Privatization of power distribution utility in India through restructuring and reformation

After enactment of Electricity Act '2003 in India, a comprehensive change is happening in Indian electricity market, and power industries are going through a reformation process to cope with the market change. In the post Electricity Act'2003 scenario restructuring & reformation is happening very fast by unbundling the power Utility by formation different business units like GENCO (Generation Company), TRANSCO (Transmission Company), & DISCOM (distribution company) to improve the overall efficiency of the Utility. Further to minimize the Aggregated Technical & Commercial (AT & C) losses, privatization of power distribution utility (DISCOM) is going on. Privatization is portrayed as means of improving efficiency and bringing in funds for investment. However, governments often have to go to considerable lengths to attract investors. Such measures include assuming the debt of the enterprise, avoiding unbundling of the sector and increasing prices. Despite privatization, governments still have responsibility for the provision of stable and affordable electricity. Hence after privatization there is a need for further support from the government to subsidize electricity prices and in some. Alternatively, governments may also restrict the create problem as firms may be unhappy to see their profits are squeezed. However, whatever measures are used, private firms should start disconnecting non-payers quickly, with presumably social implications. While privatization may deliver in the short term by reducing leakages and providing more effective billing, the longer-term implications are less clear. Possibly inefficient public sector enterprises may be replaced with powerful private sector concerns, accountable to shareholders with no democratic responsibility in the country where they are delivering this essential resource. This is particularly significant in India where the institutional infrastructure is such that regulation is weak. Rather than blindly privatizing, policy makers need to relegate privatization to its proper place of just one of a number of policy reform options - and one that comes at a substantial cost.