Unpacking India’s Electricity Subsidies

This report examines the financial sustainability of India's electricity distribution companies (DISCOMs) and the structure of electricity subsidies. It finds that while subsidies are critical for affordability, they often undermine DISCOM viability due to poor billing, delayed government payments, and regressive distribution. The report highlights a failure to meet UDAY loss-reduction targets and a lack of transparency in data reporting across states.

• Electricity consumption subsidies are the largest form of quantified energy support in India. In FY 2019, direct tariff subsidies from state governments totaled INR 110,391 crore (USD 15 billion), while cross-subsidies are estimated to have added at least another INR 75,027 crore (USD 10.2 billion).
• The financial health of DISCOMs has generally declined between FY 2016 and FY 2019. Sales revenue as a share of total expenditure decreased by 3% during this period, and 24 out of 31 states and union territories (UTs) experienced a revenue gap in FY 2019.
• Most states failed to meet the UDAY scheme's target of reducing aggregate technical and commercial (AT&C) losses to 15% by FY 2019, with 25 out of 31 states and UTs missing this target. Poor billing is identified as the primary driver of these losses.
• Agricultural consumers are the primary beneficiaries of electricity subsidies, receiving 75% of total subsidies nationally, followed by domestic consumers at 20% and industries at 4%.
• There is a significant lack of transparency and consistency in subsidy reporting. Only 13 states and UTs clearly report subsidy data, and only seven do so on a category basis. Furthermore, data for 15 states vary significantly depending on whether the source is the Power Finance Corporation (PFC) or state documentation.
• Cross-subsidies remain high and deviate from the National Tariff Policy target range of +/-20% of the average cost of supply (ACoS). In 12 of 31 states and UTs, industrial and commercial users were charged over 120% of ACoS, while domestic and agricultural users were charged less than 80%.
• Subsidy disbursement to DISCOMs is often delayed or incomplete. Between FY 2016 and FY 2019, at least seven states and UTs failed to transfer full subsidy amounts to DISCOMs by the end of the financial year.
• Evidence suggests that residential electricity subsidies may be regressively distributed. A study in Jharkhand found that the top 40% of households captured over 60% of the benefits.

APA

Aggarwal, P., Viswamohanan, A., Narayanaswamy, D., & Sharma, S. (2020). Unpacking India’s Electricity Subsidies. International Institute for Sustainable Development. https://www.iisd.org/system/files/2020-12/india-electricity-subsidies.pdf

Chicago

Aggarwal, Prateek, Anjali Viswamohanan, Danwant Narayanaswamy, and Shruti Sharma. Unpacking India’s Electricity Subsidies. International Institute for Sustainable Development, 2020. https://www.iisd.org/system/files/2020-12/india-electricity-subsidies.pdf.

Wikipedia

{{cite report |last1=Aggarwal |first1=Prateek |last2=Viswamohanan |first2=Anjali |last3=Narayanaswamy |first3=Danwant |last4=Sharma |first4=Shruti |title=Unpacking India’s Electricity Subsidies |publisher=International Institute for Sustainable Development |date=December 2020 |url=https://www.iisd.org/system/files/2020-12/india-electricity-subsidies.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{aggarwal2020unpacking, author = {Aggarwal, Prateek and Viswamohanan, Anjali and Narayanaswamy, Danwant and Sharma, Shruti}, title = {{Unpacking India’s Electricity Subsidies}}, institution = {International Institute for Sustainable Development}, year = {2020}, month = dec, url = {https://www.iisd.org/system/files/2020-12/india-electricity-subsidies.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }