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The political economy of public utilities: A study of the power sector

Author

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  • K.P. Kannan

    (Centre for Development Studies)

  • N. Vijayamohanan Pillai

    (Centre for Development Studies)

Abstract

In this paper, we attempt at an analysis of the political economy of the Indian power sector with special reference to Kerala in the light of a generic model of the political economy of public utilities we develop in the first part of the paper. The model seeks to explain the political economy of the rent seeking drives in a non-Smithian imperfect regime of self-interest maximisation, with a regulatory structure of the public utility described in a framework of the principal-agent relationship. In contrast to the usual neo-classical monolithic representation of principal and agent, we characterise each entity in a Marxian-Kaleckian vein, as a composite set of conflicting sectional interests. This helps us develop a comprehensive perspective of the politico-economic implications of the relationship among the public, government and utility. Based on this generic model, we seek to analyse, in the second part of the paper, the political economy of the power sector in India, with emphasis on Kerala. We also attempt, wherever possible, to estimate the costs of corruption involved in the administration of the power sector.

Suggested Citation

  • K.P. Kannan & N. Vijayamohanan Pillai, 2001. "The political economy of public utilities: A study of the power sector," Centre for Development Studies, Trivendrum Working Papers 316, Centre for Development Studies, Trivendrum, India.
  • Handle: RePEc:ind:cdswpp:316
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    References listed on IDEAS

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    2. Posner, Richard A, 1975. "The Social Costs of Monopoly and Regulation," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 807-827, August.
    3. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
    4. Green, Richard, 1999. "The Electricity Contract Market in England and Wales," Journal of Industrial Economics, Wiley Blackwell, vol. 47(1), pages 107-124, March.
    5. Oliver Hart & Bengt Holmstrom, 1986. "The Theory of Contracts," Working papers 418, Massachusetts Institute of Technology (MIT), Department of Economics.
    6. Tollison, Robert D, 1982. "Rent Seeking: A Survey," Kyklos, Wiley Blackwell, vol. 35(4), pages 575-602.
    7. Jean Tirole, 1985. "Hierarchies and Bureaucracies," Working papers 363, Massachusetts Institute of Technology (MIT), Department of Economics.
    8. Baumol, William J, 1977. "On the Proper Cost Tests for Natural Monopoly in a Multiproduct Industry," American Economic Review, American Economic Association, vol. 67(5), pages 809-822, December.
    9. Holmstrom, Bengt R. & Tirole, Jean, 1989. "The theory of the firm," Handbook of Industrial Organization,in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 2, pages 61-133 Elsevier.
    10. Mohammad, Sharif & Whalley, John, 1984. "Rent Seeking in India: Its Costs and Policy Significance," Kyklos, Wiley Blackwell, vol. 37(3), pages 387-413.
    11. Laffont, Jean-Jacques, 1988. "Hidden Gaming in Hierarchies: Facts and Models," The Economic Record, The Economic Society of Australia, vol. 64(187), pages 295-306, December.
    12. Breton,Albert, 1996. "Competitive Governments," Cambridge Books, Cambridge University Press, number 9780521481021, May.
    13. Bhagwati, Jagdish N & Srinivasan, T N, 1980. "Revenue Seeking: A Generalization of the Theory of Tariffs," Journal of Political Economy, University of Chicago Press, vol. 88(6), pages 1069-1087, December.
    14. Edgar L. Feige, 2003. "Underground Activity And Institutional Change: Productive, Protective And Predatory Behavior In Transition Economies," Development and Comp Systems 0305001, EconWPA.
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    Cited by:

    1. N. Vijayamohanan Pillai & K.P. Kannan, 2001. "Time and cost over-runs of the power projects in Kerala," Centre for Development Studies, Trivendrum Working Papers 320, Centre for Development Studies, Trivendrum, India.
    2. K.P. Kannan & N. Vijayaymohanan Pillai, 2002. "The aetiology of the inefficiency syndrome in the Indian power sector: Main issues and conclusions of a study," Centre for Development Studies, Trivendrum Working Papers 324, Centre for Development Studies, Trivendrum, India.
    3. K.P. Kannan & N. Vijayamohanan Pillai, 2004. "Development as a right to freedom: An interpretation of the 'Kerala Model'," Centre for Development Studies, Trivendrum Working Papers 361, Centre for Development Studies, Trivendrum, India.

    More about this item

    Keywords

    India; political economy; rent seeking; principal-agent; public utility; power sector;

    JEL classification:

    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H4 - Public Economics - - Publicly Provided Goods
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • N4 - Economic History - - Government, War, Law, International Relations, and Regulation
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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