Despite opening up the sector to private participation through independent power producers (IPPs), the actual progress of reforms in electricity has been atrociously slow. The unbundling of the industry by trifurcating the SEB and allowing private participation in the distribution subsector, as attempted by Orissa, failed to result in the desired objectives of improving efficiency or even restoring financial viability of the sector. The problem was of not frontally attacking the main and obvious problem, namely, the interruption of the cash flow through leakage, theft, and inefficiency. Fragmentation per se without a market design or working regulatory model to put the sector together was no solution. It may have even exacerbated the situation by creating massive restructuring, policy, and regulatory risk, which all but kept private investments out. This chapter argues that the IPP policy with full cost recovery even on the base load stations at 68.5 per cent, to give a return of 16 per cent was itself part of the problem.
The Beginnings Of Distribution Reforms In West Madhya Pradesh: A Report
Author : Sebastian Morris