Govt plans IPOs for five state-run power firms to raise funds for expansion

The government is considering privatising state-run discoms facing tariff limits, rising power costs, high T&D losses, and delayed payments from consumers

The government has identified five state-owned power generation and transmission companies for stock market listing to help them secure investment needed for capacity expansion.  

 

A report by Financial Express quoted power secretary Pankaj Agarwal as saying that among these companies, Andhra Pradesh Power Generation Corporation and Gujarat Energy Transmission Corporation are currently in the process of appointing merchant bankers.

 

Potential privatisation of state-owned discoms

 

Additionally, the government is exploring the possibility of privatising state-owned distribution companies (discoms), which struggle to raise tariffs despite increasing power procurement costs, high transmission and distribution (T&D) losses, and payment delays from consumers. In a recent regional meeting, states sought the Centre’s support in privatising distribution utilities to enhance service efficiency and reliability.  

   

To address financial concerns surrounding discoms, the government has formed a group of ministers. However, the power secretary ruled out the possibility of a financial bailout, the news report said.

 

The government is also considering stock exchange listings for some discoms, provided they reduce their accumulated losses. Official data shows that as of 2023-24, the total losses of discoms nationwide amounted to Rs 6.92 trillion, while their outstanding debt reached Rs 7.53 trillion by the end of FY24.  

 

While states have improved subsidy payments to discoms and the gap between the average cost of supply (ACS) and average revenue realised (ARR) has narrowed from 45 paise per kWh in 2022-23 to 19 paise in 2023-24, some pending government dues remain. By January 2025, the ACS-ARR gap had further reduced to 0.10 paise per kWh.  

 

Experts suggest that a combination of measures, including phased tariff adjustments, reduction in aggregate technical and commercial (AT&C) losses, and power purchase cost optimisation, could strengthen the financial health of discoms.  

Challenges in power procurement and tariffs

A report by ICRA noted that while coal prices have eased from their peak levels in FY23, short-term power tariffs remain high, keeping power purchase costs elevated for discoms. The report emphasised the importance of optimising procurement strategies, increasing reliance on cheaper renewable energy sources with storage, and reducing dependence on costlier alternatives, the Financial Express reported.

 

State-owned discoms continue to face financial strain due to tariffs that do not fully cover supply costs, higher-than-expected AT&C losses, and significant debt burdens.  

 

Meanwhile, Power Minister Manohar Lal Khattar stated that the country’s peak power demand is projected to reach 270 gigawatts (GW) this year, with adequate measures in place to manage summer demand.  

 

The power secretary also noted that if necessary, the government could invoke Section 11 of the Electricity Act, 2003, which allows the government to direct generation companies to operate under specific conditions in exceptional circumstances to meet rising demand.  

 

Looking ahead, the government estimates that peak power demand will reach 335 GW by 2030. In 2024, demand peaked at 250 GW, slightly below the projected 260 GW.