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					</table>The <a href="https://powermin.gov.in/" target="_blank" rel="noopener">Ministry of Power</a> has issued the Electricity Distribution (Accounts and Additional Disclosure) Rules, 2024, to enhance transparency in financial disclosures and bolster regulatory compliance for power distribution companies (DISCOMs).
The rules aim to enable DISCOMs to clearly demarcate revenue, receivables, and subsidies for better financial clarity. This will also allow investors, regulators, and the public to assess distribution entities&#8217; fiscal health better.
The rules ensure that entities are financially safeguarded against long-term defaults by mandating provisions for receivables and enforcing the reporting of trade receivable days.
The Average Power Supply (ACS), average Revenue Realized (ARR) gap, and Aggregate Technical and Commercial (AT&amp;C) loss metrics will play critical roles in policy formulation and monitoring, as these data points directly impact tariffs and financial sustainability.
The 2024 rules mandate that all DISCOMs—excluding government departments, boards, and corporations that are deemed licensees under section 14 of the Electricity Act—adopt a new reporting structure.
The rules emphasize accountability through comprehensive financial statements and additional disclosure requirements, aligning with Sections 129 and 176 of the Companies Act, 2013.
The rules outline that entities must recognize only the revenue approved within tariff orders. This means anticipated earnings outside these orders are no longer recognized in financial statements, ensuring speculative income does not distort fiscal transparency. Subsidies from state governments under the tariff subsidies program must be recorded and reported separately per guidelines.
Aimed at strengthening transparency, the new standards introduce several disclosure requirements:
<ul>
<li>Supplementary financial disclosures: Details on power sales, rebates, consumer tariffs, and government subsidies must be distinctly outlined.</li>
<li>Energy accounting: Power purchase data, including long-term, medium-term, and short-term transactions, and losses incurred in transmission are mandated to be reported.</li>
<li>Cost of supply vs. revenue gap: Entities must calculate and disclose the ACS cost against the ARR, helping regulators and stakeholders gauge efficiency and financial health.</li>
<li>AT&amp;C losses: Reporting on technical and commercial losses offers a granular view into inefficiencies, enabling corrective measures where necessary.</li>
</ul>
The minimum provisioning requirement for DISCOMs on their trade receivables from all categories of consumers in the financial statements is as follows: 
<img loading="lazy" decoding="async" class="aligncenter wp-image-71984 size-full" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2024/10/Minimum-Provisioning-Requirements-for-Trade-Receivables.png" alt="Minimum Provisioning Requirements for Trade Receivables" width="757" height="317" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2024/10/Minimum-Provisioning-Requirements-for-Trade-Receivables.png 757w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2024/10/Minimum-Provisioning-Requirements-for-Trade-Receivables-300x126.png 300w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2024/10/Minimum-Provisioning-Requirements-for-Trade-Receivables-650x272.png 650w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2024/10/Minimum-Provisioning-Requirements-for-Trade-Receivables-624x261.png 624w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2024/10/Minimum-Provisioning-Requirements-for-Trade-Receivables-600x251.png 600w" sizes="(max-width: 757px) 100vw, 757px" />
The management of each DISCOM must submit a compliance statement confirming adherence to these enhanced disclosure norms, establishing accountability, and preventing discrepancies in reporting.
These regulations could pave the way for a more transparent, accountable, and efficient power distribution sector.
Last April, the Ministry <a href="https://www.mercomindia.com/ministry-of-power-subsidy-accounting-framework-discoms/" target="_blank" rel="noopener">proposed</a> draft provisions in the Electricity (Amendment) Rules, 2023, for subsidy accounting and payment and a framework to ensure the financial sustainability of DISCOMs.
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Power Ministry Issues New Rules to Strengthen DISCOMs’ Financial Disclosure

The Union Minister R.K. Singh said in Rajya Sabha that the gap between the Average Cost of Supply (ACS) and the Average Revenue Realized (ARR) at the national level reduced from ₹0.47 (~$0.006)/kWh in FY 2015-16 to ₹0.28 (~$0.004)/kWh in FY 2019-20.
The gap between the revenue and cost per unit/kWh is one of the critical performance parameters for power distribution companies. A wider gap reflects that the distribution companies are under loss as their revenues are far lower than their expenditure.
Earlier in June this year, the Union Finance Minister Nirmala Sitharaman had <a href="https://mercomindia.com/finance-minister-announces-%e2%82%b93-03-trillion-upgrading-discoms/" target="_blank" rel="noopener">announced</a> the ‘Economic Relief from Pandemic’ package and declared several sops for power distribution companies (DISCOMs), including ₹3.03 trillion (~$40.82 billion) outlay for reform-based result-linked power distribution program.
The program aims to improve the quality and the reliability of power supply to consumers through a financially sustainable and operationally efficient distribution sector. The plan is to reduce the aggregate technical and commercial (AT&amp;C) losses across India to 12-15% and eliminate the gap between the average cost of supply and the aggregate revenue requirement by 2024-25.
The minister added that all state-owned distribution companies and state and union territory DISCOMs, excluding private sector DISCOMs, will be <a href="https://mercomindia.com/ministry-power-plan-revamp-discoms/" target="_blank" rel="noopener">eligible</a> for financial assistance under the revamped distribution sector program.
According to the data released by the Ministry of Power, the ACS-ARR gap narrowed in 18 states/union territories between financial year (FY) 2016 to FY 2020. On the national level, the gap narrowed from ₹0.47 (~$0.006)/kWh to ₹0.28 (~$0.004)/kWh from FY 2016 to FY 2020.
In reply to the question, the minister shared the state-wise data regarding the narrowing of the ACS-ARR gap and the current status of the states. The data is based on the subsidies booked by the states to the central government.
<img loading="lazy" decoding="async" class="aligncenter size-full wp-image-28197" src="https://mercomindia.com/wp-content/uploads/2021/08/Gap-in-Average-cost-of-supply-ACS-and-Average-Revenue-Realised-ARR-on-Tariff-Subsidy-Booked-Basis-in-India.png" alt="" width="456" height="941" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2021/08/Gap-in-Average-cost-of-supply-ACS-and-Average-Revenue-Realised-ARR-on-Tariff-Subsidy-Booked-Basis-in-India.png 456w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2021/08/Gap-in-Average-cost-of-supply-ACS-and-Average-Revenue-Realised-ARR-on-Tariff-Subsidy-Booked-Basis-in-India-145x300.png 145w" sizes="(max-width: 456px) 100vw, 456px" />
The ARR-ACS has considerably widened in Arunachal Pradesh, Meghalaya, Nagaland, Puducherry, and Tamil Nadu, which is concerning.
On the positive side, the ARR-ACS gap has narrowed significantly in Andhra Pradesh, Jammu &amp; Kashmir, Madhya Pradesh, Mizoram, and Sikkim.
Only six states have registered revenues more than the cost of power supply. These include Assam, Gujarat, Haryana, Himachal Pradesh, Rajasthan, and West Bengal.
In April last year, the Ministry of Power had <a href="https://mercomindia.com/electricity-act-amendment-draft/" target="_blank" rel="noopener">proposed</a> amendments to the Electricity Act 2003 to improve the health of DISCOMs, including direct benefit transfer and cost-reflective tariffs, among others.

Gap Between DISCOMs’ Energy Cost and Revenue Narrowed to ₹0.28/kWh in FY 2020

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