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Plight of the power sector in India: SEBs and their saga of inefficiency

Author

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  • K.P. Kannan

    (Centre for Development Studies)

  • N. Vijayamohanan Pillai

    (Centre for Development Studies)

Abstract

True to the spirit of a social-democratic State, India had originally evolved her power development policy, and shouldered that responsibility, in line with the State's professed commitment to honouring and ensuring social security equations. Though the State Electricity Boards (SEBs) were statutorily required to function as autonomous service-cum-commercial corporations, they became in effect agents of the Governments to subserve the socio-economic policies of the State, and hence never felt the requirement to break even or to contribute to capacity expansion programs. This unaccountability culture in turn led to gross inefficiency at all levels - technical, institutional and organizational, as well as financial. And the cost escalation from such pampered inefficiency remained above the revenue realized from an irrational subsidized pricing practice. With losses mounting up, the field was getting cleared for some new entrants of ideas and practices, that the so-called `fiscal crisis' at the turn of the nineties ushered in subsequently. Thus has commenced an era of reforms and restructuring of power sector in India, at the initiation of the World Bank that has also lit up an informed atmosphere of debates and discourses. However, little light has been thrown on the significant aspects of inefficiency costs involved in the SEBs' forced functioning that allegedly finally warranted the reforms. The present study is a modest attempt at this. Here, inter alia, we have estimated, on some very plausible assumptions, the avoidable cost of inefficiency at a few amenable levels and found it to represent about one-third of the reported cost of electricity supply in India in 1997-98! And this is regardless of a number of other possible inefficiency sources at all levels of performance.

Suggested Citation

  • K.P. Kannan & N. Vijayamohanan Pillai, 2000. "Plight of the power sector in India: SEBs and their saga of inefficiency," Centre for Development Studies, Trivendrum Working Papers 308, Centre for Development Studies, Trivendrum, India.
  • Handle: RePEc:ind:cdswpp:308
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    Cited by:

    1. Sharma, D. Parameswara & Nair, P. S. Chandramohanan & Balasubramanian, R., 2005. "Performance of Indian power sector during a decade under restructuring: a critique," Energy Policy, Elsevier, vol. 33(4), pages 563-576, March.
    2. Thakur, Tripta & Deshmukh, S.G. & Kaushik, S.C., 2006. "Efficiency evaluation of the state owned electric utilities in India," Energy Policy, Elsevier, vol. 34(17), pages 2788-2804, November.

    More about this item

    Keywords

    India; electricity; cost inefficiency; commercial loss; reform;

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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