By Akanksha Chandrakar
India’s power distribution segment remains at the centre of ongoing power sector reforms, as its operational efficiency and financial viability ultimately determine the sustainability of the entire electricity value chain. In recent years, policy efforts have increasingly focused on improving cost recovery, strengthening accountability and accelerating technology adoption to address long-standing structural issues such as high losses, tariff distortions and delayed subsidy payments. At the same time, the growing penetration of renewables, electrification of end-use sectors and rising power demand are reshaping the role of distribution utilities, requiring more agile planning, smarter networks and stronger regulatory oversight.
Renewable Watch presents a round-up of the key trends and developments in the power distribution segment…
Operational and financial performance
As per PFC Limited’s 14th Integrated Rating and Ranking Report, the aggregate technical and commercial (AT&C) losses declined from 15.97 per cent in 2023-24 to 15.04 per cent in 2024-25. Billing efficiency improved marginally from 86.99 per cent in 2023-24 to 87.59 per cent in 2024-25. Additionally, collection efficiency across power distribution utilities improved from 96.60 per cent in 2023-24 to 97 per cent in 2024-25, indicating better revenue real isation across the sector.
The average cost of supply-average revenue realised (ACS-ARR) gap (cash adjusted) improved by Re 0.25 per kWh, narrowing from Re 0.32 per kWh in 2023-24 to Re 0.07 per kWh in 2024-25, indicating a notable strengthening of the sector’s overall cost recovery position.
The power distribution sector achieved a positive profit after tax (PAT) on an accrual basis at the all-India level for the first time, posting a combined PAT of Rs 27.01 billion in 2024-25, compared to a loss of Rs 270.22 billion in 2023-24. The ACS-ARR gap on a tariff-subsidy-received basis narrowed sharply to Re 0.06 per kWh in 2024-25 from Re 0.20 per kWh in 2023-24, underscoring improved cost recovery. Subsidy realisation rose to 98.9 per cent in 2024-25 from 97.45 per cent in 2023-24, with full subsidy dues for the past three years cleared in multiple states.
Progress under the RDSS
In terms of sanctions and disbursals, as per the Revamped Distribution Sector Scheme (RDSS) portal (accessed on February 18, 2026), the total sanctioned cost under the RDSS stands at Rs 2,834.4 billion. Of this, Rs 1,306.37 billion has been allocated for smart metering works, while Rs 1,502.45 billion has been earmarked for loss reduction works. The total gross budgetary support (GBS) sanctioned under the scheme amounts to Rs 1,212.69 billion, with Rs 244.42 billion allocated for smart metering and Rs 955.2 billion for loss reduction works. So far, Rs 329.93 billion of the GBS has been released, comprising Rs 17.89 billion for smart metering works and Rs 312.04 billion for loss reduction works.
As of February 13, 2026, over 224 million smart consumer meters have been sanctioned nationwide, of which 150.2 million meters have been awarded. Further, 5.3 million distribution transformer (DT) meters and 206,929 feeder meters have been sanctioned, of which 4.94 million DT meters and 197,070 feeder meters have been awarded.
Across India, 54.67 million smart consumer meters, 1.42 million DT meters and 164,981 feeder meters have been installed, which takes the total number of deployed smart meters to over 56.26 million.
Draft National Electricity Policy, 2026
Notified in January 2026, the draft National Electricity Policy, 2026 notes that tariffs in several states remain below the cost of supply, leading to persistent revenue gaps and rising debt in the distribution segment. The plan places tariff rationalisation and loss reduction at the centre of reforms, focusing on cost optimisation, particularly power procurement, alongside AT&C loss reduction and improved governance to achieve financial sustainability. It proposes the phased deployment of prepaid smart meters, time-bound energy audits and robust accounting to target single-digit AT&C losses, while promoting shared distribution networks, geographic information system (GIS)-based asset mapping and automation to enhance efficiency and service delivery. The plan also recommends establishing a distribution system operator to facilitate the integration of distributed renewables, storage and vehicle-to-grid systems, and to enable local energy trading.
Draft Electricity (Amendment) Bill, 2025
In October 2025, the Ministry of Power (MoP) published the Draft Electricity (Amendment) Bill, 2025. Among its key provisions, the draft bill proposes the sharing of distribution networks to promote efficiency and competition. It proposes to explicitly allow distribution licensees to supply power through their own or shared networks, with non-discriminatory open access mandated under Section 42. Apart from this, the bill emphasises cost-reflective tariff determination by electricity commissions to empower state commissions to determine tariffs suo motu, ensuring timely implementation.
Technology adoption
The distribution segment is witnessing an accelerated digital shift aimed at modernising infrastructure, improving operational efficiency, and accommodating rising renewable capacity while preserving grid stability. Technologies such as artificial intelligence (AI), machine learning (ML) and advanced analytics are central to this transition. Utilities are increasingly leveraging digital twins, drones and robotics for site selection, route optimisation and real-time asset inspections, enhancing precision, safety and execution speed while minimising construction risks.
On the operations front, AI-enabled predictive maintenance, internet of things (IoT) sensors, cloud-based dashboards and advanced analytics are strengthening asset health monitoring, enabling real-time visibility and improving risk management. Discoms are also applying AI for fault detection, load forecasting, transformer condition monitoring, predictive maintenance and theft analytics, which together enhance reliability, reduce losses and optimise scheduling and restoration processes.
The MoP has initiated work on the India Energy Stack, envisaged as a digital public infrastructure for the power sector to enable interoperable and consent-based data exchange and provide common digital building blocks for utility operations and consumer services, with pilot demonstrations planned for 2026- 27.
Digitalisation across distribution assets is transforming how utilities monitor and manage network reliability. Towers are now being equipped with IoT sensors, edge computing and digital monitoring systems that track structural health and electrical parameters in real time, capturing stress, vibration, tilt, temperature and environmental conditions while enabling predictive analytics to flag emerging risks. For cables and conductors, digital asset registers and GIS-based network models, integrated with outage history and inspection data, allow utilities to identify bottlenecks, ageing spans and recurrent fault zones, supporting a shift toward risk-based maintenance and targeted replacements; and advanced tools such as thermography and drone inspections further help detect hotspots, loose joints and sagging early. Meanwhile, substations are evolving into intelligent, remotely operated hubs through fibre-based communication, digital protection and process bus technologies, enabling unmanned operations, faster fault response and improved integration of renewable power as grid complexity increases.
Challenges and outlook
The power distribution segment continues to face a complex set of structural, financial and operational challenges that constrain its performance. Persistent financial stress remains a key concern, driven by high AT&C losses, delayed subsidy payments, and gaps between the cost of supply and realised tariffs. Ageing infrastructure and inadequate network investments contribute to frequent outages, voltage fluctuations and limited system resilience. The rising share of variable renewable energy is adding pressure on distribution utilities to strengthen forecasting, balancing and grid management capabilities. In addition, issues such as power theft, billing inefficiencies, limited consumer metering coverage and slow adoption of digital technologies continue to affect revenue realisation and service quality. Regulatory uncertainties and the need to align tariffs with evolving cost structures further complicate the operating environment. Resistance by consumers in shifting to prepaid meters, issues in the implementation of the direct debit mechanism, delays in the disbursement of grant funding, and delays in timely payments from state discoms are impeding the growth of the distribution sector. Further, regulatory complexities and skill shortages continue to test the sector’s resilience. Overcoming these obstacles requires steadfast policy support, targeted capital investments and robust capacity-building to foster a culture of modernisation.
As per the Central Electricity Authority’s Draft Distribution Perspective Plan 2030, about Rs 4.28 trillion will be required for the upgradation of distribution infrastructure during 2022-27, of which about Rs 1.89 trillion will be available to discoms, including funds sanctioned under the RDSS. The available funds will be around 44 per cent of the total investment required up to 2027.
Overall, the latest trends indicate gradual but tangible progress in improving operational metrics, narrowing financial gaps and advancing digitalisation. However, sustained gains will depend on timely tariff reforms, continued loss reduction and accelerated infrastructure modernisation. The evolving policy and regulatory initiatives signal a clear push towards a more financially viable, technology-driven and consumer-centric distribution ecosystem in the coming years.
