What’s Keeping UP Government’s Power Distribution Companies Buried In Debt — A Ground Report From Agra

The Uttar Pradesh government remains firm in its decision to privatise power distribution companies (DISCOMs) in the state.

Moving forward, the Uttar Pradesh Power Corporation Limited (UPPCL) management successfully resolved legal challenges, clearing the privatisation process of two DISCOMs under the Public-Private Partnership (PPP) model.

The state government's decision to privatise DISCOMs comes from the mounting debts faced by state-owned DISCOMs.

The same approach was attempted before but never saw much success, as the engineers, and others opposed and argued that this method would not solve the problem and only create disadvantages for both employees and consumers.

Even this time, power corporation employees continue to strongly oppose this decision.  

However, they agree that multiple factors continue to lead the financial struggles of DISCOMs, including political interference, policy shortcomings, and operational issues such as electricity theft and unpaid dues, which needs to be addressed better.

In Uttar Pradesh, of the five DISCOMs, Dakshinanchal Vidyut Vitran Nigam Limited (DVVNL) in Agra has the second-highest debt, after Purvanchal Vidyut Vitran Nigam Limited (PuVVNL).

These two DISCOMs have been chosen as pilots for the government’s privatisation plan. (more details on privatisation plan, here)

Despite the implementation of subsidy schemes like Ujjwal DISCOM Assurance Yojana (UDAY), and Revamped Distribution Sector Scheme (RDSS) — which engineers admit have benefited the system overall — the financial woes persist.

According to the state government, these DISCOMs are currently facing cumulative losses of Rs 1.1 lakh crore. The rising debt is rooted to a combination of departmental inefficiencies, and severe challenges in ground-level operations and dues collection.

Many engineers in Agra claim that a large portion of the debt, estimated at nearly 50 per cent (unofficially), arises from pending payments by government bodies, including police stations and other institutions.

Moreover, electricity theft and corruption, unpaid residential dues, severely add to the burden.

Losses for DVVNL

As per power engineers in Agra, the primary reason for the losses faced by DVVNL lies in the high power procurement costs.

The cost of power generation per unit is approximately Rs 5.55, but in many cases, electricity is sold at much lower prices.

“For instance, the electricity cost is Rs 5.55 per unit, but after subsidies, it is supplied to farmers at much lower rates. Similarly, the private partner, Torrent Power, buys electricity at Rs 4.36 per unit under its agreement. This results in a clear loss of Rs 1 per unit,” says Executive Engineer Prabhat Singh.

In the 14 years since Torrent Power took charge, the power corporation has suffered a loss of Rs 2,434 crore only due to this difference.  

Why do DISCOMs face higher purchasing prices?

According to DVVNL officials, UP’s maximum power demand is around 30,000 MW, while in-state power generation is only 5,000 MW at a cost of Rs 4.12 per unit.

To meet the shortfall, the state relies on Power Purchase Agreements (PPAs) with private generators, covering both long-term and short-term contracts.

“For long-term agreements, the cost per unit remains at Rs 5.50, whereas short-term contracts average Rs 7.81 per unit, a price that has remained unchanged for years,” they tell Swarajya.

When the department is tasked with ensuring 24-hour power supply, both officially and unofficially, it often exceeds the capacity.

“For example, last summer, we were ordered to supply uninterrupted electricity for 24 hours. But the higher cost power purchased to meet the demand was not compensated.”

“Moreover, to balance the demand-supply, the power brought through exchange during peak demand periods can cost as much as Rs 20 per unit. However, this fluctuation cannot be adjusted in the billing cycles and the department bears the expense.”, the officials add.

Power experts in the region tells Swarajya, “The previous governments had announced to set up in-state power generation facilities, but it never happened. If timely steps had been taken to build these, the state could have reduced its dependency on outsourcing, and reduced these losses.”

However, aside from the high cost of power procurement, there are also operational issues on the ground, majorly caused by power theft and billing irregularities.

Power Theft In Rural Settlements

In rural regions of UP, power theft still remains a key challenge contributing to distribution losses.

In 2023-24, distribution losses for DVVNL stood at 18.44 per cent. A year before, the same was at 21.59 per cent.

These losses result from energy released by substations, but this much usage was either not recorded or billed.

While there have been multiple measures by the state government to combat this widespread ground challenge, the issue persists.

Over the years, urban areas have still seen major improvement, rural regions still sit with not paying for or stealing power — treating it as a normalised cultural practice.

“It’s a mindset issue in rural areas. Many people still believe they do not have to pay for electricity,” a senior field official in the Agra zone tells Swarajya.  

“In urban areas, people have become more conscious due to social image, but this mentality has not shifted in rural areas. This has continued to create operational and financial challenges for us.”, he adds.

The department, to prevent these activities, the teams often have to conduct raids at odd hours, like late at night or early in the morning. Yet, the challenge remains.  

The added challenges is the community networks formed within settlements, which sometimes also involve DISCOM staff.

A junior engineer (JE) working in Agra's rural areas says, “When we go for inspections, locals are often informed beforehand, giving them a chance to remove illegal connections temporarily.”

“Even then if we confront, we face threats, assault, and false accusations,”, he adds, stating through his experience of serving for two decades.

“In many cases, anti-theft teams encounter local political leaders or criminals, and the situation reaches to the risk of their safety. At such times, for our own security, we then have no choice but to move out.”

Common Methods

Similarly, there have been multiple cases of individual thefts.

One common way is through misusing the naked wires for direct connections to homes.

In another way, people bypass the connections to their meters by cutting the input feed and joining alternative lines to their homes.

“In many cases, individuals suffer fatal accidents while stealing electricity, but the practice still continues.”, the senior official adds.

While the agencies continue to face threats on ground, the lack of manpower remains a major reason for them to be unable in tackling theft.

“Officially, each feeder should have three gangs (teams). A gang consists of a lineman, patrolman, and helper. At this substation, which has eight feeders, there should be 24 such teams,”, said the official, on condition of not disclosing the substation name.

However, the station currently operates with only three teams, which has placed a tremendous burden on them to manage supply quality, handle consumer demands, and conduct anti-theft operations.

“Given the risks these employees face daily, it is not surprising that some succumb to political pressure, financial benefits, or personal connections to support illegal activities.”, he adds.

“And even after such conditions, the government compare DISCOMs operating under such strained conditions to private companies.”

The line loss at this substation remains at 23 per cent. This means 23 per cent of the electricity usage is unaccounted for and cannot be billed. While this figure is still high and a cause for concern, it has decreased from about 50 per cent just two years ago.

The government has set a target to bring line losses down to 15 per cent, as these also include losses due to transformer damages

Unpaid Bills Remains Another Challenge

Adding to theft, unpaid bills in rural areas also remains a common practice.

Many consumers avoid paying monthly dues. Instead, they wait for one-time settlement schemes to clear their payments.

“While these schemes are intended to offer relief, they have often caused more problems than benefits.”, the official added.

The government continues to roll out these schemes, especially during elections, which some experts believe is more about political gains than genuine solutions.

However, these schemes have only backfired, being misused by the public and leading to increased dues over time.

“When we send consumers bills accumulated over months, they come up with complaints that the amounts are incorrect. In about 95 per cent of cases, our checks confirm the bills are accurate. However, this process wastes a lot of time and resources,”, the official tells Swarajya.

The public has come to view one-time settlement schemes as an easy way to clear bills without paying penalties or interest, adding to the financial strain on DISCOMs.

Suggestions From Power Engineers                           

The power engineers believe that the lack of manpower and the government’s use of DISCOMs as a welfare platform for political gains have created much of these challenges.

If policies are reconsidered to address power generation and manpower shortages, the public system running DISCOMs can operate without losses.

“In 1980, the state power sector had 1,35,000 employees handling 65 lakh consumers. Today, there are only 45,000 employees managing 3.45 crore consumers. How can this structure work efficiently?” Er. RK Singh, retired engineer from UP power sector, tells Swarajya.

“Moreover, the power sector is highly technical and requires the right people for the right tasks. However, the departments are run with a bureaucratic mentality over the years.”, he adds.  

To improve the situation on ground, technical resolutions are essential.  

• To reduce theft, smart meters have been installed. Additionally, if all cables are aerial bundled instead of using naked wires, as well as use of prepaid meters will push people to pay their bills on time.

How Private Companies Manage Such Issues

For private companies, the main advantage remains its freedom from many of the liabilities and restrictions faced by government DISCOMs.

“They are not burdened by political pressure, and their goal is profit. In contrast, government DISCOMs have become more of a welfare mechanism rather than a commercial agency,”, says another power sector employee.

When it comes to tackling power theft, government DISCOMs can only manage to some extent within the ethics of the system.

However, private companies have more flexibility, such as dealing with local leaders and conducting informal transactions to address issues.

They are not under the same pressure for public welfare, and their manpower costs are lower. This allows them to better regulate and control collections of unpaid dues.

Additionally, private companies, like in the case of Torrent Power, purchase power cheaper and sell it at a higher price, benefiting from this margin.

Looking at all these advantages, however, in a way address most of the challenges that sit over public DISCOMs, and this has led many experts in Agra also to believe that private participation could be the solution to improving the system.

“As electricity is a fundamental right and essential for economic growth, the system should operate commercially, not just as a welfare system.”, says another retired power sector expert, now an industrialist.  

To resolve these issues and move past the current restrictions faced by government DISCOMs, they believe that private involvement could be key to improving the distribution network.