Pune Study Warns of Poor Financial Disclosure by Electricity Distribution Companies

Pune, 20th May 2025: A recent study by Pune-based energy research organization Prayas has raised significant concerns about the lack of clarity, accessibility, and consistency in the financial audit reports of electricity distribution companies (discoms) across India. The study emphasizes the urgent need for reforms to improve transparency, standardization, and accountability in the financial reporting practices of the power sector.

Conducted by researchers Sonali Gokhale and Shantanu Dixit, the comparative study analyzed audit reports from discoms in five states—Maharashtra, Gujarat, Rajasthan, and Andhra Pradesh—along with one private electricity distribution company. The objective was to assess the comprehensibility, reliability, and transparency of these reports for key stakeholders, including regulators, investors, banks, and consumers.

The findings revealed that many audit reports are overly complex and marked by inconsistencies, making them difficult to understand not only for the general public but also for professionals within the energy sector.

“Electricity audit reports should be presented in a simple, accessible format so that even ordinary consumers can understand the financial health of distribution companies,” said Gokhale.

The researchers noted that several discoms continued publishing audit reports despite auditors having flagged serious issues. Recurring errors and omissions across multiple companies point to systemic weaknesses in financial disclosure, rather than isolated lapses.

“These documents play a critical role in setting electricity tariffs and attracting investments,” Gokhale added. “Yet, in their current form, they fail to instill confidence. A more transparent and user-friendly balance sheet would support better policy decisions and fairer electricity pricing.”

The study strongly recommends the adoption of a uniform reporting framework, stricter regulatory standards, and certification of financial data to improve accuracy. It also calls for better coordination between regulatory authorities and auditors to implement these reforms—especially considering the capital-intensive nature of the electricity sector.

“Improving the quality of financial audit reports is essential for attracting investments and ensuring fair pricing of electricity,” the report concludes, urging all discoms to take collective responsibility in enhancing the credibility and transparency of their financial statements.