Behind new agriculture DISCOMs: Debt, farm subsidy and privatisation concerns

Agriculture remains the largest consumer category of electricity in India, accounting for roughly one-fifth of total usage. State governments are taking measures to address the solvency issues of electricity distribution companies (DISCOMs) by segregating agricultural load into separate entities, aiming to free up resources for other utility functions.

Three states, Telangana, Maharashtra and Haryana, have proposed creating dedicated DISCOMs for agricultural consumers. Telangana and Maharashtra have created these entities, although neither is yet operational, while Haryana's plan was put on hold due to opposition from power sector employees. Agriculture is the most heavily subsidized sector, with state subsidies and cross-subsidies from commercial and industrial consumers often falling short of supply costs.

This has made DISCOMs reliant on subsidies and vulnerable to delays, straining their working capital and investment capacity. State governments spent nearly Rs 1.9 lakh crore on energy subsidies in 2024-25 to support DISCOMs and provide subsidized electricity to farmers and households. Farm power subsidies alone amounted to over Rs 1.3 lakh crore in the 13 major agrarian states in FY25.

State-owned utilities continue to operate at a loss and rely on borrowings to cover operating shortfalls and accumulated liabilities. The new entities aim to address the financial burdens of agriculture while potentially paving the way for privatization. However, critics argue that these DISCOMs will become heavily dependent on government subsidies, as they lack commercial and industrial consumers to generate revenue.