Aggregate technical and commercial losses

Indian Economy glossary

Also called: AT&C losses · Topic: Infrastructure: Transport, Communications and Energy · NCERT: Beyond NCERT

Meaning

Aggregate technical and commercial (AT&C) losses are the share of electricity fed into a discom's distribution network that the discom never gets paid for. The power may be lost in the wires, stolen, badly metered, or billed but never paid.

Formula: AT&C (%) = [1 − (Billing efficiency × Collection efficiency)] × 100

It matters because it is the best single measure of how healthy a discom (distribution company, the firm that supplies power to homes and businesses) is. High AT&C losses lead to unpaid dues to power generators and repeated state bailouts.

Explanation

The two parts: technical and commercial

  • Technical losses: power that is physically lost in the network.
  • Some power turns to heat as it flows through wires and transformers.
  • Long, low-voltage lines and overloaded transformers lose more.

  • A small technical loss can never be avoided. Most of it can be cut with better equipment.

  • Commercial losses: the power reaches a consumer, but the discom is not paid for it.

  • Theft: illegal hooking of lines, or meters that have been tampered with.
  • Metering errors: faulty meters, no meters, or wrong readings, so the power used is billed too low.

  • Unpaid bills: the bill is sent but never paid, often by government departments or by consumers who have political protection.

  • AT&C adds both kinds of loss into one number. That is why it is called "aggregate".

How the formula works

  • Billing efficiency = units billed ÷ units input.

  • This covers technical losses, theft and metering errors, because none of that power gets billed.

  • Collection efficiency = money collected ÷ money billed.

  • This covers unpaid bills.

  • You multiply the two efficiencies to get the share of input power that was billed and also paid for. What is left over is the AT&C loss.

Worked example

  • Base case:
  • 100 units are input and 85 units are billed, so billing efficiency is 0.85.
  • 95% of bills are paid, so collection efficiency is 0.95.
  • Units actually paid for = 100 × 0.85 × 0.95 = 80.75.

  • AT&C = (1 − 0.8075) × 100 = 19.25%.

  • If the discom collects every rupee billed (collection efficiency = 1.00):

  • AT&C = (1 − 0.85 × 1.00) × 100 = 15%.

  • The 15% left is only the power that was never billed.

  • Lesson: better bill collection alone cannot bring the loss to zero. Theft and wire losses have to fall too.

What makes AT&C losses rise or fall

  • They rise with:
  • old wires and overloaded transformers;
  • weak metering and manual meter reading;
  • theft that the discom does not punish;
  • political pressure not to disconnect people who do not pay;

  • late or missing subsidy payments from state governments.

  • They fall with:

  • smart and prepaid meters, so people pay before they use power;
  • meters on feeders and distribution transformers, which show exactly where power is being lost;
  • stronger networks;
  • tariffs that cover cost, and regulators free from political pressure.

In India

  • Who is responsible:
  • Electricity is entry 38 of the Concurrent List, so both the Centre and the states can make laws on it.

  • Distribution is run mostly by the states, through their discoms.

  • The law:

  • The Electricity Act 2003 split the old State Electricity Boards (SEBs) into separate companies for generation, transmission and distribution.
  • It also set up CERC and the SERCs (the central and state regulatory commissions that fix tariffs).

  • The SERCs fix discom tariffs, and those tariffs decide how much of the cost of losses consumers pay.

  • The latest figure: AT&C losses fell from 21.91% in FY21 to 16.16% in FY25 (provisional) [1][2].

  • The ACS–ARR gap: this is the Average Cost of Supply minus the Average Revenue Realised, for each unit sold. It fell from ₹0.69/kWh (FY21) to ₹0.11/kWh (FY25, provisional) [1][2].
  • How losses turn into debt:

  • The discom buys power but is not paid for all of it.

    • It then delays paying the generators.
    • It borrows to cover the shortfall.
    • The state finally rescues it, which strains state finances.

  • Reforms:

  • UDAY (Ujwal DISCOM Assurance Yojana, 2015): state governments took over most of their discoms' debt. In return, the discoms promised to cut their losses.
  • Revamped Distribution Sector Scheme (RDSS, 2021):
    • Target: bring AT&C losses down to 12–15%, mainly by installing prepaid smart meters, which work like a mobile recharge.
    • Sanctioned so far: 19.79 crore prepaid smart meters, 52.5 lakh distribution-transformer (DT) meters and 2.05 lakh feeder meters, costing ₹1,30,671 crore in all [1][2].
  • Late Payment Surcharge Rules 2022: discoms must pay their old dues to generators in instalments. If they default, their access to power supply is cut back.

Don't confuse with

  • Transmission and distribution (T&D) losses: these count only power that is input but never billed, meaning technical losses plus theft. They leave out bills that are sent but not paid. AT&C losses also include the collection shortfall, so AT&C is the wider and stricter measure.
  • ACS–ARR gap: this is a gap in ₹ per unit (cost minus revenue). AT&C is a percentage of power input. High AT&C losses are one cause of the ACS–ARR gap. So is a tariff set below cost.
  • Plant load factor (PLF): PLF measures how fully a generating plant is used (actual generation ÷ the most it could produce). AT&C measures losses in distribution, after the power leaves the plant.
  • Billing efficiency vs collection efficiency: billing efficiency is about units (units billed ÷ units input). Collection efficiency is about money (money collected ÷ money billed). AT&C needs both of them.

Prelims Hooks

  • AT&C (%) = [1 − (Billing efficiency × Collection efficiency)] × 100. Billing efficiency = units billed ÷ units input. Collection efficiency = money collected ÷ money billed.
  • AT&C losses cover technical losses, theft, metering errors and unpaid bills. Trap: T&D losses do not include unpaid bills.
  • The national AT&C loss fell from 21.91% (FY21) to 16.16% (FY25, provisional) [1].
  • RDSS (2021) aims to cut AT&C losses to 12–15% using prepaid smart meters. UDAY (2015) had states take over discom debt.
  • Electricity is entry 38 of the Concurrent List, not the State List. Distribution is run mostly by states. The Electricity Act 2003 created CERC and SERCs.
  • The ACS–ARR gap fell from ₹0.69/kWh (FY21) to ₹0.11/kWh (FY25, provisional) [1][2].

Mains Points

  • Discoms are the weak link in the power chain.
  • High AT&C losses lead to unpaid dues to generators, then discom debt, then repeated bailouts: UDAY (2015), then RDSS (2021).

  • Losses have fallen to 16.16% (FY25) [1]. Lasting repair still needs tariffs that reflect cost, SERCs free from political pressure, and states that pay their subsidies on time.

  • Losses, cross-subsidy and the exit of industry are linked.

  • To cover losses and cheap farm power, discoms charge industry more. The Tariff Policy says tariffs should stay within ±20% of the average cost of supply.
  • Industry then leaves through open access or its own captive plants, so discom revenue shrinks further.

  • Suggested way out: Direct Benefit Transfer of power subsidies (paid straight into consumers' bank accounts) together with smart meters. This makes both losses and subsidies visible and easy to measure.

  • Federalism and governance (GS-II link).

  • Distribution is a state subject in practice, so the Centre uses conditional schemes such as RDSS and rules such as the Late Payment Surcharge Rules 2022 to push reform.
  • This shows cooperative federalism working through incentives. Its limit is that political will at the state level, including on theft and non-payment, finally decides the outcome.

Related concepts

Read more

Sources

  1. 1Year End Review of Ministry of Power – 2025pib.gov.in · tier 1
  2. 2Key Initiatives to Bring Down AT&C Losses of Power Distribution Utilitiespib.gov.in · tier 1