Govt eyes easing debt loads of state power distributors

NEW DELHI (Reuters) - India on Tuesday said it is eyeing a bailout for state electricity distributors saddled with 1.9 trillion rupees in debt and increasingly unable to pay for new supplies as they sell power below cost and lose much to theft.

State governments would be asked to take half the debt load from the companies with the government offering to pay them subsidies to help retire a quarter of that amount over time, India's power secretary P. Uma Shankar told reporters.

The lenders, many of which are government-owned banks, would be asked to restructure payments on the remainder of the debt to free up cash flow for the distributors, Shankar said.

India, facing chronic power shortages, plans to add 88,000 megawatts (MW) capacity to its existing 200,000 MW in the next five years. But analysts say failure to charge the full price for electricity is unsustainable with rising costs for fuel.

States would need to agree to the proposal for it be implemented.

(Reporting by Sanjeev Choudhary and Manoj Kumar; Editing by Ed Lane)

Updated Date: Jul 17, 2012 23:15 PM

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