Comparative Analysis of Total Factor Productivity Growth of Indian Public Private and State Owned Power Generating Plants: A Stochastic Frontier Approach

Abstract

The objective of this study is to measure the efficiency improvement level and productivity growth of the coal-based thermal power stations in India for regulatory purposes using Stochastic Frontier Analysis, and employing data set covering period of 2002-03 to 20010-11 via power plant specific variables to capture the effect of different characteristics of power plants on inefficiency levels. The results show significant potentials for efficiency improvement in the Indian thermal power stations. Apart from comparing the efficiency and productivity growth among different plants, the study examined the causes of technical inefficiencies, and sources of productivity change, such as technological change and pure technical efficiency change. The application of the parametric production frontier models to Indian power generation industries can be used as a tool for policy makers. Improving the efficiency of coal-based power plants plays a significant role in enhancing the performance of India‘s power sector. It allows for increased consumer benefits through cost reduction, while enhancing energy security and helping reduce local and global pollution through more efficient coal use.