Prateek Aggarwal, Anjali Viswamohanan, Danwant Narayanaswamy, Shruti Sharma
December 2020 | Power Sector
Suggested Citation: Aggarwal, Prateek, Anjali Viswamohanan, Danwant Narayanaswamy, and Shruti Sharma. 2020. Unpacking India’s Electricity Subsidies: Reporting, transparency, and efficacy. Winnipeg: International Institute for Sustainable Development.
This report, published in collaboration with IISD, evaluates the financial performance of electricity distribution companies (discoms), primarily focussing on the electricity subsidies and improving the accessibility of data in all states and union territories (UTs) across India. Using publicly available information sources, it identifies trends across discom finances, subsidies, reporting and transparency. It analyses changes from FY 2016 to FY 2019—before and after the implementation of Ujjwal Discom Assurance Yojana (UDAY) scheme.
In fiscal year (FY) 2019, direct tariff subsidies from state governments in India amounted to INR 110,391 crore (USD 15 billion). Cross-subsidies are not reported well at a national level, but the study estimated that they amounted to at least INR 75,027 crore (USD 10.2 billion). While price support is vital for small consumers, including low-income households and agricultural consumers, discoms have been struggling financially. This situation can only get worse as discoms deal with added losses due to the impacts of COVID-19. Both tariff increases and financial bailout options are limited since both consumers and governments are strapped for cash as the country continues to fight COVID-19.
Agriculture received three fourth of the total subsidy support in FY 2020
Source: Authors’ analysis from State Electricity Regulatory Commissions’ tariff orders.
*Data for FY 2019
Note: The “Others” category includes public lighting, public waterworks, signboards, hoardings, railway traction, airports, etc.
Note 2: Out of 36 states/UTs, the state level clear documentation (data) was available for 17 Seven states/UTs do not provide any subsidy support and there was no data available for 12 states/UTs.
Discoms finance trends show indicators moving in the opposite direction
Subsidy outcomes are moving in different directions, but there are common challenges with tariff design and cross-subsidies
Transparency and data reporting could be considerably improved
Andhra Pradesh, Chhattisgarh, Karnataka, Punjab, Rajasthan, and Telangana have been consistently defaulting on full subsidy payments
Improve data reporting to help inform effective policy
Decision makers (including discoms, state regulators, the Central Electricity Regulatory Commission, and the Forum of Regulators) should work together to improve transparency and reporting by:
Improve Data on Subsidy Distribution to Explore Better Subsidy Targeting
Coordinate DBT Implementation with Subsidy Targeting Effort
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