A worker stands on a transmission pole in the village of Manpur Kulchaura, Uttar Pradesh, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

India Asks Power Giants to Help Revive State Retailers, Sources Say

(Bloomberg) -- The Indian government has asked its biggest state power producer and transmission company to form a joint venture that would take over electricity distribution in some areas from financially troubled state retailers, according to people familiar with the plan.

The proposed venture between NTPC Ltd. and Power Grid Corp. of India Ltd. would manage challenging distribution areas where the retailers, known as discoms, face power theft and other difficulties, said the people, who asked not to be identified because they’re not authorized to speak to media.

Neither company, nor India’s power ministry, responded to emails and phone calls seeking comment.

As part of the plan, the JV would be expected to charge discoms a fee for services that would include seeking power theft prevention, sourcing cheaper power and improving billing and collections.

Reviving India’s ailing distributors is seen as key to extending electricity access, especially in the countryside, where low power usage makes distribution a loss-making business. Prime Minister Narendra Modi, who was partly elected on a commitment to bring power to every home, has stepped up efforts to strengthen the country’s fragile retailers ahead of a general elections expected this year.

Short on cash, state utilities often delay payments for electricity purchases or don’t buy enough power needed to service their customers, creating financial stress for generators and lenders.

A national distribution company may face challenges if state governments are reluctant to cede control of local distribution. Regional authorities often require discoms to sell power below cost, mainly because its politically popular.

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