Till four years ago, power companies were the darlings of investors, whether they were making transformers and switches or building gigantic multibillion dollar utilities. After all, every Indian has lived through power shortages and electricity is one thing we can't do without.

Today, the same companies are shunned by banks and investors. From January, Reliance Power is down about 36%; Adani Power 37%; Jayprakash Power 30%, and GVK Power 68%. A look at the net debt piled up by the top 200 non-financial companies shows that four power companies figure among the top 10.

So, what changed?

Analysts worry that electricity generated by utilities will be sold to state government-controlled electricity boards, which won't be able to pay for the power they buy. Across India, state electricity boards (SEBs) have racked up losses of around Rs 1,10,000 crore. Among these, Tamil Nadu alone is in the red for around Rs 30,000 crore. Five years of the DMK's free power politics have managed to sink the utility . If distribution companies can't pay, power generators will go bust, fear bankers. Then who'll pay back loans made to them?

This situation isn't new: exactly 10 years ago, SEBs were about to get buried under a heap of unpaid bills, just like now. At that time, the Centre dangled a rescue package, wiping out their debt in return for reforms. The states grabbed the money, but forgot to mend their ways.

Can the situation change for the better? Bharat Parekh, analyst for Bank of America-Merrill Lynch, believes it can. In data published this month, Parekh shows that as many as 12 states in India have recently increased tariffs - improving their solvency - between 9% and 34%. The list includes India's biggest power consumer, Maharashtra , which hiked rates last month.

But the best is yet to come: Jayalalithaa's Tamil Nadu has decided to reform the sector. Parekh is expecting a 20% to 30% hike in power tariffs by January and a series of reforms, including a state-led restructuring of SEB debts.

States need to crack down on electricity theft, put in proper billing systems, ensure timely payments and stop free electricity on farms, something both Punjab and Haryana politicians excel at. Then, there's another problem facing power companies: a shortage of coal, the most important fuel to run those turbines.

The Central Electricity Authority (CEA) reckons that 11 power projects, generating among them a huge 16,175 megawatts of electricity, have enough coal stocked to run for about a day. Rules say that power plants should have coal stocks to last them between 14 days and a month.

There are three reasons why coal supplies are suddenly running dry. The most proximate reason, claims Coal India Ltd (CIL), India's stateowned coal monopolist, is extraordinarily heavy rains in east India leading to floods, which have inundated its open cast mines. There's no use shipping wet coal.

Former environment minister Jairam Ramesh's no-go policy, which stopped mines from being opened up in certain areas, will delay new supplies coming in the longer run. Importing coal is an option , but an expensive one. Indeed two of the vast, 4,000 MW ultra mega projects, the Tata's at Mundra and Reliance's at Krishnapatnam, are supposed to run on imported coal. But as the cost of coal has spiked globally, both find that their costs are going up and are lobbying to raise the prices at which they'd