Why your ₹4,999 power bill fuels more than just your home: Analyst explains India’s power math

When you pay your ₹4,999 electricity bill, where does your money really go?

A striking graphic shared by Dhananjai Khilare, a credit analyst, on LinkedIn, peels back the layers of India’s electricity payments—revealing a system where consumers often pay more than just their share of the power they use. 

The breakdown shows how subsidies, cross-subsidies, and DISCOM losses quietly load extra costs onto paying customers while others get heavily discounted or free electricity.

The first stop for your payment is your local Distribution Company (DISCOM). These entities purchase electricity from power generators—whether coal, gas, hydro, or solar—and handle the transmission and distribution to homes and businesses. They also maintain the vast physical infrastructure: poles, wires, transformers, and meters.

While your bill covers these services, the actual cost of power supply is often higher than what many consumers pay—especially residential and agricultural users. To bridge this gap, state governments inject subsidies directly into DISCOMs. In FY2019, these subsidies totaled ₹1.1 lakh crore.

Schemes like the PM Surya Ghar Muft Bijli Yojana further lower or even eliminate power bills for certain consumer groups, leaving regular paying customers to absorb more of the system's costs.

Commercial and industrial consumers face higher tariffs—often well above the real cost of supply—to make up for the shortfall created by subsidized or free electricity given to farmers and low-income households. This is known as cross-subsidy, and it's a central feature of India’s power pricing system.

Despite subsidies and cross-subsidies, most DISCOMs still struggle financially. In FY2020-21, the gap between their revenues and costs was over ₹1 lakh crore. To survive, DISCOMs often resort to borrowing—further deepening their debt load and eroding their financial health.

State governments frequently delay subsidy payments, worsening DISCOMs’ cash crunches. Over the years, the central government has stepped in repeatedly with bailouts, the latest being the Revamped Distribution Sector Scheme (RDSS) aimed at reducing losses and pushing DISCOMs toward financial discipline.

Part of your bill also funds investments in smart grids, smart meters, and technology upgrades designed to curb theft, improve billing efficiency, and reduce technical losses.

While some consumers enjoy free or heavily subsidized electricity, others—including regular households and businesses—shoulder the burden, both through higher tariffs and indirectly via taxes used to bail out debt-laden DISCOMs.