Performance Assessment of Indian Electric Distribution Utilities Using Data Envelopment Analysis (DEA)

Abstract

One of the most important links in the electricity market is the electricity distribution sector as it involves interfacing the end customers and providing the revenue that is required for running the entire chain of the electricity sector. Besides, it provides power to the individual consumers at relatively lower voltages by absorbing high voltage power from the transmission sector and involves revenue collection from the consumer sector. The primary aim of the distribution sector, as stated by the Provisions of Tariff policy, Government of India, 2016, is to provide reliable, quality and sustainable power at reasonable rates. Despite the restructuring of Indian Power Sector post implementation of Electricity Act 2003, the electricity distribution utilities, in the recent past, are experiencing poor financial results irrespective of their ownership (public, private or joint sector). This has been attributed to various factors related to economic, environmental, physical, social and technical streams related to the operation of the utilities. The performance of these electricity distribution utilities can be assessed using Data Envelopment Analysis (DEA) tool which is extensively used in the recent past by the researchers to analyze the performance of entities of other sectors. The successful employment of DEA for evaluating the electricity distribution utilities lies with the proper selection of input and output variables that are chosen for the analysis. The current work analyzes the relative comparative performance of electricity distribution utilities across India and identifies inefficient utilities besides providing peers/reference, slack analysis for effective strategic improvement.