CAG begins nationwide audit of 39 power discoms, to examine consumer satisfaction and short-term power procurement

The Comptroller and Auditor General of India (CAG) has begun an audit of the operational and financial performance of 39 state-owned power distribution companies (discoms), with a special focus on consumer satisfaction and short-term power procurement practices, The Indian Express has learnt.

Unlike earlier audits, which examined individual discoms in different states in separate years, the current exercise brings 39 state-owned discoms across the country under a single audit.

It also covers five departmental undertakings where electricity distribution is still handled directly by government departments rather than separate companies.

The audit began in some states in July and is expected to be completed by the middle of the next financial year, sources said.

The exercise is part of the CAG’s plan to undertake an integrated audit of the power sector, which is expected to attract investments of around Rs 50 lakh crore by 2032 and Rs 200 lakh crore by 2047.

The audit is being conducted by the CAG’s State Commercial Audit division, which was set up last year to focus on state-owned public sector enterprises.

The integrated audit is envisaged to cover all major segments of the power sector over the next four years — generation, transmission, distribution and renewable energy.

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According to officials, distribution has been taken up in the first year because discoms are the direct interface between the power sector and consumers, and their financial health is connected to power supply, other segments of the sector and wider economy.

State-owned discoms continue to face financial stress, with accumulated losses and mounting liabilities weighing on their balance sheets.
Public sector discoms have accumulated losses of Rs 6.77 lakh crore and borrowings of Rs 7.11 lakh crore.

Officials maintained revenue grants have grown more than four times as compared to increase in capital grants, indicating that an increasing share of government support is being used to meet the cost of losses, debt and interest payments rather than fund investments.

Focus on short-term power procurement

While the audit will examine the conventional operational parameters of discoms, including Aggregate Technical and Commercial (AT&C) losses, billing efficiency, collection efficiency and power supply performance, equal emphasis is being placed on assessing
their financial health and sustainability.

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A key focus of the audit will be on assessing consumer satisfaction to evaluate the quality of electricity services delivered by discoms and the level of satisfaction among different categories of consumers, including domestic, industrial, commercial and agricultural consumers.

For this, the apex auditor is planning to conduct a consumer satisfaction survey by the Ministry of Statistics and Programme Implementation (MoSPI) or other survey agency.

The survey will cover around 10,000 consumers across the country in the different categories.

Another key area of focus will be to examine power procurement practices of discoms, including purchases through power exchanges, officials said.

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Officials said this is mainly due to increasing share of the short-term power procurement in the power purchase basket of the states.

“We found that it has grown from around 7-8% four- five years ago to around 14%. And of that the exchanges are contributing more than 56%. So this is and the quantum of purchase is quite huge. So we actually wanted to know whether there is a robust demand forecasting system and the timing of the markets by the state entities. Ultimately the cost at which the power is purchased would impact the end consumer of the electricity,” an official said, adding, “we will be focusing on the power trading aspect very critically this time around.”

Integrated auditing approach

Meanwhile, the auditor has also increasingly been adopting an integrated approach to auditing, bringing together different audit wings and government departments to examine an entire sector or scheme rather than assessing individual departments in isolation.

Explaining the approach, a senior official said that the objective was to get a more comprehensive picture of how different parts of a sector function together.

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For instance, in the audit of multimodal transport, officials from the railway, shipping and road infrastructure audit wings worked together to examine the movement of freight across different modes of transport. Earlier, these areas would have been audited separately, making it difficult to assess the overall efficiency of the country’s freight transportation system.

This approach could also help identify irregularities that may not emerge when individual schemes or departments are audited separately, officials said.

So far, the approach has been adopted in auditing subjects like ease of doing business focusing MSMEs, ease of living which was audited in 101 cities, and urban mobility, among others.