Power Sector Reform - a Case Study of Delhi

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Submitted By: Abhishek Kumar M. A. (F) Economics

Supervisor: Prof. T. A. Farooqui Department of Economics JMI

Head of Department: Prof M. S. Bhatt Department of Economics JMI


1. Introduction 2. 3. 4. 5. 6. 7. 8. Indian Power Sector – Current Scenario Background to the Reforms Reform Process Current Scenario Literature Review Objectives Hypotheses Methodology & Data Sources Reform in Power Generation and Its Impact Reform in Power Distribution and Its Impact Conclusion References

1 2 3 6 8 11 15 15 16 17 22 28 30

It is a critical infrastructure on which the socio – economic development of a country depends. Supply of electricity at reasonable rate is essential for overall development. Reliable and quality power at competitive rates to Indian industry is necessary to make it globally competitive. Services sector has made significant contribution to the growth of our economy. Availability of quality power is very crucial to sustained growth of this segment as well.

Exclusive dependence on government for the provision of all infrastructure services causes difficulties concerning adequate scale of investment, technical efficiency, proper enforcement of user charges, and competitive market structure. At the same time, complete reliance on private production, particularly without appropriate regulation, is also not likely to produce optimal outcomes. Therefore, in the last two decades the power sector in both developed and developing countries has been subject to restructuring. Although the approaches to reform have varied across countries, the main objective has been to improve the economic efficiency of the sector by introducing private capital, liberalizing markets and introducing new regulatory institutions. Regulatory bodies are needed because of the kind of market the power sector forms, i.e. more or less there is little scope for competition. Therefore, privatization, competition and more effective state regulation of monopoly activities lead to improved economic performance. This depends, however, on the reforms being appropriately designed and implemented.


Power sector in India is witnessing major changes. Its growth since independence has been noteworthy. However, the demand for power has been outstripping the supply. Substantial energy shortages have prevailed in the country. This is due to inadequacy in generation, transmission and distribution as well as inefficient use of electricity. Power industry has been characterized with very high level of technical and commercial losses and lack of commercial approach in management. As per Census 2001, about 44 % of the households do not have access to electricity in India. Whereas the total generation capacity of India was 1,27,673 MW as on December 2006. According to a study of Central Electricity Authority (CEA) India has an estimated unutilized hydro-power potential of more than 1, 50,000 MW.

For exploiting the potential power generation capacity and improving the quantity and quality of power in India some State Electricity Boards (SEBs) have gone through reform processes e.g. Orissa power sector reform (1996), Andhra Pradesh power sector reform (1999) and Delhi power sector reform (1997 – 2002).

With Delhi’s per capita electricity consumption (1000 units) thrice the national average (350 units), Delhi Vidyut Board (DVB) was among the highest loss incurring SEBs in India. Power Sector reform in Delhi started with the setting of DVB in 1997 and ended with the privatization of DISCOMs (Distribution Companies) in 2002. This case study of Delhi Power Sector reform will be an evaluation of the same.


Delhi Vidyut Board (DVB) was a State Electricity Board set up in 1997 under the Electricity (Supply) Act, 1948, succeeding the Delhi Electricity Supply Undertaking...
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