India Plans ₹1 Trillion Bailout for Debt-Ridden Power Distributors, Pushes Privatisation
India is preparing a bailout package exceeding ₹1 trillion ($12 billion) to rescue its debt-laden state-run power distribution companies, as part of Prime Minister Narendra Modi’s most ambitious reform drive to date. According to a government document and officials, states seeking bailout funds will be required either to privatise their electricity utilities by transferring managerial control or to list them on stock exchanges. The final framework is being reviewed by the Ministries of Power and Finance, with an official announcement expected in the February 2025 budget.
Under the proposal, states must ensure that at least 20% of total power consumption comes from private firms and assume part of their distributors’ debt. They can opt to create a new distribution company and sell a 51% stake to qualify for 50-year interest-free loans, or privatise up to 26% of existing utilities to access low-interest federal loans. Alternatively, states retaining full control will need to list their utilities within three years to secure infrastructure financing support from the federal government.
India’s state-run power retailers collectively owe ₹7.42 trillion ($84.4 billion) and have accumulated losses of ₹7.08 trillion ($80.6 billion) as of March 2024, despite multiple past bailouts. Private players such as Adani Power, Tata Power, Reliance Power, CESC, and Torrent Power are expected to benefit from the reforms through potential equity acquisitions. However, analysts warn that while privatisation could boost financial efficiency, it may face resistance from employees and opposition parties, as witnessed in previous reform attempts.
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