India weighs bailout plan for debt-laden state power utilities amid surging demand: Report

The document, circulated this week, details plans for a ministerial panel to identify states in urgent need of financial support, design a "fiscal discipline program to enable them to avoid a debt trap," and propose measures to attract private investment.

If implemented, this would be the first financial support from the central government to state power utilities since 2021, when a similar intervention cost $35 billion.

The Ministry of Power has also recommended privatising distribution utilities, most of which are run by state governments.

These utilities struggle to raise tariffs despite rising power procurement costs, high transmission and distribution losses, and delayed payments from consumers.

According to a December 19 report by the Reserve Bank of India, state-run power distribution companies had accumulated losses of $75 billion by the fiscal year ending March 2023—equivalent to about 2.4% of states' GDP.

Currently, 65 power distribution companies operate under state control.

"The financial health of distribution companies (DISCOMS) is crucial for sustaining a reliable and uninterrupted electricity supply to consumers," the document states.

It highlights key challenges faced by DISCOMS, including inadequate tariff structures, escalating power purchase costs, high transmission and distribution losses, and delays in payment collection, all of which contribute to revenue deficits and operational inefficiencies.

The ministerial group mentioned in the document convened for the first time on January 30 and is expected to meet again this month to discuss a financial package for the utilities, according to two government sources.