beaton,Anjali Viswamohanan,Prateek. How Can India’s Energy Sector Recover Sustainably from COVID-19? International Institute for Sustainable Development, 2020. https://www.iisd.org/articles/how-can-indias-energy-sector-recover-sustainably-covid-19.

Wikipedia

{{cite report |last1=Aggarwal, |first1=Christopher Beaton,Anjali Viswamohanan,Prateek |title=How Can India’s Energy Sector Recover Sustainably from COVID-19? |publisher=International Institute for Sustainable Development |date=24 July 2020 |url=https://www.iisd.org/articles/how-can-indias-energy-sector-recover-sustainably-covid-19 |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{aggarwal2020how, author = {Aggarwal,, Christopher Beaton,Anjali Viswamohanan,Prateek}, title = {{How Can India’s Energy Sector Recover Sustainably from COVID-19?}}, institution = {International Institute for Sustainable Development}, year = {2020}, month = jul, url = {https://www.iisd.org/articles/how-can-indias-energy-sector-recover-sustainably-covid-19}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }