CAG widens purview of power sector audit, starts with discoms

1. At a Glance

• The Comptroller and Auditor General of India (CAG) is extending its audit work in the power sector beyond the generation and transmission PSUs it has usually examined. It is starting with electricity distribution companies (discoms). [1][2]
• A horizontal performance audit of discom operations has been started. It also covers the PM Surya Ghar rooftop solar scheme. [2]
• Discoms are where the power sector's money problems pile up: high AT&C losses, a gap between cost of supply and revenue (ACS–ARR gap), and poor billing efficiency. [4][5]
• Exam angle: the limits of the CAG's mandate (federalism, privately run discoms), power-sector reform, and the draft Electricity (Amendment) Bill, 2025. [3][4]

2. Why in the News

• On 13 November 2026, The Hindu reported that the CAG is widening its power sector audit and starting with discoms. [1]
• The CAG had held a national conference on the power sector (press release dated 23 February 2026). There it set out its audit plan and said a horizontal performance audit of discoms had been started. [2]
• In 2026 the CAG's audit of Delhi's private discoms became sub judice, and courts are deciding whether the CAG has authority. [6]

3. Background & Evolution

• Constitutional base: The CAG is a constitutional authority under Articles 148–151. Its duties and powers are set by the CAG (Duties, Powers and Conditions of Service) Act, 1971. [static — unsourced, verify]
• Government companies: The CAG audits state-owned discoms as government companies under the Companies Act, 2013 (it appoints statutory auditors and can run supplementary or test audits). [static — unsourced, verify]
• Earlier distribution-sector reforms (context):
• UDAY (2015) let states take over discom debt. [static — unsourced, verify]

• The Revamped Distribution Sector Scheme (RDSS) was launched in June 2021 by the Ministry of Power. Its targets are national AT&C losses of 12–15% and an ACS–ARR gap of zero. Funds are released only when performance conditions are met. [5] (figures came through secondary reproductions; check against powermin.gov.in)

• 9 October 2025: The Ministry of Power published the draft Electricity (Amendment) Bill, 2025 for public comments. [3][5]

• 22 November 2025: A PIB explainer said the Bill aims to fix persistent discom losses caused by poor billing efficiency and high AT&C losses. [4]
• 18 December 2025: PRS released a Legislative Brief on the draft Bill. [3]
• 23 February 2026: The CAG held its national power sector conference. It started the horizontal performance audit of discoms and PM Surya Ghar, and linked its audit plan to the Viksit Bharat 2047 goals. [2]

4. Core Static Facts

Item	Fact
Auditor	CAG of India. Constitutional basis: Arts. 148–151 [static — unsourced, verify]
Audit type now applied	Horizontal performance audit, meaning the same issue is examined across many states or entities at once [2]
Initial scope	Discom operations and the PM Surya Ghar scheme [2]
Capacity partner	MoU with Vasudha Foundation for capacity building and detailed power-sector audits [2] (reported in coverage of the CAG event)
Nodal ministry for distribution reform	Ministry of Power (RDSS; draft Electricity (Amendment) Bill, 2025) [3][5]
AT&C loss	Technical losses plus commercial losses. Commercial losses come from theft, meter tampering, unmetered supply, billing errors and unpaid bills [4]
RDSS targets	AT&C losses of 12–15% nationally; ACS–ARR gap of zero [5]
Governing statute	Electricity Act, 2003, which the 2025 draft would amend [3]

5. Multi-Dimensional Analysis

Economic

• Discom losses are the sector's weakest link. Poor billing efficiency and high AT&C losses keep discoms in financial trouble. [4]
• A performance audit can show how far states pay subsidies late and how badly discoms collect revenue. This matters for state finances and for whether generators get paid. [2][4]

Legal / Constitutional

• The CAG can audit state-owned discoms. Its audit of privately run discoms, such as those in Delhi, is being contested in court and is sub judice. [6]
• The underlying question is whether the CAG's mandate covers private bodies that handle public money, for example through subsidies or regulatory assets.

Governance / Accountability

• A horizontal audit lets the CAG compare discoms across states and find the same problems recurring, instead of producing one-off findings about single entities. [2]
• Auditing PM Surya Ghar at the same time tests how well a flagship central scheme is being delivered at the discom level. [2]

Federal / Administrative

• Electricity is in the Concurrent List [static — unsourced, verify]. Discoms are state utilities, so CAG reports go to state legislatures and are examined there by the PAC and COPU.
• The draft Electricity (Amendment) Bill, 2025 would allow several discoms to operate in one area. Critics say having a single supplier in each area removes any incentive to cut theft or improve service. [3][5]

Environmental / Energy transition

• A PM Surya Ghar audit checks how fast rooftop solar is being rolled out, which is central to distributed renewable energy. [2]

6. Recent Developments (last 12–18 months)

• 9 October 2025: Draft Electricity (Amendment) Bill, 2025 released for comments. [3][5]
• 22 November 2025: PIB explainer on the Bill's reform aims. [4]
• 18 December 2025: PRS Legislative Brief on the draft. [3]
• 23 February 2026: CAG national power sector conference. Horizontal performance audit of discoms and PM Surya Ghar started, and Vasudha Foundation MoU signed. [2]
• 2026: CAG audit of Delhi discoms becomes sub judice. [6]
• 13 November 2026: The Hindu reports that the CAG is widening its power-sector audit, starting with discoms. [1]

7. Prelims Hooks

• The CAG conducts horizontal performance audits, which cover several entities or states on one theme. [2]
• The CAG's horizontal performance audit of the power sector covers discom operations and the PM Surya Ghar scheme. [2]
• The CAG national power sector conference press release is dated 23 February 2026. [2]
• The CAG signed an MoU with Vasudha Foundation for power-sector audit capacity building. [2]
• AT&C loss has two parts: technical losses and commercial losses (theft, meter tampering, unmetered supply, billing errors, non-payment). [4]
• RDSS was launched in June 2021 by the Ministry of Power. [5]
• RDSS targets: national AT&C losses of 12–15% and an ACS–ARR gap of zero. [5]
• RDSS funds are released only when performance conditions are met. [5]
• The draft Electricity (Amendment) Bill, 2025 was released by the Ministry of Power on 9 October 2025. [3][5]
• The draft Bill would allow multiple discoms in the same area of supply. [5]
• The CAG's mandate comes from Arts. 148–151 and the CAG (DPC) Act, 1971. [static — unsourced, verify]
• CAG reports on state discoms are laid before the state legislature (Art. 151(2)). [static — unsourced, verify]

8. Why the Delhi Case Will Decide How Far the CAG Can Reach

• The Supreme Court has paused the CAG audit of Delhi's private discoms
• The Delhi government had ordered the CAG to audit the three private discoms: BRPL, BYPL and TPDDL [8].
• On 3 July 2026 the Supreme Court stayed that order, after hearing DERC (the Delhi Electricity Regulatory Commission) and the discoms [8].

• So the CAG's wider power-sector audit begins at a time when its power over privately run discoms is still undecided.

• The tribunal also said no to a CAG audit

• In April 2026, APTEL (the Appellate Tribunal for Electricity) rejected DERC's own plan to have the CAG audit the Delhi discoms' accounts [9].
• APTEL told DERC to issue an order clearing more than ₹38,500 crore of pending discom dues within three weeks [9].

• The tribunal's message: settle the dues through the regulator's process, and do not delay them with a fresh audit.

• Why this matters beyond Delhi

• Odisha also has privately run discoms (the note lists it as a privatisation model).
• If the court rules against the CAG, the new horizontal audit cannot compare public and private discoms on equal terms. It will cover only state-owned ones.
• The draft Electricity (Amendment) Bill, 2025 would allow several suppliers in one area, so more private players may come in. The question of who audits them will only get bigger [5].

9. The Strongest Case Against a CAG Audit of Private Discoms

• The objection: private discoms already have an auditor, and that is the regulator
• A private discom's accounts are checked by its own statutory auditors. The SERC (State Electricity Regulatory Commission) then checks its costs before it fixes tariffs.
• In August 2025 the Supreme Court itself told regulatory commissions to carry out intensive audits of why discoms were not recovering their costs [7].

• So a CAG audit on top of this adds a second check on the same accounts. It can delay money the courts have already said must be paid. APTEL took exactly this view when it rejected DERC's plan [9].

• What is right about the objection

• The law makes the SERC the body that decides tariffs. The CAG cannot change a tariff.

• Delay has a real cost. Unpaid dues keep growing, and consumers pay for them later.

• Why the objection is not the full answer

• In the same August 2025 judgment, the Supreme Court said DERC itself had failed to follow the rules on creating and recovering these dues [7].
• So the regulator is not a neutral checker here. Its own past decisions are part of the problem.
• Delhi's discoms are private, but the government shares the cost: power subsidies and the dues consumers will pay later are both public money in substance. The open legal question is whether that is enough to give the CAG a role [6][8].

10. Regulatory Assets: The Hidden Bill the Audit Has to Find

• What a regulatory asset is
• Sometimes a regulator keeps tariffs lower than the real cost of supply, usually to avoid an unpopular price rise.
• The unpaid cost is not written off. It is recorded as a "regulatory asset", which means money consumers owe the discom and will pay later through higher tariffs.

• Interest builds up on this amount while it waits. A small gap today becomes a large bill tomorrow.

• The Supreme Court has set a deadline

• All pending regulatory assets must be cleared by 1 April 2028 [7].
• Any new ones must be cleared within three years [7].

• Each regulatory commission must publish a road map for clearing the old ones [7].

• Why this is the right place for a horizontal audit

• Regulatory assets keep a discom's accounts looking healthy now and push the cost onto future consumers.
• A horizontal audit (one issue checked across many states at once) can show which states built up these dues, and why.
• This is exactly the cross-state pattern that a one-state audit would miss [2][7].

11. Why One Profitable Year Does Not Mean Discoms Are Fixed

• The good news is real but small
• In FY25 discoms together made a profit of ₹2,701 crore, after years of losses [11].

• AT&C losses (power lost to technical faults, theft and unpaid bills) fell from about 22.6% in FY14 to about 15% in FY25 [10].

• The old losses are still huge

• Accumulated losses (all past losses added together) stood at about ₹6.47 trillion at the end of FY25 [10][11].

• The FY25 profit is less than 0.1% of that amount. One good year barely touches the debt.

• 15% is only at the edge of the target

• The RDSS target is AT&C losses of 12–15% [5].
• At about 15%, the national figure has just reached the weakest end of that range [10].

• A national average also hides states that are still far above it.

• People are asking whether the profit will last

• Down To Earth asks whether the profit can be sustained, and raises questions about the accounting reforms behind it [12].
• This is the job a performance audit can do. It can test whether the profit came from real efficiency, such as better billing and less theft, or from timing, such as subsidies paid on schedule for once or costs pushed into later years.

12. What Each Actor Should Do Next

• CAG: test regulatory assets against the Supreme Court's rules in every state
• The court has already set the rules: clear old dues by April 2028 and new ones within three years [7].

• The horizontal audit can check each state's discoms and regulator against these rules. This gives state legislatures a common scorecard [2][7].

• SERCs: publish the road maps the court asked for

• Without a public road map, nobody can tell whether a discom's "profit" is real or just cost pushed into the future [7][12].

• Ministry of Power: settle who audits private discoms in the new law

• The draft Electricity (Amendment) Bill, 2025 would let several discoms supply the same area [5].

• The Bill could state clearly how the use of public money (subsidies and regulatory assets) by private discoms will be audited. The Delhi dispute shows that leaving this question open leads to court cases [8][9].

• State legislatures: use the PAC and COPU to follow up

• CAG reports on state discoms go to the state legislature. An audit only changes things if these committees question the discom and the government on what it finds.

13. Anchors for Answers

• Data: National AT&C losses fell from about 22.6% (FY14) to about 15% (FY25) [10]
• Data: Discoms made a combined profit of ₹2,701 crore in FY25, but accumulated losses were about ₹6.47 trillion [10][11]
• Data: More than ₹38,500 crore of regulatory assets pending in Delhi alone [9]
• Law/Case: Supreme Court, August 2025: all regulatory assets to be cleared by 1 April 2028, new ones within three years, and SERCs to publish road maps [7]
• Law/Case: Supreme Court stay (3 July 2026) on the Delhi government's order for a CAG audit of BRPL, BYPL and TPDDL [8]
• Law/Case: APTEL order (April 2026) rejecting DERC's plan for a CAG audit and ordering it to clear the dues [9]
• Scheme: RDSS (2021): AT&C target of 12–15%. The national figure has only just reached the top of this range [5][10]

14. Mains Relevance

• GS-II: Constitutional bodies (CAG); parliamentary and legislative accountability; federalism.
• GS-III: Infrastructure (energy); state finances; renewable energy.
• Possible questions: 1. Discuss how the CAG's audit of power distribution companies can strengthen fiscal accountability. What are the legal limits of its mandate over privatised utilities? 2. Persistent AT&C losses and the ACS–ARR gap continue to threaten the viability of India's power sector. Evaluate RDSS and the proposed Electricity (Amendment) Bill, 2025 as remedies. 3. Performance audits are moving the CAG's role from checking compliance to assessing outcomes. Examine this with reference to recent sectoral audits.

15. Related Topics to Study Next

• CAG: Arts. 148–151 and the DPC Act, 1971. These set the boundaries of the CAG's mandate.
• Electricity Act, 2003 and the 2025 draft amendment. The legal framework discoms work under. [3]
• RDSS / UDAY. Earlier attempts to fix discom finances. [5]
• PM Surya Ghar Muft Bijli Yojana. One of the schemes under audit. [2]
• State Electricity Regulatory Commissions and regulatory assets. Central to the dispute over the Delhi discom audit. [6]
• Public Accounts Committee / Committee on Public Undertakings. These committees examine CAG reports.
• Power distribution privatisation models (Delhi, Odisha). Raise the question of whether the CAG can audit private entities.

16. NCERT Concepts to Revise

• Comptroller and Auditor General (Polity): The CAG is the constitutional auditor whose mandate and limits over discoms the whole article turns on.
• Performance audit (Polity): The new horizontal audit checks economy, efficiency and effectiveness of discoms, not just whether accounts are in order.
• Distribution company (Economy): Discoms are the first target of the audit and the weakest financial link in the power sector.
• Aggregate technical and commercial losses (Economy): AT&C losses are the key measure of discom inefficiency that the audit and reform schemes target.
• Revamped Distribution Sector Scheme (Economy): RDSS is the main central scheme to cut discom losses, which the audit will indirectly test.
• PM Surya Ghar Muft Bijli Yojana (Geography): This rooftop solar scheme is audited alongside discom operations in the CAG's horizontal audit.
• Sub judice (Polity): The CAG's audit of Delhi's private discoms is pending in court, limiting what can be concluded.
• Public Accounts Committee (Polity): This committee examines CAG reports, including those on state discoms, to enforce accountability.
• Committee on Public Undertakings (Polity): It scrutinises CAG audits of state-owned undertakings like discoms, so it is the follow-up forum.
• Federalism (Polity): Discoms are state utilities, so CAG reports go to state legislatures, raising Centre-state questions.
• Concurrent List (Polity): Electricity is a Concurrent List subject, so both Centre and states legislate on it, including the Bill.
• Public sector undertaking (Economy): State-owned discoms are public undertakings, which is why the CAG can audit them.
• Companies Act, 2013 (Economy): The Act lets the CAG audit state-owned discoms as government companies.
• Privatisation (Economy): Private discom models, such as Delhi's, raise the question of whether the CAG can audit private entities.
• Distributed Renewable Energy (Geography): Rooftop solar under PM Surya Ghar is a form of distributed renewable energy that discoms must absorb.

17. Common Errors / Trap Areas

• Compliance vs. performance audit: A performance audit asks whether money achieved economy, efficiency and effectiveness. A horizontal audit means one theme examined across many entities. Don't treat either as a financial audit.
• Ministry: RDSS and the Electricity (Amendment) Bill belong to the Ministry of Power. PM Surya Ghar is run by MNRE, not the Ministry of Power [static — unsourced, verify].
• Reports on state discoms go to the state legislature, not Parliament.
• AT&C vs. T&D losses: T&D losses are only technical and transmission/distribution losses. AT&C losses add commercial losses (theft, billing, collection). [4]
• Private discoms: Don't assume the CAG automatically has jurisdiction over them. The Delhi matter is sub judice. [6]