CAG to audit power discoms amid mounting financial stress

The CAG audit will initially focus on the operational and financial performance, with particular attention to power procurement, demand forecasting, metering, regulatory accounting and consumer services.

The national auditor, the Comptroller and Auditor General of India (CAG), has launched a nationwide performance audit of power distribution companies (Discoms), which face mounting financial stress, high debt and persistent operational inefficiencies, as part of a four-year exercise to assess the health of India's power sector, according to two government officials.

The audit will initially focus on the operational and financial performance, with particular attention to power procurement, demand forecasting, metering, regulatory accounting and consumer services.

The broader exercise will cover all major segments of the power sector, including generation, transmission, distribution and renewable energy, over the next four years, said the first among the two officials cited above.

The move comes against the backdrop of significant financial weaknesses in the distribution sector. As of 31 March 2025, 24 Discoms had negative net worth, with accumulated losses of ₹3.42 trillion. Their outstanding borrowings amounted to ₹7.26 trillion, attracting an annual interest burden of ₹77,653 crore, the official said.

Of the Discoms covered in the data, 41 reported aggregate profits of ₹32,661 crore in FY25, while 23 incurred combined losses of ₹29,959 crore.

“The audit will examine whether government support to the distribution sector is translating into structural improvements or increasingly being used to meet the cost of accumulated losses and debt,” said the second official. Both the officials spoke on condition of anonymity.

Revenue grants to Discoms increased 69.4% to ₹94,095 crore between FY21 and FY25, compared with a 16% rise in capital grants to ₹1.25 trillion during the same period.

“Government support is increasingly meeting the cost of losses, debt and interest rather than investment,” this official said.

Mint's queries emailed to the CAG spokesperson remained unanswered.

Operational efficiency

The auditor also flagged the uneven performance of Discoms in reducing aggregate technical and commercial (AT&C) losses, a key indicator of operational efficiency. National-level AT&C losses stood at 15.04% in FY25, marginally above the 12-15% target under the Revamped Distribution Sector Scheme (RDSS).

The performance varied significantly across states, with losses ranging from 3.63% to 48.86%. As many as 27 Discoms failed to meet the prescribed benchmarks.

The audit will be conducted across all states through the respective field audit offices, with findings presented to state legislatures through state audit reports. Common policy issues and systemic deficiencies emerging from these reports will be consolidated and brought to the Union power ministry for consideration and possible policy interventions, according to the officials.

The CAG has also integrated the audit of the Centre's RDSS with the state-level Discom audits to avoid duplication and assess the scheme's implementation and outcomes using evidence gathered from individual utilities.

Consumer satisfaction

Beyond conventional financial and operational indicators, the exercise will assess consumer satisfaction across domestic, industrial, commercial and agricultural categories. This is intended to assess the quality and reliability of electricity services and the extent to which distribution-sector reforms have benefited consumers.

Power procurement will be another key area of scrutiny, including purchases through power exchanges. The audit will examine power purchase arrangements, market transactions and their financial implications for distribution companies.

The officials further said that the exercise would go beyond a conventional assessment of Discom performance to identify systemic weaknesses and implementation gaps in reforms.

The CAG is the country's constitutional authority responsible for auditing the receipts and expenditure of the Union and state governments, as well as government-funded bodies and public sector entities. It promotes financial accountability, transparency and legislative oversight by placing audit findings before Parliament and state legislatures.

About the Author

Dhirendra Kumar is a seasoned policy reporter with about 20 years of experience in deep, on-ground reporting across key economic and governance sectors. His work spans finance, public expenditure, disinvestment, public sector enterprises, textiles, trade, consumer affairs, and agriculture, with a strong focus on uncovering structural policy shifts and their real-world impact.<br><br>Kumar has been awarded the Chaudhary Charan Singh Award for Excellence in Journalism in Agricultural Research and Development, recognising his contribution to reporting on critical issues in the farm sector. He has also been a recipient of a fellowship in international trade from the National Press Foundation, which has further strengthened his coverage of global trade dynamics and their implications for India.<br><br>Kumar is known for breaking complex policy developments into clear, accessible stories. His reporting focuses on uncovering under-reported trends, explaining policy shifts, and helping readers stay informed about developments that shape India’s economic landscape.