New Delhi: The Comptroller and Auditor General of India (CAG) has started an integrated audit of the operational and financial performance of 39 public sector power distribution companies (discoms) and five power departments across the country. State-wise reports are expected next year. Private distribution companies fall outside the exercise.
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A senior official said the auditor had put discoms first because of their position in the power chain. “Given the fact that discoms are the interface between the power sector and consumers and their stress affects the reliability and affordability of power supply and spills over into state finances through subsidies, guarantees and equity support, priority was accorded to the horizontal performance audit of their operational and financial performance,” the official said.
The CAG regularly audits power utilities, schemes and entities at both the Union and state levels. According to the official, what sets this exercise apart is its integrated and horizontal scale.
The audit will examine data from the last five years. “There are 28 officers involved in this audit,” the official said.
Auditors will look at aggregate technical and commercial (AT&C) losses, billing efficiency and collection effectiveness. They will also review power supply performance, the financial health of the utilities and short-term power purchases, including those made through power exchanges. A consumer satisfaction survey will cover about 10,000 consumers across the country and across consumer categories.
The CAG has also folded its audit of the Centre’s Revamped Distribution Sector Scheme (RDSS) into the exercise. This will assess how the scheme was implemented and what it achieved, alongside the performance of the discoms.
The official said discoms’ financial stress was linked to weak power procurement, demand forecasting, metering, regulatory accounting and consumer service. Government support, the official added, has changed in character. “Revenue grants have grown more than four times as compared to increase in capital grants,” the official said. “Government support is increasingly meeting the cost of losses, debt and interest rather than investment.”
According to the figures the CAG presented, discoms’ accumulated losses exceeded Rs 3.41 lakh crore at the end of March 2025. Their outstanding borrowings stood at over Rs 7.26 lakh crore, with an annual interest burden of Rs 77,653 crore. In 2024-25, 41 discoms reported aggregate profits of Rs 32,661 crore, while 23 reported combined losses of Rs 29,959 crore.
The discom audit is the first step in a four-year plan that will extend to every major segment of the power sector. Transmission, generation and renewable energy will follow in that order. This is the first time the CAG is applying a multi-year, sector-wide roadmap with a single methodology across all states.
To that end, the CAG has drawn up an audit-design matrix with inputs from internal and external stakeholders and domain experts. It has also fixed a common sampling methodology. The Indian Institute of Management (IIM) Ahmedabad is helping design the audit strategy and fill capacity-building gaps.
The auditor is consulting its field audit offices in every state, along with state and Union power secretaries and the power utilities. Regulators, the Central Electricity Authority (CEA) and the Central Electricity Regulatory Commission (CERC) are also being consulted.
Electricity distribution is primarily a state subject, so the audit is being carried out at the state level. Its findings will go to the respective state legislatures as State Audit Reports. Common and systemic deficiencies will be compiled and sent to the Union Ministry of Power for policy action.
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The CAG first announced the audit at a national conference on the power sector it hosted in February. Additional Deputy CAG Guljari Lal had told the conference that the CAG had initiated a horizontal performance audit of the operational and financial performance of discoms. He said it had also begun a performance audit of the Pradhan Mantri Surya Ghar Muft Bijli Yojana.