"The fund is in the process of being formulated," the Mint quoted, power secretary P Umashankar as saying.
The fund would be the latest in a series of recent government measures to overhaul India's creaky infrastructure, long seen as a drag on growth in Asia's third-largest economy.
A separate $11 billion debt fund for infrastructure has already been announced and could be implemented by the end of the year.
The planning commission said in a report that the shortage in the power sector could prevent India from achieving double-digit growth.
The commission predicts India will likely add 62,000 megawatts (MW) of power capacity in the five years to 2012, short of a 78,000mw target.