Published Mar 26, 2026 | 12:18 PM ⚊ Updated Mar 26, 2026 | 12:18 PM
Representational image. Credit: iStock
Synopsis: Andhra Pradesh is pursuing a dual strategy to ease power sector stress—tightening DISCOM efficiency for immediate savings while scaling renewable energy for long-term cost reduction. CM Chandrababu Naidu targets lowering average purchase cost to ₹4/unit, avoiding tariff hikes. Refunds, rooftop solar, pumped storage, and debt management underpin reforms, aiming for sustainable, affordable electricity and sectoral leadership.
Facing mounting financial stress in the power sector, the Andhra Pradesh government is rolling out a two-pronged strategy to bring down electricity cost— tightening operational efficiency for immediate relief while aggressively expanding renewable energy to secure long-term savings.
Chief Minister N. Chandrababu Naidu has set an ambitious target of reducing the average power purchase cost to around Rs 4/unit, a move aimed at easing pressure on state utilities without passing the burden on consumers through tariff hikes.
At a high-level review recently, the CM made it clear that the state would accord priority to cost discipline and innovation over politically sensitive price increases. The approach marks a shift from earlier cycles where mounting debts and expensive power purchase agreements (PPAs) forced periodic tariff revisions, often triggering public backlash.
Officials said the government’s immediate focus is on extracting savings through better management of distribution companies (DISCOMs), renegotiation strategies where feasible, and plugging inefficiencies in procurement and transmission. These measures have already begun to yield results. The average power purchase cost has dropped by Rs 1.32/unit so far, with a medium-term target of ₹4.10/unit by 2028–29.
In 2025–26 alone, improved operational efficiency has generated savings of Rs 339 crore. In a significant relief measure, the government has not only avoided imposing fresh tariff hikes but also implemented a marginal tariff reduction of 13 paise/unit. This has directly benefited households, farmers and industries at a time when inflationary pressures remain a concern.
It was done at the instance of the Andhra Pradesh Electricity Regulatory Commission (APERC) which directed DISCOMs to refund about Rs 924 crore to consumers following a ‘true-down’ exercise.
This is the first such instance since the regulator’s formation in 1999, reflecting lower-than-anticipated power purchase and fuel costs. The refund, equivalent to roughly 13 paise/unit, is being passed on in monthly instalments through electricity bills.
The government’s strategy is rooted in the belief that financial sustainability of the power sector cannot be achieved by burdening end-users. Instead, Naidu called for a comprehensive debt management framework for utilities, coupled with technological interventions to enhance efficiency and reduce losses.
At the same time, the state is betting big on renewable energy to structurally lower power costs. Andhra Pradesh has already signed agreements worth nearly Rs 3 lakh crore across solar, wind, pumped hydro storage and green hydrogen projects. It has budgetary support to the sector of Rs 13,934 crore n 2026–27.
The aspect of this strategy is scaling up solar energy at both utility and household levels. Under the PM Surya Ghar Yojana, nearly one lakh rooftop solar systems with a combined capacity of around 330 Megawatt Peak (MWp) have been installed so far. The government is pushing to accelerate adoption by improving access and awareness.
Parallelly, efforts are underway to promote solarisation in agriculture through the PM Kusum Scheme, which aims to reduce the subsidy burden on the state while ensuring reliable daytime power supply to farmers.
Recognising the intermittent challenges in renewable energy sector, the government is also fast-tracking investments in pumped storage projects and battery energy storage systems. These are expected to play a crucial role in ensuring round-the-clock power availability while maximising the share of clean energy in the grid.
Naidu has also emphasised the need for Andhra Pradesh to reclaim its position as a leader in power sector reforms. The state, which was an early adopter of energy auditing and sectoral restructuring, is now looking to leverage global trends favouring affordable and green energy.
As part of this programme, the Chief Minister has proposed setting up an Energy University to drive research and innovation, alongside strengthening existing institutions like the Centre of Excellence for Energy Transition. There are also plans to create an incubation ecosystem for startups in the energy space, with support from power utilities.
The long-term goal is to transform state utilities into financially robust, technologically advanced entities capable not just of meeting internal demand but also offering consultancy services to other states. Under broader frameworks such as the Accelerating Sustainable State Energy Transition programme, Andhra Pradesh aims to bring down average power costs further to the Rs3.90–4.20/unit range over the next decade.
However, the transition is not without challenges. Opposition parties have flagged concerns over certain high-cost renewable PPAs, particularly those routed through central agencies, and have called for a review. The government, however, maintains that contracts cannot be unilaterally altered without legal and financial implications, and that the focus will remain on improving efficiency and optimising future procurement.
Transmission and distribution losses, currently hovering around 9 percent, are another area of concern. The government has set targets to bring these down further through grid modernisation and better monitoring systems, according to official sources.
