Power Minister Sushilkumar Shinde said the entire northern grid collapsed for six hours shortly after 2:00am (2030 GMT Sunday), causing chaos in nine states including the capital New Delhi.
The cut severely disrupted transport networks as around 300 passenger trains ground to a halt, requiring the deployment of diesel engines to pull them to safety, railways officials said.
In New Delhi, metro services started up an hour late and were operating at only 25% capacity for most of the morning, while traffic lights also went down causing snarls and lengthy tailbacks in the early rush hour.
Major hospitals and airports in the region were able to function normally on emergency back-up power, officials said.
"As soon as there was a disruption, all our essential services like flight arrivals and departures, and check-in were shifted to our back-up system," a spokesman at New Delhi's international airport said.
The Delhi water board said the capital's seven water treatment plants were shut down by the blackout, but five were back in operation by mid-morning.
The northern grid covers a vast region that is home to 28% of India's 1.2-billion population, and includes the states of Jammu and Kashmir, Punjab, Rajasthan and Uttar Pradesh.
"It is an accident, a failure," Shinde, the federal power minister, told reporters, adding that a special committee was being set up to probe the precise trigger for the blackout.
The Press Trust of India said initial suspicions had focused on problems at a sub-station in the Taj Mahal city of Agra that might have tripped the rest of the grid.
But Delhi Power Minister Haroon Yusuf blamed neighbouring states for overdrawing electricity.
According to the Power System Operation Corp. (PSOC), which manages the northern grid, 100% power had been restored to New Delhi as of 1:00pm and 70% to the rest of the affected region.
The grid would be back at full capacity by the evening, said PSOC spokesperson S.K. Soonee.
Limited power outages are extremely common across India, which runs a peak-hour power deficit of around 12%, leading to constant load-shedding.
Industry leaders say electricity shortages have become a major obstacle to economic growth in the country, which has an installed power generation capacity of 187 gigawatts — about 20% of China's level.
"I believe it [the outage] could be because of the great indiscipline of the states in overdrawing power — the grid will only collapse if you overdraw," said Vivek Pandit, energy director at business lobby group the Federation of Indian Chambers of Commerce and Industry.
Shinde said the speed with which the situation had been remedied compared well with similar mass outages in the developed world, including the 2003 blackout that affected much of the eastern seaboard of the United States.
"It took four days to restore power in America … our power grid is very good," he said.
Within hours of the northern region going down, electricity was brought in from the the eastern and western grids, as well as the neighbouring Himalayan kingdom of Bhutan.
"By 2014, the whole country's grids will be connected so they can take power from each other … so you won't have these problems again," Shinde said.
The last serious power outage in India was in 2001, when the northern grid crashed for around 12 hours, costing industry an estimated $110-million in lost production.
India's fast-growing economy is heavily dependent on highly pollutant coal and imports of crude oil. Less than 3%t of India's electricity comes from nuclear power but it hopes to raise the figure to 25% by 2050.– Sapa-AFP