India Mulls Rs 1.2 Lakh Crore Bailout For State Power Discoms, Eyes Privatisation: Report
The power and finance Ministries are currently working out the final details, with an announcement expected in the Union Budget in February, as per the report.
India is considering a bailout of Rs 1.2 lakh crore for financially stressed state-run power distribution companies, news agency Reuters reported, citing government officials and a power ministry document.
To qualify for the funding, states will need to privatise their electricity distribution utilities and hand over managerial control, or alternatively retain control but list the companies on a stock exchange, according to the report.
The planned move, as claimed in the report, represents the government's most aggressive reform attempt yet to fix the loss-making state power distributors — long seen as the weakest link in the country's energy ecosystem.
The power and finance Ministries are reportedly working out the final details, with an announcement expected in the Union Budget in February. Under the plan, states must ensure that at least 20% of their total power consumption is handled by private companies and must absorb part of the power retailer's debt, the report said.
One option requires states to create a new distribution company and divest 51% equity in return for a 50-year, interest-free loan to clear debt and access to five years of low-interest federal loans, the news agency said. A second approach allows states to privatise up to 26% equity of an existing distribution company in exchange for five years of low-interest federal financing. States that do not privatise will have to list their utilities within three years to be eligible for low-interest loans, it added.
State power retailers currently have accumulated losses of Rs 7.08 lakh crore and outstanding debt of Rs 7.42 lakh crore as of March 2024, despite multiple bailouts over the past 20 years, according to the report.
At present, only a few regions in the country, including Delhi, Maharashtra and Gujarat, have privatised distribution zones. The government also plans to amend laws in the next Parliament session to allow private firms to use state-owned power networks, as per the report.
