Fixing the leaking bucket: Financial factors and the improved performance of India’s electricity distribution utilities.

India’s state-owned electricity distribution utilities (SEDUs) play a central role in supporting a fast-growing economy and have undergone multiple reforms in recent years; however, many continue to face resource constraints and financial challenges. The financial and operational performances of SEDUs are closely intertwined. Our research identifies critical financial performance indicators through which India’s SEDUs have improved operational performance. We construct a rich utility-level dataset combining SEDUs’ financial and operational performance variables for (fiscal years) 2007–2020, focusing specifically on average technical and commercial loss (ATCL), total electricity sales, and payables (for purchase of power). We address multicollinearity by using principal component analysis (PCA). Our main results indicate that net worth and loans from financial institutions, banks, and bonds are the most impactful financial factors in reducing ATCL—a one-standard-deviation change in each of these factors reduces average annual ATCL by 8.2 % and 6.8 %, respectively. Similarly, a one-standard-deviation change each in grants on capital assets and net worth increase average annual electricity sales by Rs.cr. 487.75 and Rs.cr. 346, respectively. Finally, payables are decreased slightly by reductions in average cost of supply and loans from state government. Our research highlights the importance of targeting critical financial factors to further strengthen operational performance among India’s SEDUs.

• Usha Nair-Reichert
• Matthew Oliver

Ghodeswar, A., Nair-Reichert, U., & Oliver, M.E. (2026). Fixing the leaking bucket: Financial factors and the improved performance of India’s electricity distribution utilities. The Electricity Journal 39(2): 107530.

• School of Economics