Analysing Efficiency of Electric Distribution Utilities in India : A Data Envelopment Analysis

Reforms in the Indian power sector mid 90s led to restructuring of the vertically integrated State Electricity Boards (SEBs). Orissa led the march by unbundling, corporatising and privatization of distribution electric utilities. A number of states have embraced regulatory reforms and unbundling of SEBs. This has led to emergence of a number of distribution companies. Regulatory reforms in states have led to setting up of State Electricity Regulatory Commissions (SERCs), which adopted a rate of return regulation regime. Distribution companies continue to be saddled with operational inefficiency and financial losses. Setting the performance benchmarks remains one of the key regulatory challenges. The Electricity Act 2003 further suggests adoption of a multi-year tariff regime. In such an environment, regulators need to be equipped with tools to set performance standards against costs are allowed to distribution companies. Jamasb & Pollitt (2003), Thakur et. al. (2006), Edvardsen and Førsund (2003) and Chen (2002) have measured relative efficiency of distribution companies in national as well as international context