Fifth GoM Meeting Discusses Reform-Based Debt Restructuring, Full-Cost Tariff and State Liability for Discoms

The Centre and state governments are working on a reform-driven plan to restructure the rising debt of electricity distribution companies, aiming to resolve the persistent financial challenges facing the sector.

The issue dominated discussions at the fifth meeting of the Group of Ministers (GoM), chaired by Union Minister of Power and Housing and  Urban Affairs Manohar Lal in New Delhi.

The session was attended by Union Minister of State for Power and New and Renewable Energy Shripad Yesso Naik, along with energy ministers from Maharashtra, Uttar Pradesh, Tamil Nadu and Rajasthan. Ministers from Andhra Pradesh and Madhya Pradesh joined through video link. Senior officials of the Centre, State governments, utilities, the Central Electricity Authority and Power Finance Corporation Ltd. were also present.

Opening the meeting, the Power Secretary underlined the urgent need for reforms that not only pull discoms out of their present financial stress but also ensure that improvements are irreversible, avoiding any repeat of the current debt trap. He noted that the GoM was constituted specifically to identify and frame such measures.

Union Minister Shripad Yesso Naik highlighted deliberations from earlier meetings and stressed the need for stronger regulatory reforms. He said that both Central and State governments must work together to bring down debt burdens and improve efficiency, enabling utilities to supply quality and reliable power.

Chairing the meeting, Manohar Lal said the operational and financial health of discoms is fundamental to ensuring uninterrupted and affordable electricity for consumers. He urged states to accelerate the installation of prepaid smart meters in all government establishments and reaffirm their commitment to 'Power for All, at All Times' in an efficient, cost-effective and sustainable manner.

Presentations by senior officials from the Ministry of Power highlighted persistent challenges. Excessive cross-subsidies, they said, have inflated electricity costs for industries, affecting competitiveness, while continued losses have discouraged private investment. Distribution companies’ inability to recover costs has translated into mounting debt and weakened service delivery.

To address these issues, the GoM discussed a package of reforms that would form the basis of the new debt restructuring scheme. Proposals included requiring state regulatory commissions to issue full cost-reflective tariffs, with any additional subsidy to be borne directly by state governments. Ministers also emphasised that the debt of distribution utilities should ultimately be recognised as a liability of state governments, ensuring greater accountability.

The meeting further deliberated on introducing mediation mechanisms to resolve disputes quickly and discourage unnecessary litigation. Officials argued that timely subsidy payments, clearance of government dues, and faster rollout of smart meters were essential to restoring financial discipline. The greater use of data analytics for demand forecasting and power purchase optimisation was also identified as a priority.

The Additional Secretary briefed members on the proposed Electricity (Amendment) Bill, which seeks to strengthen the regulatory framework, improve financial viability of utilities, promote energy transition, and optimise distribution network use. The Bill, officials said, would also enhance the ease of doing business and improve overall service delivery for consumers.

The GoM concluded by reaffirming its commitment to finalising a reform-based debt restructuring plan that would put discoms on a sustainable footing. Members stressed that only through coordinated efforts of the Centre, States and regulators can the sector’s viability be secured and the national goal of reliable, affordable power for all be achieved.