Unpacking India’s Electricity Subsidies

The report finds that electricity subsidies in India are the largest form of energy support, with direct tariff subsidies totaling INR 110,391 crore in FY 2019. Despite the UDAY bailout scheme, DISCOM finances have generally worsened, characterized by increasing average costs of supply (ACoS) and persistent revenue gaps. The analysis reveals significant transparency issues, with discrepancies between Power Finance Corporation (PFC) reports and state regulatory orders. Subsidies are heavily skewed toward agricultural (75%) and domestic (20%) consumers, often without clear consumption limits, leading to regressive distribution where higher-income households capture a disproportionate share of benefits. The report recommends improving data standardization, exploring targeted subsidies via Direct Benefit Transfer for Power (DBT-P), and prioritizing billing and collection efficiency to reduce aggregate technical and commercial (AT&C) losses.

• Electricity subsidies represent the largest quantified energy support in India, with direct tariff subsidies from state governments totaling INR 110,391 crore (USD 15 billion) in FY 2019, supplemented by estimated cross-subsidies of at least INR 75,027 crore (USD 10.2 billion).
• The financial health of DISCOMs has declined between FY 2016 and FY 2019; sales revenue as a share of total expenditure fell by 3%, and 24 out of 31 states and union territories reported a revenue gap in FY 2019.
• The average cost of supply (ACoS) increased by 13% nationally from INR 5.31 per kWh in FY 2016 to INR 6.00 per kWh in FY 2019, with 19 of 31 states and UTs experiencing higher supply costs.
• 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 the target.
• Subsidy distribution is heavily concentrated in the agricultural sector, which received 75% of total subsidies, 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 15 states show significant variations between PFC reports and state documentation.
• Cross-subsidies are widely used but fail to meet National Tariff Policy targets; in 12 of 31 states and UTs, industrial and commercial users are charged over 120% of ACoS while domestic and agricultural users are charged less than 80%.
• Subsidy disbursement is frequently delayed, with at least seven states and UTs failing to transfer full subsidy amounts to DISCOMs by the end of the financial year in every year from FY 2016 to FY 2019.
• Tariff design often lacks specific consumption limits for subsidies; only four states (Delhi, Haryana, Tamil Nadu, and Uttar Pradesh) clearly specify the number of units for which a subsidy is offered.

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} }