Power Minister Sushilkumar Shinde said the entire northern grid collapsed for six hours shortly after 2:00 am (2030 GMT Sunday), causing chaos in nine states including the capital New Delhi.
The cut severely disrupted transport networks, including trains and metro services, while traffic light systems also went down in some major cities causing snarls in the morning rush hour.
Major hospital and airports in the region were able to function normally on emergency back-up power, officials said.
"We are used to electricity going occasionally, so we have a good back-up system," said a spokesman for Safdarjang Hospital in New Delhi, N. Makwana.
Shinde said a system overload was probably responsible for the outage. The grid was brought back online at 8:00 am, but running at only 60 percent capacity.
"It is an accident, a failure," the minister admitted to reporters, adding that a special committee was being set up to probe the incident.
In a statement, the Power System Operation Corporation (PSOC), which manages the northern grid, said the "entire northern region", which is home to 28 percent of India's 1.2 billion population, had been affected.
The nine affected states were Delhi, Haryana, Himachal Pradesh, Jammu and Kashmir, Madhya Pradesh, Punjab, Rajasthan, Uttarakhand and Uttar Pradesh.
Limited power outages are extremely common across India, which runs a peak-hour power deficit of around 12 percent according to the Central Electricity Authority.

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