Power Ministry Warns Aid Cut to 6 States Over Discom Privatisation Reforms

The Ministry of Power has issued a stern warning to 6 Indian states regarding pending electricity distribution reforms. With mounting losses in state-run Discoms, the Centre is pushing for privatisation or listing-led reforms, threatening to withhold financial support exceeding ₹1,00,000 crore if conditions are not met.

States Face Ultimatum: Reform or Sacrifice Central Financial Assistance

During a key meeting on October 10, 2025, the Centre informed the governments of Uttar Pradesh, Andhra Pradesh, Madhya Pradesh, Maharashtra, Rajasthan and Tamil Nadu that future financial aid will be blocked if reforms are not initiated. These states must either reduce operational losses or take measures to privatise or list their power distribution companies (Discoms).

The options laid out are clear: sell 51% of Discom equity to private players with the Centre absorbing the debt, divest 26% while retaining ownership but conceding management control, or list these firms on stock exchanges, provided they earn at least an ‘A’ credit rating.

Mounting Discom Losses Trigger Central Intervention

Discoms in these states are burdened by politically dictated subsidies, delayed dues payments, and non-cost-reflective tariffs. These factors have led to soaring cumulative losses, prompting the Ministry of Power to intervene. The planned ₹1,00,000 crore bailout represents the fifth such effort to revive this sector.

The bailout will only benefit states ready to restructure their Discoms either through privatisation or listing on public markets. The initiative aims to draw private participation and infuse financial discipline into the electricity distribution sector, which has traditionally operated at a loss.

Read More: India Surpasses 500 GW in Installed Power Generation Capacity!

Conclusion

The power ministry’s latest reform push sets a clear choice before state governments: comply with privatisation or listing norms or forego access to a ₹1,00,000 crore bailout. With key deadlines approaching, how states respond will shape the future trajectory of India’s power distribution sector.

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