Telangana Cabinet Likely To Approve Discom for Free Power
New firm to take big debts, handle free power schemes and ease the discom burden
Hyderabad: The Cabinet meeting scheduled for Tuesday is likely to approve the incorporation of a third power distribution company (discom), a move aimed at restructuring Telangana’s financially strained electricity sector.
According to official sources, the proposal forms part of a broader reform programme, with the new discom expected to absorb nearly Rs 36,000 crore of debt from the two existing discoms to improve their national credit ratings. As on March 31, 2025, the southern (TGSPDCL) and northern (TGNPDCL) discoms together recorded losses amounting to Rs 59,671 crore.
The new entity will function as a dedicated welfare discom responsible for handling electricity supplied under government-sponsored free power schemes, including free electricity for agricultural pump sets, the Gruha Jyothi programme offering 200 units of free domestic supply, free supply to government schools and colleges, drinking water schemes like Mission Bhagiratha, and lift irrigation projects.
Around 28.9 lakh connections are expected to be transferred to the new discom, along with corresponding distribution transformers. The government estimates that the new discom will require a chairperson and managing director, a board of directors, and approximately 2,000 employees.
The proposal was first announced by Chief Minister A. Revanth Reddy on September 15, during a high-level review meeting on the energy department, where officials were asked to draft a comprehensive restructuring plan covering staff allocation, asset distribution, dues settlement, and power purchase agreement sharing among all three Discoms.
The final blueprint is now expected to be placed before the Cabinet for approval. Power purchase agreements held by the existing discoms will be divided among all three, while dues owed to various generating companies amounting to Rs 26,950 crore, along with Rs 9,032 crore in other liabilities, will be transferred to the new entity.
Officials noted that high-cost coal procurement, delayed subsidy payments, and mounting government department dues contributed to the downfall of two existing discoms finances. They pointed out that various departments owe Rs 48,005 crore — Rs 31,763 crore in consumption charges and Rs 16,242 crore as surcharge arrears — while tariff subsidy arrears worth Rs 3,553 crore from earlier years remain unsettled. The state’s power utilities collectively face working capital loans of Rs 53,900 crore and capital expenditure loans of Rs 44,904 crore.
The Cabinet is also expected to take up the proposal to lay an underground cable network in GHMC limits to reduce outages and improve power quality. Officials estimate that 43,384 km of power cables would need to be placed underground at a cost of Rs 14,725 crore, significantly higher than Bengaluru’s estimated expenditure of Rs 5,281 crore for 14,199 km of underground lines due to higher operational and logistical requirements.
The Cabinet will deliberate broader reforms in the power sector, including enhanced capacity addition to meet rising power demand driven by rapid industrialisation, urbanisation, agricultural growth, and implementation of welfare schemes.
Telangana’s peak electricity demand grew from 6,755 MW in 2015 to 17,165 MW by March 2025 and is projected to reach 31,809 MW by 2034-35, leaving a deficit of over 47,000 million units if capacity is not expanded. Future plans include large-scale solar additions, battery energy storage systems, pumped hydro units, and expansion of Ramagundam and Kothagudem thermal capacity.
