Lessons From Global Reform Experiences for Revival of Indian Electricity Distribution Sector

Abstract

Indian electricity distribution sector remains elusive of competition and market principles; and past reforms have failed to produce the desired outcomes. A denovo rethink on the distribution reform programs is needed and for this purpose, we undertake a within country analysis of India and cross-country analysis in select countries having pioneered electricity distribution reforms through application of the Standard Reform Model. Countries surveyed include European nations such as Norway and United Kingdom; Latin American countries namely, Argentina, Brazil, Chile and Peru; and Asia-Pacific countries like Japan, New Zealand and Philippines. In a novel contribution to literature, the paper identifies specific lessons from global electricity reform experiences of these countries for successful application in Indian settings. Several key lessons emerge: first, decoupling network business from retail supply along with expeditious privatization of retail supply business to ensure accountability; second, moving away from rate of return regulation to incentive regulation framework to reward efficiency; and third, dissociation from political interference for ensuring cost reflective tariffs to enable long-term financial sustainability. The policy implications outlined by our study could rightly guide the ongoing debates on the distribution provisions in Draft Electricity (Amendment) Bill 2020 which seeks to metamorphosize the Indian electricity sector.