Amid faltering efforts to resolve the solvency of electricity distribution companies (DISCOMs), state governments are increasingly resorting to an easier fix: hiving off agricultural consumer load into separate entities and freeing up the rest of the utility from the burden of agri-supply losses. At least three states, Telangana, Maharashtra and Haryana, are pursuing plans to segregate agricultural consumers from existing DISCOMs and create separate entities for one of the power sector’s most heavily subsidised categories.While Telangana and Maharashtra have created separate agriculture DISCOMs, neither is fully operational. Haryana’s proposal for a dedicated agricultural DISCOM was deferred after opposition from power sector employees.Agriculture accounts for nearly one-fifth of electricity consumption and is the sector’s most heavily subsidised consumer category. With tariffs often below the cost of supply, DISCOMs rely on state subsidies and cross-subsidies from commercial and industrial (C&I) consumers, making them vulnerable to delays in subsidy payments — which can strain working capital and constrain investment in network upgrades, affecting reliability and power supply quality.Also Read | NxtGen takes cloud services overseas amid AI infrastructure raceAccording to the Comptroller and Auditor General of India, state governments spent nearly Rs 1.9 lakh crore on energy subsidies in 2024-25, mainly to support DISCOMs and provide subsidised electricity to farmers and households, making power the largest component of their subsidy bill. The 13 major agrarian states, accounting for 99% of India’s agricultural electricity sales, incurred over Rs 1.3 lakh crore in farm power subsidies in FY25, as per a report by the Council on Energy, Environment and Water.Most state-owned utilities continue to incur losses and rely on borrowings to fund operating shortfalls and accumulated liabilities. Public sector DISCOMs have accumulated losses of Rs 6.77 lakh crore and borrowings of Rs 7.11 lakh crore. Telangana, Maharashtra and Haryana’s DISCOMs are also loss-making, with thousands of crores in debt.A new DISCOM, old liabilitiesIn its December order last year, the Telangana government attributed the creation of this third DISCOM — Telangana Rythu Power Distribution Company Ltd — to the deteriorating financial position of the state’s two existing distribution companies: the Southern Power Distribution Company of Telangana Ltd (TGSPDCL) and Northern Power Distribution Company of Telangana Ltd (TGNPDCL), whose combined accumulated losses stand at Rs 69,741 crore against a borrowing of Rs 59,230 crore.In March, the new entity was created to supply electricity to agriculture, lift irrigation schemes, the Composite Protected Water Supply Scheme/Mission Bhagiratha, the Hyderabad Metropolitan Water Supply and Sewerage Board, and municipal water connections with separate distribution transformer connections. Subsequently, over 29 lakh agricultural consumers, along with several hundred others, were transferred to the new utility.Story continues below this adLiability, too, moved with the load. The new entity would be liable for Rs 26,950 crore in payables to state-owned power-generating companies and a working capital loan of Rs 9,032 crore. Against this, the state government infused Rs 5 crore in equity, along with assets — agriculture distribution transformers worth Rs 2,792 crore and agriculture low-tension lines valued at Rs 2,137 crore.However, without commercial and industrial consumers, the financial viability of agriculture-focused DISCOMs remains uncertain, with fears they could become heavily dependent on government subsidies.“These DISCOMs will become exclusive government subsidy-based agencies. If you mop out all profitable areas, where is the financial estate of these DISCOMs? The purpose of these DISCOMs is to segregate losses and enable privatisation of profits,” said K Ashok Rao, patron at All India Power Engineers Federation.Also Read | For cash, assets stashed abroad, Centre’s one-time Rs 5-crore offerCleaning up the balance sheetIn Maharashtra, MSEB Solar Agro Power Ltd was carved out of state-owned Maharashtra State Electricity Distribution Company Ltd (MSEDCL) as a subsidiary of its parent, Maharashtra State Electricity Board (MSEB) Holding Company, to function as a deemed distribution licensee and retail supplier for agricultural consumers, including billing.Story continues below this adUnder the restructuring scheme notified in May, Rs 32,679 crore of MSEDCL’s Rs 59,527 crore in pending agricultural dues will be written down, with the Maharashtra government assuming an equivalent liability through government securities. MSEDCL will create a corresponding reserve to write down the agricultural receivables.This is despite MSEDCL’s own financial stress, with the DISCOM currently carrying Rs 90,659 crore in borrowings and an accumulated loss of Rs 35,671 crore.Notably, 78% of MSEDCL’s net receivables, including accrued interest, were owed by agricultural consumers, underscoring the substantial financial burden that the agricultural consumer base adds on the state-owned DISCOM.The remaining Rs 26,848 crore in agricultural dues will be transferred to the new agriculture entity, along with subsidy receivables and security deposits from agricultural consumers. The government will also provide a minimum guarantee of Rs 2,500 crore to meet the entity’s working-capital needs.Story continues below this adAccording to Shrinivas Bobade, President of Maharashtra-based Subordinate Engineers Association, the entire exercise is nothing but paperwork to clean up the balance sheet of MSEDCL, as it seeks to go for an initial public offering (IPO). “If MSEDCL’s balance sheet shows such huge receivables from the agricultural consumers, who would like to invest? So, they created this agriculture DISCOM to make their books better,” he told The Indian Express.Concerns on privatisationBeyond financial implications, there are concerns about ring-fencing agricultural consumers, alongside the push for parallel licensing that could accelerate privatisation by separating loss-making agriculture from commercially viable consumers.In Haryana, where the government’s proposal to create a separate agriculture DISCOM has already seen backlash from power sector employees, a private company has applied for a distribution licence covering the Gurugram and Nuh revenue districts. While the Haryana Electricity Regulatory Commission (HERC) has constituted an expert committee to examine the application, the move has heightened employees’ apprehensions.“On the one hand, they are separating agricultural consumers, while on the other hand they are planning to allow parallel licences in cities. This is clearly a way towards privatising the distribution sector,” Subhash Lamba, National Vice-President of the Electricity Employees Federation of India, told The Indian Express.Story continues below this adQueries sent to the state governments, MSEDCL and MSEB Holding Company, and Telangana Rythu Power Distribution Company remained unanswered till the time of filing this report.