- By Mayuri Singh and Nishant Saxena
Rising DISCOM debt has become a central concern in India’s power sector discourse. The 16th Finance Commission’s latest analysis highlights both the scale and concentration of these liabilities, alongside a policy tilt favoring SPV-based debt warehousing and conditional incentives linked to privatization.
Yet amid this national narrative of mounting debt and private-sector remedies, Uttar Pradesh presents a striking counterpoint. Its DISCOMs have achieved substantial operational improvements and a steady reduction in liabilities, demonstrating that large-scale public-sector reforms can succeed when rigorously implemented. This story is not merely about numbers; it is about a missed narrative opportunity, offering lessons for policymakers, investors, and energy professionals.
The 16th Finance Commission Perspective
India’s DISCOM debt has surged from roughly ₹4.7 lakh crore in 2018-19 to an estimated ₹7.4 lakh crore by 2023-24. Analysis from the PFC Integrated Rating data indicates that the recent escalation is highly concentrated, with a small group of large states, notably Maharashtra, Tamil Nadu, Andhra Pradesh and Rajasthan, driving the bulk of the increase in DISCOM debt.
The 16th Finance Commission underscores this concentration and recommends targeted SPV-based debt warehousing, linking a portion of central capital assistance to states that adopt such models and undertake privatization of their DISCOMs. While privatization is positioned as the preferred reform pathway, the Commission does not make it a legal inevitability, leaving room for states to demonstrate alternative approaches.
This framing is significant because it shapes policy and media narratives: debt reduction, privatization, and SPVs are often presented as the primary solutions, while public-sector reform successes remain underrepresented. Uttar Pradesh’s experience challenges this assumption, highlighting that context, scale, and disciplined implementation can produce comparable fiscal and operational outcomes.
Uttar Pradesh’s Trajectory of Operational Gains and Debt Reduction
Uttar Pradesh’s DISCOMs stand apart from high-liability states. Over the last five years, power-sector debt in the state has fallen materially, with recent parliamentary data indicating a high single-digit percentage decline in FY 2024-25. Media reports and Lok Sabha tables collectively suggest a roughly 25% reduction over five years, a remarkable achievement given the state’s massive, predominantly rural load profile.
Operational improvements complement the fiscal gains. AT&C losses, a key indicator of revenue efficiency, declined from 22.18% in FY 2022-23 to 19.54% in FY 2024–25, despite partial reversal of the sharp gains achieved in FY 2023-24. ACS-ARR gaps have narrowed, and UP has emerged among the leading states in smart-meter installation and utilization of IT and analytics for billing and collections.
These metrics underscore that scale and scope need not be trade-offs in reform: a public-sector utility can deliver operational efficiency across tens of millions of rural consumers. Comparative analysis reinforces this distinction: while Maharashtra, Tamil Nadu, Andhra Pradesh, and Rajasthan drive the majority of new debt accumulation, UP’s liabilities have stabilized and trended downward. This contrast highlights that national narratives of escalating DISCOM debt are not universally applicable, and blanket prescriptions for privatization may overlook state-specific lessons in effective governance.
Achieving Scale in Distribution Reforms
The scale of UP’s reforms is unmatched. The Revamped Distribution Sector Scheme (RDSS) has strengthened metering, enabled targeted loss-reduction measures, and optimized revenue collection. Its success hinges not only on capital investment but also on disciplined implementation, data-driven monitoring, and rigorous operational oversight.
UP demonstrates that public‑sector models can achieve credible financial and service‑level improvements approaching those of better‑run private utilities, yet at the scale of the country’s largest rural population. In contrast, states such as Tamil Nadu and Rajasthan continue to carry power-sector liabilities in the range of 5-7% of their GSDP, reinforcing the notion that liability concentration is highly state-specific. UP’s trajectory shows that well-designed, rigorously executed reforms can produce measurable improvements without resorting to privatization.
Contextualizing the Privatization Debate
Privatization remains central in the Finance Commission’s recommended reform toolkit. By linking SPV-based debt warehousing with additional capital assistance, the framework positions privatization as a preferred pathway for states seeking central support. Delhi and parts of Odisha exemplify private-sector success in reducing AT&C losses and improving service quality.
Yet UP illustrates that public-sector DISCOMs can deliver substantial fiscal and operational gains at massive scale. Its experience is a compelling alternative narrative that deserves recognition. Highlighting UP does not negate the benefits of privatization but underscores the importance of nuanced, state-specific understanding. Policymakers, investors, and media often emphasize aggregate debt indicators, inadvertently obscuring operational successes. Recognizing UP ensures that public-sector reform models are represented and that the broader discourse on sector reform remains rich and multifaceted.
Narrative, Perception, and Strategic Communication
Despite these achievements, UP’s story remains underreported. Media narratives and policy notes frequently focus on aggregate debt and privatization benchmarks, obscuring state-level operational successes. This “aggregate blindness” can distort investor perception, misinform policy debates, and undervalue lessons embedded in state-specific reforms.
Strategic communication becomes an integral tool for reform advocacy. By systematically reporting operational metrics, highlighting debt trajectories, and framing the narrative around scale and complexity, UP’s experience can inform both policy and market expectations. Clear storytelling ensures that public-sector achievements are recognized alongside privatization successes, enriching the national conversation on distribution reform.
Systematic reporting, benchmarking, and targeted engagement with media, regulators, and stakeholders can reposition UP as a model of public-sector reform. This informs replication strategies for other states and shapes market and policy perceptions in a sector where investor confidence and regulatory clarity are increasingly critical.
UP’s Story Matters
Uttar Pradesh’s experience is more than a data point; it is proof that public-sector DISCOMs, when managed strategically, can achieve financial stability, operational efficiency, and large-scale rural outreach. Its achievements challenge the prevailing privatization-centric narrative, highlight the importance of state-specific reform strategies, and underscore the need for better communication of success stories in shaping policy, investment, and public understanding.
In an environment dominated by aggregate debt figures and prescriptive reform frameworks, UP reminds us that context, scale, and disciplined execution matter. Its story deserves a platform not merely for recognition but as a strategic lesson: effective reform is possible across ownership models, and careful storytelling amplifies both its impact and replicability.
Parting Thought
Uttar Pradesh’s discom reforms challenge conventional assumptions that privatization is the primary lever for operational and fiscal recovery. The state’s experience underscores the value of disciplined public-sector management, targeted interventions, and systematic reporting at scale.
Reframing UP’s story allows policymakers, investors, and regulators to appreciate that impactful reform can emerge from scale, operational rigor, and disciplined execution. These lessons merit both attention and deliberate storytelling in India’s evolving energy landscape, reminding the sector that reform is about design, governance, and communication, not ownership alone.
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