State of competition in Indian power sector: an exploratory analysis

Abstract

Competition in the electricity industry in India is primarily intended to enhance operational efficiency. With the enactment of Electricity Act 2003, competition got a new nomenclature and thrust. The paper conducts an exploratory analysis of the state of competition in the Indian power sector in the context of reform and restructuring. Evolving trends and patterns of competitive mechanisms are discussed and analysed. The analysis reveals that competition, as it evolved over the last decade or so, reflects a growing trend of an efficient, liquid, and complete market. The paper also identifies certain key anomalies and distortions inhibiting the seamless growth of competition. More action is required on certain directions, such as enhancing the liquidity of the market, addressing transmission congestion and open access problems, controlling market power, strengthening the role of regulators, and importantly, addressing political economy concerns. It concludes that in order to carry forward the momentum, a cautious approach needs to be adopted and necessary ancillary measures are to be undertaken.