New Rules Mandate Enhanced Financial Disclosure and Provisioning for Electricity Distribution Licensees

The Ministry of Power, Government of India, issued a significant notification on September 25, 2025, introducing the Electricity Distribution (Accounts and Additional Disclosure) Rules, 2025. This new set of rules, published in the Gazette of India as G.S.R. 718(E), supersedes the Electricity Distribution (Accounts and Additional Disclosure) Rules, 2024, which were dated October 10, 2024, and published on October 14, 2024. The new rules, framed under sub-section (1) and clause (z) of sub-section (2) of section 176 of the Electricity Act, 2003, read with the second proviso to sub-section (1) of section 129 of the Companies Act, 2013, aim to bring greater financial discipline and transparency to the power distribution sector. These rules will come into force from April 1, 2026.

The rules apply to "Specified Entities," defined as distribution licensees under the Electricity Act, 2003, with specific exclusions such as Military Engineering Services, Municipal Corporations, Ports or Trusts, Transport Undertakings, Damodar Valley Corporation, Government Departments not incorporated under the Companies Act, 2013, and entities solely engaged in power distribution in Special Economic Zones. A key provision mandates Specified Entities to recognize regulatory deferral account balances or income recoverable from future tariffs in their Financial Statements, adhering to applicable Accounting Standards and Guidance notes. Entities are required to review estimated recoverable amounts at least annually and account for changes as per relevant accounting standards. Furthermore, the rules introduce minimum impairment provisioning norms for such claims where approval for recovery from a competent authority is unavailable, ranging from 25% for balances aged more than three years up to five years, to 100% for balances exceeding seven years. A 100% provisioning is also required if a petition or appeal for recovery is not filed within the statutory time limit. These provisioning norms will apply to balances arising after April 1, 2026, while for balances existing as of March 31, 2026, the norms will apply assuming that date as the year of recognition. The legislation provided: “In addition to the statutory disclosures as mandated under the Companies Act, the Specified Entity shall also prepare the Additional Disclosure Statements for each financial year in the form and manner as provided in the Schedule.”

The new framework also establishes minimum provisioning requirements for trade receivables from all categories of consumers. This provisioning is structured progressively over financial years, starting with 5% for receivables outstanding between 90 and 180 days in FY 2026-27, increasing to 15% for the same period by FY 2028-29 and onwards. For receivables outstanding for more than three years, the provisioning requirement escalates from 75% in FY 2026-27 to 100% by FY 2028-29. Dues from permanently disconnected consumers will require a 75% provisioning. However, these provisioning norms do not apply to trade receivables from Government Consumers (departments, urban/rural local bodies, public sector undertakings of State and Central Government) or to Specified Entities with aggregate trade receivable days less than or equal to ninety days. The Appropriate Commission retains the power to set higher provisioning requirements based on recommendations from a State Government-appointed committee. The rules also mandate the preparation of "Additional Disclosure Statements" for each financial year, to be annexed to the Financial Statements. These statements, specifically for the power-related business of the entity, include supplementary disclosures, a statement of the Average Cost of Supply-Average Revenue Realised gap, and a statement of Aggregate Technical and Commercial loss. For the financial year 2026-27, comparative figures for the previous financial year will be optional. A statement of compliance from the management of the Specified Entity is also required, confirming adherence to the prescribed form and manner of these disclosures.

Keywords: Electricity Distribution, Accounts, Disclosure Rules, Power Sector, Financial Reporting, Regulatory Deferral, Trade Receivables, AT&C Loss, India, Ministry of Power

Geo Tags: India, New Delhi District: Not Applicable