Performance analysis of electricity distribution sector post the implementation of electricity act 2003: empirical evidence from India
Journal of Advances in Management Research
ISSN: 0972-7981
Article publication date: 30 July 2020
Issue publication date: 8 October 2020
Abstract
Purpose
The objective of the present study is to evaluate and analyse the performance of Indian electricity distribution utilities post the implementation of landmark Electricity Act 2003.
Design/methodology/approach
Stochastic frontier analysis (SFA) that incorporates exogenous influences on operational efficiency is adopted in the present study. Specifically, a stochastic frontier production function model with a technical inefficiency effects model (Battese and Coelli, 1995) is chosen as a preferred model. In this model, the function that explains the inefficiency scores is estimated in a single stage with the production technology. This avoids the problem of inconsistency which is possible in the two-stage approach.
Findings
The sample involved 52 Indian electricity distribution utilities for seven-year period from 2006 to 2013. Major findings of SFA show that Indian electricity distribution utilities post the implementation of Electricity Act (2003) had, on average, experienced efficiency improvement during the observed period. The overall mean technical effciency score is estimated as 78.5% which indicates that there exist wide scope for effciency improvement in the sector. Further, the empirical findings also indicate that publicly owned distribution utilities obtain average technical efficiencies of 71.3%, which is lower than privately owned distribution utilities, which achieve average technical efficiencies of 85.7%.
Research limitations/implications
Power supply quality indicators such as SAIFI, SAIDI, CAIFI, etc. and unobserved heterogeneity also influence the efficiency analysis of electricity distribution utilities. Hence, these parameters as explanatory variables can be incorporated in the future work.
Practical implications
The results obtained from this empirical study would likely be helpful for utility managers and policymakers to know how well they are performing, and how a better corporate strategy a particular utility can formulate to improve its operational efficiency and also its position in the marketplace.
Originality/value
This paper is amongst the first significant attempts that implement SFA approach to the panel dataset over a longer period of time – 2006 to 2013, so, as to evaluate and analyse the operational efficiency of Indian electricity distribution utilities in a single framework after the enactment of Electricity Act (2003). Unlike previous studies, this study investigates the degree to which various exogenous (or environmental) factors influence efficiency levels in these utilities.
Keywords
Citation
Khetrapal, P. (2020), "Performance analysis of electricity distribution sector post the implementation of electricity act 2003: empirical evidence from India", Journal of Advances in Management Research, Vol. 17 No. 5, pp. 669-696. https://doi.org/10.1108/JAMR-04-2020-0060
Publisher
:Emerald Publishing Limited
Copyright © 2020, Emerald Publishing Limited