India Plans $41 Billion Reform to Revive Ailing Power Utilities

Plan for power retailers may be unveiled in next week’s budget.

India Plans $41 Billion Reform to Revive Ailing Power Utilities
Power cables and telephone lines hang from a utility pole. (Photographer: Amanda Mustard/Bloomberg)

India plans to spend 3 trillion rupees ($41 billion) on a new plan to revive regional electricity retailers, people with knowledge of the matter said, after a previous attempt failed to stem losses at the utilities.

The spending would be spread over a few years and is likely to be unveiled on Feb. 1 as part of the government’s budget for the year starting April 1, the people said, asking not to be identified as the proposal isn’t public. The plan for carrying out reforms for reducing losses of state distribution utilities was sought by the nation’s power ministry and is under discussion.

Prime Minister Narendra Modi’s government is focusing on turning around electricity distributors to ensure reliable power supplies, improving the financial health of generators and making the sector more attractive to foreign investors. The combined loss at the nation’s power distribution companies, mostly controlled by provincial administrations, jumped 69% to 496.2 billion rupees in the year ended March 2019, the latest available data.

The spending would focus on upgrading infrastructure and technology of the ailing utilities to make them more efficient and reduce financial losses, according to the people. Under the plan, the federal government would provide annual grants to states that meet targets set by New Delhi.

Spokesmen at the finance and power ministries were not immediately available for comment.

The plan could include some specific measures such as separating power feeder grids for farmers and residential users, and installation of prepaid smart meters to stop pilferage and encourage timely payment, they said. It also plans to replace overhead cables with special insulated wires to prevent theft.

Electricity retailers are the weakest link in the country’s power supply chain, losing on an average about a fifth of their revenue because of technical and commercial reasons, including loss of power supplies through theft, poor transmission infrastructure and inefficient billing and collection.

The plan will be a modified version of an earlier program unveiled in 2015 to revive power distributors through restructuring of their debtheir debt. That attempt remained unsuccessful in making retailers profitable by March 2019.

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