CAG Power Sector Audit Covers 39 DISCOMs and 10,000 Consumers

The news

The Comptroller and Auditor General of India has begun a comprehensive audit of the power sector, starting with distribution companies, where consumer satisfaction, power trading and financial sustainability are the key focus areas. The exercise, which commenced in July 2026, will cover 39 distribution companies and five departmental undertakings across the country, though privately owned discoms are excluded. The audit report for the distribution phase is expected around the middle of the next financial year.

The distribution phase assesses performance between FY21 and FY26. Auditors have been directed to engage directly with around 10,000 electricity consumers across industrial, agricultural and domestic categories, with particular emphasis on the reliability and quality of power supply. The audit will also examine aggregate technical and commercial losses, billing and collection efficiency, and the financial health and long-term viability of discoms. The CAG will involve the coal department to facilitate an integrated assessment of the sector. Findings will be presented to respective state legislatures through State Audit Reports, and common policy concerns will be consolidated for the Union Ministry of Power. The transmission segment audit is scheduled to begin in FY27, followed by generation, renewable energy and the Revamped Distribution Sector Scheme.

What is the CAG’s constitutional mandate for auditing state entities?

The Comptroller and Auditor General of India derives the power to audit state-level entities such as distribution companies from Article 149 of the Constitution and the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971. Under Section 14 of the 1971 Act, the CAG audits the accounts of bodies or authorities substantially financed by the Consolidated Fund of a State. The CAG’s reports on state public sector undertakings are submitted to the Governor of the state, who causes them to be laid before the state legislature under Article 151. The Revamped Distribution Sector Scheme, which the audit will later cover, was launched by the Union Ministry of Power in 2021 as a reforms-based result-linked scheme to improve the operational efficiency and financial sustainability of distribution companies.

Why distribution companies first?

Distribution companies provide the direct interface between the electricity sector and consumers. Their operational performance and financial health can affect other segments of the power system and the wider economy. The audit therefore begins with distribution before moving to transmission, generation, renewable energy and the Revamped Distribution Sector Scheme.

What the audit will assess and how

The audit extends beyond conventional financial and operational assessment to direct consumer engagement. Feedback from industrial, agricultural and domestic users will help assess reliability and quality of supply. Power procurement costs matter both to consumers and to company finances, while losses and billing and collection efficiency indicate operational performance. Involving the coal department can support a more integrated view across the power supply chain.

What happens after the audit?

Findings are to reach respective state legislatures through State Audit Reports. Common policy concerns and systemic deficiencies will then be consolidated for consideration by the Union Ministry of Power. The distribution audit report is expected around the middle of the next financial year, while the transmission audit is scheduled to begin in FY27.