Bailout approved for Indian power distributors

India has approved a bailout for cash-strapped power distributors who have accumulated US$17.35 billion in losses as of 2010-2011 financial year.

The power distributors were mostly state-owned.

The country's distribution utilities were blamed for triggering probably the worst blackout in history in July, when power was cut for two consecutive days in a massive area home to 670 million people.

A lifeline for power distributors would free up cash and help them buy more power to supply factories and homes that resort to expensive diesel generators and solar panels to plug their energy gaps.

Lenders, who are mostly government-run banks, will be asked to turn the rest into long-term loans and offer a moratorium on repayment of the principal for three years. But they would not be expected to reduce interest rates on the restructured loans, said Montek Singh Ahluwalia, the deputy chairman of the Planning Commission.

But analysts said the bailout plan did not address the country's long-term energy problems and may only drag government lenders deeper into the red. - Reuters

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