Budget 2026 Expectations: Centre May Raise RDSS Allocation to ₹18,000 Cr as Discom Stress Persists

The Centre is likely to increase the annual allocation for the Revamped Distribution Sector Scheme (RDSS) to ₹18,000 crore in the upcoming Union Budget, Mint reported, citing sources.

The Union Budget for FY27 is scheduled to be presented on February 1 by Union Minister of Finance and Corporate Affairs Nirmala Sitharaman.

Launched in 2021, the RDSS aims to transform the power distribution sector by improving efficiency and ensuring financial sustainability. “This year, the power ministry has proposed an allocation of around ₹18,000 crore for RDSS, which is currently under consideration. Smart meter installation is gaining pace, with about 1.5 lakh meters being installed every month. With this momentum, funding needs to increase,” Mint reported, quoting a source who sought anonymity.

In the FY26 Budget, the scheme was allocated nearly ₹16,000 crore. The proposed increase comes at a time when power distribution companies (discoms) continue to face financial stress, with cumulative debt exceeding ₹7 trillion.

Government initiatives to address these challenges include the Ujjwal Discom Assurance Yojana (UDAY), launched in 2015, and the proposed Electricity Amendment Bill, 2025. The Bill, expected to be tabled during the parliamentary session beginning January 28, seeks to introduce reforms such as greater competition in power distribution, stricter performance benchmarks for discoms, and expanded consumer choice.

Separately, the power ministry on Wednesday released a draft National Electricity Policy 2026, proposing a series of reform measures, including mandatory tariff revisions and the introduction of an index-based automatic tariff adjustment mechanism. The government has rolled out multiple schemes over the years to achieve universal household electrification.

In March last year, Parliament’s Standing Committee on Energy flagged concerns over delays in the rollout of smart meters under the flagship distribution reform scheme. According to Mint, a panel report for the power ministry noted that of the ₹30,065 crore allocated to RDSS during its first four years, only about ₹5,664 crore had been utilised as of February 10, 2025.

India’s plan to install 250 million smart meters is expected to require cumulative investments of around $30 billion, the report said.

Mint also reported that the target of eliminating the gap between the average cost of supply and average revenue realised (ACS–ARR) by FY25 has not been met. As of the end of the last fiscal year, the gap had narrowed to 6 paise per unit, from 48 paise in FY24.