Electricity privatization revisited: A commentary on the case for new initiatives in India

Abstract

Normally privatization is resorted to by different economies for different reasons - resource mobilization, introducing efficiency by promoting competition, and for achieving commercial orientation. Often these are assumed to be independent objectives. The Indian experience is showing that they are quite interdependent and unless all the three objectives are tackled simultaneously, privatization will not succeed. Specifically, the poor financial performance of the state electricity boards and their lack of commercial orientation is applying a brake on investment in the power sector by foreign IPPs. Similarly the government's approach to privatization without promoting competition - through the so-called Memorandum of Understanding - is leading to high cost solutions and acrimonious public debates demanding transparency in decision making and review of those already made. Copyright © 1996 Elsevier Science Ltd.