After Bill, Govt Plans Bailout Package To Privatise Power Sector
The government is considering a bailout exceeding Rs one lakh crore for debt-laden state-run discoms: Reports
CHENNAI: Having laid the roadmap to get the power sector privatised through the Electricity Amendment Bill, the government is considering a bailout package of Rs one lakh crore for the debt-laden loss-making distribution companies only if they agree to be privatised.
Financial Chronicle on Tuesday had reported how the new bill will force the state-owned discoms to share their network with private companies for nominal wheeling charges. The loss-making public discoms will continue to carry the financial burden of the network, while the private companies will enjoy the profits.
To put more pressure on the public discoms, the government is also preparing a bailout package, as per a report by Reuters.
The government is considering a bailout exceeding Rs one lakh crore for debt-laden state-run discoms. To receive the bailout funds, the states will be required to privatise their electric utilities and transfer managerial control or keep control but list them on a stock exchange, it said.
The Power Ministry and the Ministry of Finance are discussing the final details of the bailout and an announcement expected in the February budget. Under the proposal, at least 20 per cent of the state's total power consumption must be met by private companies and the states must assume part of the retailer's debt.
To do so the states can choose to privatise their distribution operations for access to loans to pay off existing debt under two options.
First, the states can create a new distribution company, divest 51 per cent of the equity, which will enable them to access a 50-year interest-free loan for the privatised company's debt, along with access to low-interest federal loans for five years.
The second option would let states privatise up to 26 per cent of the equity of an existing state-owned power distribution company in exchange for access to low-interest loans from the federal government for five years.
States that do not decide to transfer managerial control through privatisation must list their utilities on a recognised stock exchange within three years and they would receive low-interest loans from the federal government for infrastructure management, the Reuters report said.
The state power retailers have accumulated losses of Rs 7.08 lakh crore and outstanding debt of Rs 7.42 lakh crore as of March 2024. Private companies such as Adani Power, Reliance Power, Tata Power, and Torrent Power are expected to benefit from the reforms as they are likely to gain stakes in the state companies.
Further, The Electricity (Amendment) Bill 2025 is also meant to get the discoms privatised, which can make power tariffs costlier for farmers and common consumers.
“This will mark the beginning of the end of electricity distribution in the government sector,” said All India Power Engineers Federation (AIPEF) Chairman Shailendra Dubey.
As per the bill, the distribution networks of discoms will have to be shared with private companies for nominal wheeling charges and the entire responsibility for the maintenance and strengthening of the network financial burden of this will fall on the government electricity distribution corporations. Private companies will get the freedom to earn money through this network.
Private companies will not have the obligation of universal power supply and the responsibility of supplying power to loss-making farmers and poor domestic consumers will remain with the state-owned discoms.
As a result, government electricity distribution companies will become bankrupt and will not even have money to purchase electricity or pay salaries to their employees, said Dubey.
