The government said on Monday that it would give state power utilities Rs 40,000 crore (Rs 400 billion) over the next five years to reform the ailing industry after huge losses and decades of poor management.

"A decision has been taken to support state electricity boards," Cabinet spokeswoman Sushma Swaraj told a news conference after a meeting. "Incentives will be given to strengthen infrastructure and to reduce losses."

The bankruptcy of power utilities has been a key obstacle for the country in attracting foreign investment.

Swaraj said Rs 20,000 crore (Rs 200 billion) would be given as an incentive to state power firms that reduce losses through more efficient generation, transmission and distribution of electricity.

The rest would go to the states to upgrade their existing power facilities or build new systems.

Swaraj said New Delhi had already set aside Rs 3,500 crore (Rs 35 billion) rupees for state power utilities from the new financial year beginning April 1 and that more funds would follow.

State firms, monopoly distributors of power across most of the country, are mired in financial problems due to large-scale power theft and subsidised supplies to farmers.

Swaraj said the losses of state power utilities were mounting and were currently around Rs 26,000 crore (Rs 260 billion).