The Indian government is hoping to improve the performance of the country’s power sector through a plan to restructure utilities’ burgeoning debt.
The scheme applies to India’s state electricity distribution companies and is designed to help them to become commercially viable by restructuring $35 billion of debt.
The move came seven weeks after a power cut of catastrophic proportions swept across the country, affecting half of India’s 1.2 billion population for nearly 10 hours.
The new scheme involves state governments guaranteeing bonds to replace half of distributors’ short-term debts. Banks will reschedule the remaining debts and accept repayment moratoriums.
The scheme is voluntary but includes certain conditions.
The August power failure – thought to be the largest one ever in the world – was the second significant power cut in India in two days and was caused by distribution utilities in the north of the country taking too much power from the grid.
Distribution utilities in India sell power at discounted rates and have therefore racked up large debts with state-owned as well as private banks. Their financial positions also mean that investment levels in the distribution system are low.
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