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Effect of open access reform on electricity prices and labor market: Plant-level evidence from India

Author

Listed:
  • Sinha, Apra
  • Mehta, Tarun
  • Kumar, Surender
  • Sarangi, Gopal K.

Abstract

Electricity is an important input for manufacturing, and lowering its cost is likely to foster industrialization and economic development. This paper estimates the effect of state-level open access (competition-enhancing) reform in India’s electricity market on electricity prices and labor market outcomes, using administrative plant-level data. Results suggest that open access leads to a decline in electricity prices and an increase in labor share, with stronger effects for grid-dependent plants. The decline in price and increase in labor share are larger in states with higher electricity revenue (per kWh) from the agricultural sector. These states also experience a greater decline in labor markdown. This is likely because utilities in such states face less resistance to open access and impose lower cross-subsidization surcharges, reinforcing both extensive and intensive margins of open access utilization. Accelerating reform and removing cross-subsidization surcharges would generate broad gains for both industry and workers.

Suggested Citation

  • Sinha, Apra & Mehta, Tarun & Kumar, Surender & Sarangi, Gopal K., 2026. "Effect of open access reform on electricity prices and labor market: Plant-level evidence from India," Economic Modelling, Elsevier, vol. 160(C).
    • Handle: RePEc:eee:ecmode:v:160:y:2026:i:c:s0264999326001203
    DOI: 10.1016/j.econmod.2026.107591
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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • P41 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Planning, Coordination, and Reform
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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