India Exports Electricity. So Why Do Homes Still Face Power Cuts?

“The problem is never where you think it is.” — Unknown

India produces more electricity than it consumes and is now a net exporter of power to neighbouring countries including Bangladesh and Nepal. And yet, millions of Indian homes still face regular power cuts. How is that possible? The answer reveals a fascinating paradox about the gap between generation and distribution.
Economy & Policy
Author

Satvik Raman

Published

July 13, 2025

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Introduction

Imagine a restaurant that produces more food than its dining room can seat. It starts delivering meals to the neighbourhood. And yet, somehow, some of its own kitchen staff go hungry.

That is roughly India’s electricity situation.

India became a net exporter of electricity in 2017. Today it exports power to Bangladesh, Nepal, Myanmar, and Bhutan under long-term agreements. The government has even signed an ambitious deal to eventually export electricity to Saudi Arabia via an undersea cable across the Arabian Sea. In 2024–25, India exported over 21.5 billion kilowatt-hours of electricity worth $1.49 billion.

And yet, many Indian homes — particularly in smaller cities and rural areas — still face regular load shedding or power cuts. The paradox is real. How?

The Chain From Power Plant to Your Home

Understanding this requires knowing how electricity actually reaches your home.

Power plants generate electricity. It then travels through high-voltage transmission lines (managed by companies like Power Grid Corporation of India) to substations. From there, it enters the distribution network — the last mile that connects substations to homes and businesses.

This last mile is managed by state-run Distribution Companies, known as DISCOMs. Each state has its own DISCOMs, and they are the critical link between the grid and your switchboard. They buy electricity from generators and sell it to consumers.

Here is where the problem begins.

The DISCOM Problem

India’s DISCOMs are in terrible financial shape. According to an RBI report, these companies had accumulated losses of $75 billion as of March 2023 — roughly 2.4% of India’s GDP.

How did this happen? Several reasons:

Subsidised prices: State governments subsidise electricity for farmers and low-income households. Politicians are reluctant to raise tariffs because it is politically unpopular. The result is that DISCOMs often sell electricity for less than what it costs them to buy and distribute it.

Theft and losses: India loses a significant amount of electricity to theft and poor infrastructure — these are called aggregate technical and commercial losses. In some states, losses exceed 25%.

Unpaid bills: Government departments, municipal bodies, and even some state governments are chronic late-payers or defaulters on electricity bills.

The outcome of all this: DISCOMs are often unable to afford to buy enough electricity, even when it is available. So during peak demand — like summer afternoons when everyone runs air conditioners simultaneously — they simply do not buy enough power to meet demand. They ration supply instead. That is your power cut.

Why Exports Continue Despite Domestic Shortfalls

If India has power cuts, why is it still exporting electricity? The answer is about the nature of power agreements.

India’s cross-border electricity deals are long-term contracts — often 25 years. They cannot simply be cancelled during a heatwave. Moreover, not all parts of India face shortages simultaneously. Power surplus states (like in southern and western India) export power through the national grid while deficit states in northern India face cuts.

The grid itself also has constraints. High-voltage transmission lines connecting surplus regions to deficit regions have limited capacity, and upgrading them takes years.

The Way Forward

India is investing heavily to fix these problems. The government’s RDSS (Revamped Distribution Sector Scheme), launched in 2021, aims to modernise infrastructure and reduce losses. There is also political pressure to privatise DISCOMs in certain states, as private operators tend to be more efficient at controlling losses.

But fixing finances is harder than building power plants. It requires political will to raise tariffs to cost-recovery levels, crack down on theft, and make DISCOMs commercially viable.

Final Thoughts

India’s electricity paradox is a powerful reminder that producing something is only half the challenge — getting it where it needs to go at a price people can afford is the other half. For students, this story is a lesson in systems thinking: a problem that looks like a supply shortage is actually a distribution and finance problem. Solving it requires not just engineering, but economics and politics too.