New Delhi: The Cabinet has cleared a Rs 2 lakh crore proposal to restructure the debt of the state power boards. But the question is whether this will address India's long-term energy problems or drag the government lenders deeper into the red.
Just seven of the country's 28 states - Rajasthan, Uttar Pradesh, Haryana, Tamil Nadu, Punjab, Madhya Pradesh and Andhra Pradesh - have between them accumulated losses of Rs 1.9 lakh crore from power distribution. The government's stimulus package is a step to save these companies going into deeper losses.
Years of populism, corruption and mismanagement have driven the power distributors, most of them state-owned, deep into the red. By the end of the 2011 financial year, they had accumulated losses of Rs 92,600 crore. The country's state-owned distribution utilities are drowning in losses and were blamed for triggering probably the worst blackout in history in July.
Experts say that the losses have accumulated due to bad governance. Anil Razdan, former secretary, Ministry of Power, says that overall, it was bad governance, bad economics and bad technical performance. These three issues led to a loss of confidence of the lending sector as their money got stuck in the process.
The bailout may be a welcome step, but it remains to be seen whether it will address problems such as electricity theft and decrepit networks.