India plans financial aid for struggling state power utilities

India is evaluating a financial assistance plan for debt-laden state-run power distribution companies (DISCOMs) to maintain sector stability amid growing electricity demand, according to a Ministry of Power document cited by Reuters.

A ministerial panel has been set up to determine which states require urgent funding, develop a fiscal discipline framework to prevent further debt accumulation, and explore ways to attract private investment. If approved, this would be the first federal financial intervention since 2021, when Rs 2.9 trillion ($35 billion) was allocated to state power utilities.

The document also proposed privatizing DISCOMs, which are struggling with financial losses due to restricted tariff adjustments, rising power procurement expenses, high transmission and distribution losses, and delays in revenue collection. As of March 2023, DISCOMs had recorded total losses of Rs 6.2 trillion ($75 billion), equivalent to 2.4% of states’ gross domestic product, according to a Reserve Bank of India report.

The ministerial panel held its first meeting on January 30 and is expected to reconvene this month to deliberate on a financial relief package. The power ministry has not yet issued a statement on the matter.