India's power distribution companies (discoms) are on a recovery path, with their financial health strengthening due to policy reforms proposed under the Draft National Electricity Policy 2026, the Electricity (Amendment) Bill 2026, and the Digital India Energy Stack, according to a report by Macquarie. The report highlights that the power sector recorded a profit of approximately Rs 25 billion in FY25, after decades of being loss-making.
Record Peak Power Demand and Grid Pressure
Peak power demand reached a record high of around 271 GW in May 2026, indicating significant pressure on the grid despite adequate base generation capacity. The report notes that coal continues to provide baseload power with plant load factors (PLFs) exceeding 65 percent, while reforms aim to make the sector more market-driven and financially robust.
Improved Financial Performance of Discoms
The financial performance of discoms has improved, supported by investments under the Revamped Distribution Sector Scheme (RDSS) and the rollout of smart meters. As of March 2026, 59.7 million smart meters had been installed nationwide. Aggregate technical and commercial (AT&C) losses declined to 16 percent in FY25 from 21.9 percent in FY21, moving closer to the national target of 12-15 percent. The RDSS aims to reduce AT&C losses to 12-15 percent and eliminate the gap between average cost of supply (ACS) and average revenue realised (ARR). Under the scheme, projects worth Rs 1.53 trillion have been sanctioned for distribution infrastructure, and projects worth Rs 1.3 trillion approved for smart metering.
Regulatory Reforms and Market Shift
The report highlights that the Draft National Electricity Policy 2026 proposes a shift towards market-based power systems, moving away from rigid, long-term coal power purchase agreements (PPAs). The Electricity (Amendment) Bill 2026 seeks to enhance state discom efficiency by mandating cost-reflective tariffs, which is expected to reduce cross-subsidies and strengthen the sector's credit profile. Additionally, the India Energy Stack will provide a digital backbone for the power sector by standardising data exchange and identity systems.
According to the report, "Improved billing, reduced leakages, and LPS-driven decline in overdue payables indicate materially stronger financial health versus historical levels." The report also notes that the power sector is undergoing a dual-track transition, with coal maintaining baseload supply while new reforms drive market orientation.
