The Uttar Pradesh (UP) electricity sector has been riddled with its distinct and complex challenges. Firstly, it is a sector dominated by a large domestic consumer base, contributing to ~45% of electricity demand. In contrast, cross-subsidising commercial and industrial sales only contributes to 27% of electricity demand. Secondly, in spite of financial bailouts, there is a persistent challenge of rising costs and revenue gaps. Thirdly, the sector has consistently had high losses, with its present Aggregate Technical and Commercial (AT&C) loss at 31%, while the national average is 19%. Added to these structural challenges, the sector has historically been lacking accountable regulatory processes in terms of conducting timely true-ups, or treating parts of DISCOM losses as “additional subsidy requirement”

The DISCOMs have to meet the commitment of providing reliable and affordable power to its 30 million consumers, 30% of whom are recently electrified households. Rapid electrification in the past few years will possibly translate to increased domestic consumption in the next few years. This will need added tariff support and expansion of distribution networks. The present financial distress makes investment in such expansion challenging. As a consequence, quality of supply and service might get neglected if DISCOMs decide to forgo necessary capital expenses and operation and maintenance expenditure. It is likely that arrears will build up faster in the absence of quality supply of power, which will further affect DISCOM finances.

The UP power sector requires keen attention and fundamental changes to ensure optimization of cost of supply. Only then can quality, reliable and affordable power be supplied to all, especially to the 8 million beneficiaries of recent large-scale electrification efforts. Given these challenges, the state overview delves into key parameters and recent trends that affect UP DISCOMs’ financial health, and supply and service quality. The full overview can be read here.