Reorganization of the power distribution sector in India

This paper presents the central issues for electricity-sector reform in India, as they grew out of the reform process that began in 1991, and within the context of the sectorʹs organization, regulatory structure, and other institutional characteristics. The paper argues that Indiaʹs current reform policies will not be sufficient to achieve reliable, efficient power because distribution reform has not been done. Undertaking distribution reform is a difficult path to tread because of the absence of global consensus on best practices and conflicting forces, both economic and political. The paper analyzes alternative institutional structures for reform in the distribution sector. The findings include that the objectives of coverage and efficiency may conflict, that economically efficient reorganization may be politically unachievable and that the small, municipally owned firm may be the best compromise. Since many Indian states are economically and politically diverse from each other, and include both large served and unserved areas, there is scope to vary the organizational structure depending on the stateʹs situation. This paper provides a means to do so. The agenda for policymakers is to identify the situation in their respective states and choose a reorganization path that is the best compromise.