Electricity revenue subsidies finance 10% to 30% of the revenue required by electricity distribution companies (DISCOMs) in India. Consequently, they have significant impacts not only on the state exchequer but also on DISCOM finances.

Once electricity connections are given, to improve quality of life and promote economic activities, it is essential to ensure sufficient and affordable electricity supply, delivered with good quality, and supported by good service.

Electricity distribution sector is at a cross-road, with rising cost of supply, emergence of competitive renewable supply options, loss of cross-subsidising sales, and sustained high-cost base-load surplus.

There is mounting evidence of the severe health impacts of household air pollution from burning traditional fuels such as firewood, agricultural residue, dung, coal and kerosene for cooking. This is particularly relevant in the Indian context where more than 75% of rural households in India primarily use such fuels.

The implementation of fuel surcharges has been strongly advocated by the Union Government as a measure to alleviate the financial predicament of DISCOMs. In this context, the report studies the various processes, methodologies, and practices across states to determine, levy, and recover fuel surcharges.