EXPLAINED | What could Karnataka gain and lose if Tata Power gets a distribution licence
From internet providers to telecom services, people in Karnataka can choose their service providers and switch when the service is not suitable for them. But electricity was never part of this selective system.
Electricity supply in Karnataka is a system run by Escoms; Each region is assigned a fixed distribution company based on geography, and there is no switching option even if service is poor.
What can change?
In a bid to break this structure, Tata Power Company Limited (TPCL) has recently approached the Karnataka Electricity Regulatory Commission (KERC) seeking a power distribution license for areas currently served by Bangalore Electricity Supply Company (Bescom), Chamundeshwari Electricity Supply Company (CESC) and Escoms in Hubballi (Hescom), Mangaluru (Mescom) and Kalaburagi (Gescom).
Tata Power Company has stated that it plans to serve more than 1.86 lakh consumers within three years of getting the licence, within Bescom limits alone.
The proposal triggered fierce and expected opposition from numerous unions across the state; unions warned of violent agitations and even lawsuits if the proposal was accepted.
The proposal raised a fundamental question: Should electricity remain a single-provider system, or should multiple companies be allowed to provide energy in the same area?
Choice and efficiency
Independent energy experts and supporters of the movement say the biggest change will be the election. If more than one distributor operates in the same region under a parallel licensing model, consumers will no longer be dependent on a single company. Different companies will compete to supply energy and provide consumer services, but questions remain about how infrastructure will be shared, duplicated or developed if a parallel distribution system is implemented. They argue that poor service directly risks losing consumers.
They also argue that competition can increase efficiency. Escoms of Karnataka continue to report high losses due to leakage, theft and delay in recovery. These inefficiencies ultimately fuel tariff pressures or require government support. Supporters say overall system costs could decline over time if competition pushes for better performance.
financial stress
Data on the financial health of Karnataka’s power distribution companies paints a bleak picture.
Accumulated losses of the state’s Escoms rose from about ₹ 17,559 crore in 2022-23 to about ₹ 34,980 crore in 2024-25, while borrowings rose from about ₹ 32,211 crore to almost ₹ 47,993 crore in the same period. Experts argue that these figures reflect a system under increasing fiscal stress, with consumers ultimately bearing the cost through tariff revisions, government support, additional borrowing or deferred investments.
renewable resources
Supporters also argue that the economics of the energy sector have changed significantly over the years, indicating changes in the energy market.
Electricity from newer renewable sources such as solar power is available today for around ₹2.50 to ₹3 per unit in most cases, while some older power purchase agreements continue with rates around ₹8 per unit. Companies with stronger purchasing power and greater financial flexibility can move faster to obtain cheaper energy, invest in grid upgrades, smart meters and renewable energy integration, and increase overall efficiency, according to competition supporters.
Private distributors can only survive if electricity consumption is measured accurately, invoices are issued correctly and dues are collected on time. Better measurement, tighter billing systems and faster recovery of payments naturally create pressure to reduce losses and improve service quality.
Arguments of those who oppose this
However, opponents argue that electricity cannot be treated like telecom or internet services.
They say Escoms operate not only as commercial service providers but also as ‘welfare-linked’ distributors. Under a parallel system, private companies such as Tata Power would operate alongside existing Escoms, potentially creating a divide where private players focus on urban and high-salaried consumers, while government services are left to farmers, low-income households and subsidized users.
According to unions, this concern stems from the scale of Karnataka’s subsidy system. Agricultural pump sets alone account for approximately 24,000 million units of electricity consumption, that is, approximately 32% of the State’s total use. Around 35 lakh consumers depend on subsidized or free electricity for irrigation. The subsidy burden on agricultural supply is estimated at around ₹20,640 crore, apart from ₹10,100 crore spent under Gruha Jyothi.
They say this is where anxiety begins.
Agricultural energy supply is one of the biggest problems raised. Farmers’ unions, including groups from Dharwad and organizations such as the Karnataka Rajya Raitha Sangha (KRRS), argue that farmers rely heavily on subsidized or free electricity for irrigation pump sets and fear that multiple distributors could make it difficult to ensure uniform supply and consistent subsidy distribution.
Social welfare schemes such as Bhagya Jyothi and Kuteera Jyothi, which provide free or highly subsidized electricity to eligible households, are also seen as vulnerable. These benefits are currently delivered through the Escom system, and opponents argue that ensuring uniform application across multiple distribution companies could become complicated.
The government’s promise of free electricity for up to 200 homes is also being ignored. Critics say that in a system with private players, cost pressures can cascade into how such subsidies are structured or maintained, especially if fiscal responsibilities are unequally distributed between public and private entities.
Beyond subsidies
Associations like the Federation of Karnataka Electricity Board Employees Union and Associations also fear that private distributors will naturally gravitate towards urban households, commercial establishments and consumers with predictable payment records, while Escoms will continue to take a larger share of subsidized consumers and welfare liabilities. If this happens, they argue, the financial burden on public services could become even heavier.
Supporters reject this definition and argue that efficiency should not be confused with picky consumers. They argue that any distributor, whether public or private, can be asked by the regulator to comply with subsidy mechanisms, consumer protection norms and public service obligations.
Beyond subsidies
Beyond subsidies, critics have also raised concerns about the financial impact Escoms will have on them.
Employee unions argued that pro rata deposits collected from consumers would mean they would have to move with those consumers if they changed distributors. They argue that large-scale migration could further worsen liquidity pressures, as securities deposits constitute an important source of working capital for Escoms. Karnataka’s Escoms currently hold over ₹11,371 crore in consumer security deposits; this includes around ₹6,668 crore in Bescom alone. They argue that transferring these deposits to a new distributor could impact the utilities’ working capital position.
parallel distribution
There are also practical questions about how a parallel distribution system will work. Regulatory discussions around the proposal indicate that any new operators are expected to establish an independent infrastructure rather than relying entirely on networks created by Escoms. Critics argue this could lead to asset proliferation and operational difficulties, while supporters say true competition will require new investment rather than relying on existing public infrastructure.
Tata Power’s existing distribution operations in Mumbai, New Delhi, Ajmer and parts of Odisha demand relatively lower base tariffs and higher operational efficiency. The total technical and commercial losses of TPCL’s distribution businesses are reportedly below 6%, almost 50% lower than Bescom alone, which continues to report losses of around 12%.
