by Our Correspondent in New Delhi
India is considering a bailout exceeding 1 trillion rupees ($12 billion) for its financially struggling state-run power distribution companies, Reuters reports. The proposed plan links access to federal funds with either privatization of the utilities or listing them on a stock exchange, according to government officials and a Power Ministry document outlining the proposal.
The move represents Prime Minister Narendra Modi’s most ambitious reform yet to overhaul the country’s inefficient electricity distribution sector, widely regarded as the weakest link in India’s energy chain. Final details of the bailout are under discussion by the Ministry of Power and the Ministry of Finance, with an announcement expected in the February budget, sources told Reuters.
Under the proposal, at least 20% of a state’s electricity consumption must be met by private companies, and states would assume partial responsibility for the retailer’s debt. Two privatization options are on the table: states can divest 51% equity in a newly created distribution company to access 50-year interest-free loans or privatize up to 26% of an existing company for low-interest federal loans over five years. States that do not transfer managerial control must list their utilities on a recognized stock exchange within three years to access low-interest infrastructure loans.
State power retailers have accumulated losses of 7.08 trillion rupees ($80.6 billion) and debt of 7.42 trillion rupees ($84.4 billion) as of March 2024. Despite decades of bailouts, deeply subsidized tariffs have left the companies financially strained. Private players such as Adani Power, Reliance Power, Tata Power, CESC, and Torrent Power are expected to benefit from the reforms.
Experts caution that the privatization push could face resistance from employees and opposition parties. “Privatisation is much needed to improve both financial and operational metrics… however, this move could face some resistance and will require strong political will,” said Debabrat Ghosh, Head of India at Aurora Energy. The government is also preparing to amend laws to allow private firms to use existing state-run networks, signaling a major restructuring of India’s power distribution landscape.
