Srinagar, December 28: Jammu and Kashmir’s power sector is heading towards a severe financial crunch as officials project a staggering revenue shortfall of over Rs 4,200 crore for the fiscal year 2025–26. The crisis, primarily triggered by a sharp decline in local hydroelectric generation and soaring costs of imported electricity, threatens the financial stability of the Union Territory’s power infrastructure and its ability to sustain reliable energy supply in the coming months. Authorities attribute the widening revenue deficit to a 70 percent decline in local power generation from both Jammu and Kashmir-owned hydro projects and those operated by the National Hydroelectric Power Corporation (NHPC). The region, traditionally reliant on abundant hydropower, has been forced to import around 3,000 MW of electricity from external distribution companies at significantly higher rates. The dependence on costly imports has drastically inflated operational costs and created an unsustainable financial burden for the already fragile power system. The Annual Performance Review (APR) for FY 2024–25 and the Aggregate Revenue Requirement (ARR) proposal for FY 2025–26 reveal a stark financial imbalance. The documents project total revenue requirements of Rs 6,827.18 crore for the upcoming fiscal, while the anticipated realisable revenue at existing tariffs—even assuming a 93 percent collection efficiency—stands at just Rs 2,688.99 crore, leaving a massive deficit of Rs 4,136.03 crore.
Rising Costs and Declining Efficiency
The power purchase cost, which includes both procurement and transmission expenses, is expected to surge to Rs 5,924.15 crore in FY 2025–26, compared to Rs 5,620.88 crore in the current fiscal. This category alone accounts for nearly 87 percent of the total revenue requirements, making it the single largest expenditure for the Power Development Department (PDD). A senior official from the Kashmir Power Distribution Corporation Limited (KPDCL) acknowledged the mounting challenges:
“The revenue gap remains a serious concern for the power sector in Jammu and Kashmir. Despite our efforts to enhance operational efficiency and reduce losses, the rising cost of power purchase and inadequate cost recovery through current tariffs continue to exert tremendous pressure on the system. We are working to reduce Aggregate Technical and Commercial (AT&C) losses, improve collection efficiency, and optimise purchase planning, but the magnitude of the challenge requires sustained policy support and consumer cooperation.”
Jammu and Kashmir’s distribution losses are among the highest in India, projected to reduce only slightly—from 47.79 percent to 46.41 percent—during FY 2025–26. This figure is nearly three times the national average of 15 to 20 percent. In real terms, this means that out of every 100 units of power purchased, less than 54 units are actually billed and recovered, with the remaining units lost to technical inefficiencies, theft, and billing gaps. The dramatic drop in local power generation has been caused by a convergence of environmental, technical, and operational challenges. Hydropower stations across the region have witnessed reduced water discharge due to changing precipitation patterns and diminished snowmelt. Several generating units have undergone prolonged maintenance shutdowns as part of overdue overhauls, further reducing available output. Officials also point to ageing infrastructure, limited storage capacity in run-of-the-river projects, and delays in new capacity additions owing to environmental and funding hurdles. Many upcoming hydro projects—expected to add critical megawatts to the local grid—remain stuck in procedural stages due to delayed clearances and financial constraints. Experts note that Jammu and Kashmir’s seasonal hydropower dependency makes it particularly vulnerable to fluctuations in water availability. During the winter months, when water discharge is minimal, local generation typically plummets, forcing the UT to rely on costly electricity imports from northern and central grids. This dependency pattern has deepened this fiscal year, as water inflows in major rivers such as the Chenab and Jhelum dropped to multi-year lows.
Escalating Financial Stress
The mounting revenue deficit underscores a structural imbalance between the cost of power procurement and tariff-based recoveries. While the government has continued to subsidise power supply for domestic and agricultural consumers, the existing tariff framework fails to reflect actual supply costs, resulting in persistent under-recoveries. According to the ARR, employee costs are projected at Rs 648.58 crore, forming the largest portion of the Rs 713.76 crore operation and maintenance expenses. The department has proposed a capital expenditure plan of Rs 519.10 crore for FY 2025–26, a notable increase from Rs 330.67 crore in the ongoing fiscal. The proposed investments focus on network strengthening, smart meter rollout, IT upgrades, and other efficiency improvement measures. Officials argue that smart metering and feeder metering initiatives could significantly reduce billing losses and improve revenue collection. However, the success of these measures hinges on public cooperation, especially in rural and semi-urban pockets where meter resistance remains high.
The Joint Electricity Regulatory Commission (JERC) is currently reviewing the department’s proposals. Its upcoming decision will be crucial in determining whether tariff rationalisation or additional government support can offset the growing revenue gap. The regulator must strike a delicate balance between ensuring consumer affordability and maintaining financial sustainability for the distribution utilities. Energy analysts argue that the government needs to rethink its pricing and subsidy model, as chronic under-recoveries undermine both fiscal stability and service reliability. They caution that unless loss reduction targets are achieved and cost-reflective tariffs introduced, Jammu and Kashmir could face recurring power shortages and cash flow constraints that hamper future investments. JERC’s deliberations are expected to focus on optimising procurement contracts, revising tariff slabs, and tightening enforcement mechanisms to curb theft and pilferage. The Commission may also explore performance-linked incentives for utilities that achieve measurable reductions in technical losses. For consumers, any potential tariff hike will likely trigger concern, as households across the Union Territory already face irregular supply, frequent outages, and billing discrepancies. Low-income families, who rely heavily on subsidised electricity, could find themselves struggling if tariffs are revised upward without accompanying safeguards. Business associations, particularly in the industrial and tourism sectors, have urged the government to avoid steep tariff increases, warning that such measures could raise operating costs and slow post-pandemic recovery efforts. They have instead called for focused investment in power infrastructure and accelerated completion of stalled hydro projects to reduce long-term import dependence. At the same time, consumer rights groups argue that improving billing transparency and accountability within power corporations is essential to build trust and encourage timely payments. Many consumers complain about inflated bills, inconsistent readings, and delayed grievance redressal, which further weakens collection efficiency.
Government Response and Future Outlook
The Jammu and Kashmir administration has emphasised that power sector reform remains a top priority, with plans underway to digitise metering, modernise grids, and expand renewable capacity. Officials highlight that the installation of smart meters across urban clusters has already yielded measurable improvements in billing accuracy and revenue collection. The government is also exploring public-private partnerships (PPP) to accelerate infrastructure upgrades and improve operational efficiency. Several pilot projects under the Revamped Distribution Sector Scheme (RDSS) have shown positive results in select districts, leading to reduced outages and better energy accounting. Experts, however, warn that technological interventions alone cannot resolve deep-rooted structural issues. Sustainable recovery requires fiscal discipline, institutional transparency, and a policy framework that aligns generation, transmission, and distribution objectives under a unified roadmap. Energy policy specialists stress that enhancing hydropower reliability through reservoir augmentation, accelerating renewable integration, and strengthening inter-state coordination for power trading could provide long-term relief. They also call for investment in forecasting systems to better manage seasonal variations in river discharge. Jammu and Kashmir’s power sector stands at a crossroads. The persistent revenue deficit, coupled with escalating purchase costs and high distribution losses, underscores the urgency for comprehensive reform. Without decisive measures—such as tariff restructuring, aggressive loss reduction, and investment in local generation capacity—the financial stress could spiral further, impacting both consumers and the region’s broader economic trajectory. While the administration continues to seek fiscal and technical interventions, the challenge is far from over. Sustainable progress will depend on collective efforts by policymakers, utilities, and consumers to ensure that power supply becomes both financially viable and operationally reliable. If the region can successfully bridge its financial gap through structural reform and strategic investments, Jammu and Kashmir could eventually transform its energy sector from a chronic liability into a model of sustainable power management—anchored in efficiency, accountability, and long-term stability.
