Daijiworld Media Network – New Delhi
New Delhi, Oct 31: In a major reform initiative, the Central government is planning a bailout package worth over Rs 1 trillion ($12 billion) for debt-laden state-run electricity distribution companies (discoms). The move aims to push states towards privatising their utilities or listing them on stock exchanges to improve efficiency and accountability.
According to officials, the Ministry of Power, in coordination with the Ministry of Finance, is finalising the plan, which is likely to be announced in the Union Budget in February 2026. The proposal marks one of the Modi government’s most ambitious reform drives to overhaul India’s struggling power distribution sector.
Under the scheme, states seeking bailout funds must either transfer managerial control through privatisation or retain control but list their utilities on recognised stock exchanges within three years. The plan mandates that at least 20% of the state’s total power consumption should be supplied by private companies.
Two options have been proposed. States can either create a new distribution company and divest 51% equity to private players, qualifying for a 50-year interest-free loan and low-interest Central loans for five years, or they can privatise up to 26% of equity in their existing utilities to access low-interest loans for five years.
States that choose to list their utilities instead of privatising them will be eligible for Central loans for infrastructure management.
As of March 2024, state power discoms have accumulated losses of Rs 7.08 trillion ($80.6 billion) and outstanding debt of Rs 7.42 trillion ($84.4 billion). Despite three Central bailouts in the past two decades, most discoms remain financially distressed, largely due to deeply subsidised tariffs and inefficient cost recovery.
The reform is expected to open up opportunities for private power giants such as Adani Power, Reliance Power, Tata Power, CESC, and Torrent Power, who may gain stakes in state-run distribution networks.
Experts say the move is essential but politically sensitive. “Privatisation is much needed to improve both financial and operational metrics of many power distribution companies. However, this move could face some resistance and will require strong political will,” said Debabrat Ghosh, Head of India Operations at Aurora Energy.
Currently, only a few regions, including Delhi, Maharashtra, and Gujarat, have successfully privatised distribution operations. The government is also planning to amend the Electricity Act in the upcoming Parliament session to allow private firms to use existing state-run networks, paving the way for broader participation and better service delivery.