ESTIMATING THE IMPACT OF RESTRUCTURING ON ELECTRICITY GENERATION EFFICIENCY: THE CASE OF THE INDIAN THERMAL POWER SECTOR

This paper examines the impact of unbundling of generation from transmission and distribution on the operating efficiency of state-owned thermal power plantsin India. Using information collected by India's Central Electricity Authority we construct a panel dataset for thermal power plants for the years 1994-2008. We take advantage of variation across states in the timing of reforms to examine the impact of restructuring on plant performance and thermal efficiency. We estimate difference-in-differences models that control for state-level time trends, and plant and year fixed effects. The models suggest that unbundling significantly improved average annual plant availability by about 4.6 percentage points and reduced forced outages by about 2.9 percentage points in states that unbundled before 2003. Restructuring has not, however, improved thermal efficiency. This may reflect the fact that unbundling has not yet attracted independent power producers into the market to the same extent as has occurred in the US.