Sustainability of power sector reform in India: what does recent experience suggest?

Abstract

India has been flirting with the idea of power sector reform for more than a decade. However, despite the enactment of a comprehensive legal framework for governing the electricity industry, limited progress has been made in terms of achieving widespread sector liberalisation and privatisation. This paper presents a systematic approach to analysing the sustainability of the reform model and the experience in implementing it. It argues that the reforms to date have not produced desirable political, economic, financial, social or environmental outcomes. Political instability and opportunistic behaviour of political parties in India have reduced the acceptability of reforms, while the poor financial performance of utilities and subsidy burden show little signs of improvement. Reform has not succeeded in rationalising tariffs or balancing supply and demand. Electricity market reform has not increased access levels, and the rise of captive power generation is likely to have an adverse impact upon the natural environment. In conclusion, there are doubts about the sustainability of reform measures, highlighting a need to find policy alternatives.