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Uttar Pradesh team discusses Centre’s bailout package for power sector at Delhi meet
State government likely to formally announce concrete steps for privatisation of Agra and Varanasi discoms after Bihar assembly polls
Amid the Centre’s move to finalise a ₹1 trillion ( ₹1 lakh crore) national bailout package for debt-ridden state power distribution companies, chief secretary SP Goyal on Friday led a team of energy department and UP Power Corporation Ltd (UPPCL) officials to a key meeting in Delhi with the prime minister’s advisor Tarun Kapoor.
Simultaneously, energy department officials indicated the pace of privatisation in Uttar Pradesh could pick up after the Bihar assembly elections, with the state government likely to formally announce concrete steps for the Agra and Varanasi discoms, a process initiated in November last year but facing strong employee resistance.
At the Delhi meeting, according to a senior official, the Group of Ministers’ recommendations on financing discom liabilities were reviewed and the reform-linked assistance proposed under the upcoming Union Budget 2026 was discussed.
Goyal is learnt to have conveyed the state’s consent in principle to the Centre’s bailout plan, which ties funding to deep structural reforms such as privatisation or public listing of state-run discoms.
Uttar Pradesh has already identified two of its five discoms- Agra and Varanasi-for privatisation due to their financial and operational efficiency parameters.
At Friday’s meeting, officials are said to have presented the privatisation model they were working on for the two discoms.
“As of March 2025, the combined debt of Uttar Pradesh Power Corporation Limited (UPPCL), holding five discoms under it, stood at around ₹62,000 crore-mostly loans taken from banks and financial institutions after earlier bailouts had cleared past liabilities and UP was ready to avail of the Centre’s conditional bailout package as discussed in the meeting at the PMO on Friday,” a senior UPPCL official disclosed.
The last major restructuring took place under the Ujwal Discom Assurance Yojana (UDAY) in January 2015, when the UP government took over 75% of the discom debt amounting to ₹53,211 crore with central support. Despite the relief, the utilities continued to incur losses, which rose to ₹7,932 crore in FY 2017 from ₹7,791 crore a year earlier.
Before UDAY, the UPA government had launched a similar scheme in 2012 under which UP took over 50% ( ₹33,000 crore) of short-term discom loans and guaranteed restructuring of the balance amount with additional central support in the form of interest subsidies.
Under the new bailout framework, states will qualify for central funding only if they agree to privatise or list their utilities. They may either sell a 51% stake in a newly formed company to private partners or divest up to 26% equity in existing entities while transferring management control. Those unwilling to privatise must list their utilities within three years to access concessional loans. The scheme proposes interest-free or low-interest central loans for five years and a 50-year moratorium on old dues, subject to reform milestones.
The plan also requires states to ensure at least 20% private participation in power supply and to bear part of their discoms’ debt burden. Central assistance will be linked to improved efficiency, lower AT&C losses, and narrowing the gap between cost of supply and revenue realization.
With Uttar Pradesh among the six states flagged by the ministry of power along with Andhra Pradesh, Madhya Pradesh, Maharashtra, Rajasthan and Tamil Nadu, the Delhi meeting may chart the next steps for reforming the power sector.
“Whether the proposed bailout and privatisation moves will genuinely revive the ailing power sector, however, remains far from certain, given the state’s repeated failures to sustain past reform gains,” the energy department official noted.
