The Daily Brief India’s state discoms are at the cusp of a big change
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Dec 18, 2025 Explore the looming crisis of India's DISCOMs, grappling with chronic losses and costly power procurement contracts. Discover how new amendments aim to reform the sector with competition and flexible tariffs. Shift focus to global trade disruptions expected in 2025, where economies are adapting rather than collapsing, with nations like Mexico and Vietnam emerging as key players. Uncover the nuanced effects of industrial policy and the rise of targeted trade deals, highlighting India's role in the changing global value chains.
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Procurement Drives Most DISCOM Costs
- Procurement makes up roughly 70% of a DISCOM's costs and is locked by long-term PPAs with fixed capacity charges.
- These contracts force DISCOMs to buy expensive legacy power even when cheaper alternatives exist.
Tariff Model Blunts Efficiency Incentives
- Cost-plus regulated tariffs remove incentives for DISCOM efficiency and allow losses to be rolled into regulatory assets.
- Political resistance to passing costs to consumers perpetuates hidden IOUs and large regulatory assets.
Cross-Subsidy Model Is Unraveling
- Cross-subsidies make industries pay more to subsidize households and farmers, but high-paying CNI customers are exiting the grid.
- As industrial customers opt for captive or third-party power, the subsidy pool shrinks and DISCOM finances worsen.