India Mulls ₹1 Trillion Bailout for State Power Distributors
The Indian government is considering a bailout of over ₹1 trillion (around US $12 billion) to support debt-laden state-run power distribution companies (discoms). The proposal, led by the Ministry of Power and the Ministry of Finance, is expected to be announced in the Union Budget in February.
Bailout Linked to Reforms
To access these funds, states would need to reform their power utilities by either transferring majority managerial control or listing the utility on a stock exchange within three years. Another condition: states must source at least 20 % of their electricity from private companies and share part of the distributor’s debt.
Why the Need?
State-run power distributors continue to face large accumulated losses and high debt. As of March 2024, these losses stood at about ₹7.08 trillion and outstanding debt at roughly ₹7.42 trillion. The reforms are seen as necessary to improve financial stability and operational efficiency in the power sector.
Strategic Implications
The move signals a major push by the government to privatise segments of the electricity distribution chain and attract private investment. However, the conditions attached to the bailout—privatisation or listing—may face political resistance from states. The success of the plan will depend on the willingness of state governments to comply with reform requirements.
