Challenges in India’s power distribution systems leading to high AT&C losses

By Abhinash Jena & Sahithi Kandala on June 10, 2025

Energy is a fundamental requirement and necessity for a nation’s overall development. As electric power utilities face rapidly increasing demand, ensuring the efficient functioning of the distribution system, that is, the final stage of power delivery to end consumers, becomes critically important. Maintaining the health of this system is essential not only for reliability but also for economic sustainability. The power distribution network of India continues to face chronic financial distress due to inadequate revenue and subsidy realisation. Despite multiple government-led initiatives to reform the sector, the outcomes have been limited. A key contributor to this problem is Aggregate Technical and Commercial (AT&C) losses, which encompass both energy dissipation in the infrastructure and commercial issues like theft, tampering, and poor billing. High Aggregate Technical and Commercial (AT&C) losses are one of the major challenges affecting the power distribution efficiency in India.

Aggregate Technical & Commercial (AT&C) losses are the difference between the amount of energy a power company sends out and the amount that gets billed to customers. The AT&C loss is calculated using the formula (Pawar & Singh, 2012):

Aggregate Technical & Commercial (AT&C)
Aggregate Technical & Commercial

Rising concerns over increasing AT&C losses in India

The concept of Aggregate Technical and Commercial (AT&C) loss is a key metric used to evaluate the financial health of a power utility. Aggregate Technical and Commercial (AT&C) losses are a critical concern in India’s power distribution landscape. According to Pawar & Singh (2012), India’s national average for T&D losses stood at around 32.5%, and AT&C losses ranged between 18% and 62% across different states, with a national average of 36.63% in 2002–03. As a result, it has led to the scarcity of electricity, and frequent power cuts have become a common occurrence across India.

Chandel et al. (2016) highlighted that commercial losses, largely due to theft, are a major contributor to the gap between electricity demand and supply in India, with average losses around 25%. Moreover, electricity theft is rampant in many urban areas. It accounts for an estimated 1.5% of India’s GDP, posing a significant economic burden (B.Karajgi & Udaykumar.R.Y, 2012). The introduction of electronic meters with anti-tamper features was a step forward, but the continued prevalence of theft indicates the need for more advanced solutions (Chandel et al., 2016).

Furthermore, technical losses occur naturally during the flow of electricity through the components of a power system due to the inherent resistance and impedance in electrical conductors, transformers, and other equipment. Technical losses are physical and are largely unavoidable, though they can be minimised with proper design and system optimisation. In India, technical losses in distribution networks have been estimated to be around 22.5%, which is higher than international best practice standards of 5%–10% (Ramalla & Namburi, 2014).

Furthermore, Ramalla & Namburi (2014) also emphasised that AT&C losses are a significant contributor to the demand-supply gap in India’s power sector. AT&C losses remain persistently high in many parts of India despite government reforms, technology interventions, and privatisation efforts (Power Finance Corporation Ltd., 2025). These losses continue to:

  • Undermine the financial viability of distribution utilities,
  • Increase the cost burden on consumers, and
  • Reflect deeper systemic inefficiencies like theft, billing delays, and infrastructure constraints.

The annual performance report (Power Finance Corporation Ltd., 2025) shows that the all-India average AT&C loss for FY 2021–22 was at 16.52%, a marginal improvement from previous years. Several states and union territories continue to record AT&C losses above 25%, with some even exceeding 35%. The large gap between Average Cost of Supply (ACS) and Average Revenue Realised (ARR) remains substantial in high-AT&C-loss states. This is leading to increasing subsidy burdens on state governments and arrears to the power companies. The report also flags poor implementation of reforms, delayed procurement of smart meters, and weak enforcement mechanisms.

The lack of accountability and political interference in power distribution

The conceptualisation of electricity as a public good in India is rooted in the nation’s post-independence development agenda. The government has long endeavored to provide affordable and accessible electricity to all, particularly to uplift the rural and economically disadvantaged populations. Kale (2004) argues that the historical trajectory of electrification in different states of India has shaped their contemporary political economies of power. States where rural constituencies gained significant political influence early on have seen the deepening of agricultural power subsidies, making any subsequent tariff reform politically perilous.

India’s power distribution sector has shown measurable improvement over the last three years. According to the Performance of Power Utilities Report 2023–24 (Power Finance Corporation Ltd., 2025), total revenue increased from Rs 9.03 lakh crores in FY 2021–22 to Rs 10.43 lakh crores in FY 2023–24. Total losses declined sharply from Rs 79,379 crores to Rs 25,553 crores during the same period. This improvement reflects the impact of targeted reforms like the Revamped Distribution Sector Scheme (RDSS), adoption of smart metering, and enhanced billing and collection practices.

However, despite these gains, persistent systemic inefficiencies remain, particularly related to political influence, regulatory capacity, and institutional accountability. One of the critical issues is the politicisation of power tariffs. Several states continue to offer free or heavily subsidised electricity, especially to the agriculture sector, often without timely subsidy reimbursements to DISCOMs (Power Finance Corporation Ltd., 2025). Vibhuti Garg & Kashish Shah (2020) also highlighted that tariffs are not determined based on cost recovery but on political considerations, especially for agricultural consumers. State Electricity Regulatory Commissions often defer tariff hikes, under political pressure or due to a lack of independence.

Furthermore, the UDAY scheme’s outcomes show that despite debt takeovers, the lack of tariff discipline and subsidy accountability has hindered long-term financial improvement (Power Finance Corporation Ltd., 2025). While operational efficiency has improved, the underlying causes of high AT&C losses, political interference, weak regulatory enforcement, and lack of institutional accountability still remain unaddressed.

Role of infrastructure challenges and operational inefficiencies in discoms

The Indian power sector has changed a lot since 2003. While power generation and transmission have become more competitive, the distribution part is still mostly run by state-owned companies (Pandey & Ghodke, 2019). The Indian power sector, particularly electricity distribution companies (discoms), faces significant financial challenges. These companies struggle with considerable debts, accumulated losses, and outstanding dues, which hinder their ability to operate effectively and invest in necessary infrastructure (Singh et al., 2024). High Aggregate Technical and Commercial (AT&C) losses in India are not merely statistical anomalies but symptomatic of deeper infrastructural and operational deficiencies. A primary challenge lies in India’s ageing and overburdened distribution infrastructure. State-owned DISCOMs continue to rely on outdated transformers, undersized conductors, and overloaded feeders, originally designed for much lower urban and rural load densities (Verma et al., 2020). This technical fragility leads to significant energy dissipation before it reaches the consumer. Pandey & Ghodke (2019) attributed in their study that the lack of effective regulation by state governments to be the main cause of financial instability at the discoms. Poor operational efficiency and delays in receiving subsidies are also linked to insufficient state spending.

The commercial performance of most of the state utilities is alarming, despite various reform initiatives to make the State-Owned Electricity Utilities financially sustainable. The generation, transmission, and distribution capacities of the Indian power sector are not in tune with the massive future energy demand (Ghosh et al., 2021). Das & Srikanth (2020) found that electricity distribution companies in the Southern Region, even those performing relatively well, are experiencing financial stress. This is primarily attributed to the high cost of buying electricity. Key factors contributing to this include significant overestimation of electricity demand by the government, leading to excess generation capacity. The overestimation of demand leads to the signing of long-term power contracts that are not fully needed, resulting in high fixed costs. Athawale & Felder (2023) also found substantial evidence suggesting that India’s transmission system was overbuilt between 2008 and 2022. This is supported by the reduction in grid congestion to almost zero, the increase in transmission charges, and findings from government audits indicating low utilisation rates for many transmission assets. Such a regulated rate-of-return mechanism incentivises transmission companies to invest more capital, potentially leading to overbuilding, especially when oversight is weak. The burden of these inefficiencies is ultimately borne by consumers through increased tariffs. The lack of power purchase cost optimisation is a key challenge that leads to high AT&C losses. Power purchase cost is the major portion (70-80%) of the total cost of supply and is outside the direct control of most distribution utilities in India. The lack of generation capacity and operational inefficiency discourage discoms from purchasing power from distant sources due to transmission losses, resulting in frequent power outages (Pandey & Ghodke, 2019).

The global average for AT&C losses is estimated to be around 7%, as reported by the International Energy Agency (India Energy Outlook 2021 – Analysis, 2021) and corroborated by multiple World Bank and regional electricity sector studies. This stark contrast reflects systemic inefficiencies deeply embedded across technical, operational, institutional, and political layers. Addressing infrastructure and operational deficits is not just a technical imperative but a strategic necessity for India to ensure reliable, affordable, and equitable power access across regions. There is a strong need for a unified national framework for measurement and transparency, alongside improved data systems to ensure loss accountability and targeted interventions. The discoms today require a governance model that empowers utilities to function efficiently, enforces regulatory compliance, and ensures sustained investment in both people and infrastructure.

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I am an interdisciplinary educator, researcher, and technologist with over a decade of experience in applied coding, educational design, and research mentorship in fields spanning management, marketing, behavioral science, machine learning, and natural language processing. I specialize in simplifying complex topics such as sentiment analysis, adaptive assessments and data visualizatiion. My training approach emphasizes real-world application, clear interpretation of results and the integration of data mining, processing, and modeling techniques to drive informed strategies across academic and industry domains.

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