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Int. J. Energy Technology and Policy, Vol. 7, No. 4, 2011

Evolution of legal framework and regulatory challenges in the context of Indian power sector reform Niranjan Kumar*
Electrical Engineering Department, National Institute of Technology Jamshedpur, Jamshedpur 831014, India E-mail: nknitjsr@gmail.com *Corresponding author

Devadutta Das
Water Resources Development & Management Department, Indian Institute of Technology Roorkee, Roorkee 247667, India E-mail: devdsfwt@iitr.ernet.in

N.P. Padhy
Electrical Engineering Department, Indian Institute of Technology Roorkee, Roorkee 247667, India E-mail: nppeefee@iitr.ernet.in
Abstract: The paper aims to give an overview of Indian power sector with some historical background and traces the development of regulation of electricity starting with the provisions of the Indian Electricity Act 1910, the Electricity (Supply) Act 1948, Indian Electricity Regulatory Act 1998 and the Electricity Act 2003. They gave authority to central and state governments to regulate power sector. The Regulatory Act 1998 empowers the respective government for tariff fixation and certain licensing. Still, there are some difficulties and challenges for the regulatory institutions, which need to be resolved. Also, the overall reforms so far in the different states of India have been highlighted and finally some concluding remarks have been presented. Keywords: Electricity Act 2003; electricity industry; regulation. Reference to this paper should be made as follows: Kumar, N., Das, D. and Padhy, N.P. (2011) Evolution of legal framework and regulatory challenges in the context of Indian power sector reform, Int. J. Energy Technology and Policy, Vol. 7, No. 4, pp.342357. Biographical notes: Niranjan Kumar, Member (10) IEEE, graduated in Electrical Engineering and MTech in Power System Engineering from National Institute of Technology (NIT), the then Regional Institute of Technology (RIT) Jamshedpur, India, in 1988 and 1996 respectively. He received his PhD (Power System Engineering) from Indian Institute of Copyright 2011 Inderscience Enterprises Ltd.

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Technology (IIT) Roorkee in the year 2010. He joined National Institute of Technology (then RIT) Jamshedpur, India, in 1998 as an Assistant Professor in the Department of Electrical Engineering and, presently, he is working as an Associate Professor in the same Department. His research interests are energy system planning and economics, power systems analysis and power sector deregulation issues. Devadutta Das worked with the Department of Power, Government of Orissa in planning, design, operation and maintenance of large hydro and thermal power stations from the year 1967. He joined the then University of Roorkee, presently Indian Institute of Technology in the Department of Water Resources Development and Management as Reader in the year 1980 and working as Professor since 1990. His areas of interest are planning and design of hydroelectric power stations, small hydroelectric and renewable energy systems and energy system economics. He is independent Director of Orissa Hydro Power Corporation Limited. He is member of the monitoring committee for the execution of the first tidal power station in India, and the R&D committee of the Central Electricity Authority. Narayana Prasad Padhy, Senior Member (09) IEEE, received his PhD (Power Systems Engineering) from Anna University, Chennai, India, in the year 1997. He is working as a Professor in the Department of Electrical Engineering, Indian Institute of Technology (IIT) Roorkee, India. During 20052006, he worked as a Research Fellow in the Department of Electronics and Electrical Engineering, University of Bath, UK, under BOYSCAST Fellowship from Govt. of India. He has also worked as a Research Fellow in the Department of Electrical and Computer Engineering, Ryerson University, Toronto, Ontario, Canada, during 20092010. He has been awarded Humboldt Research Fellowship for Experienced Researchers in 2009. His research interests are in power systems analysis, pricing, economics and optimisation and AI.

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Introduction

Electricity as a matter of legislative and executive competence falls in the concurrent list (list III of the seventh schedule to Constitution of India). Federal Parliament and state legislatures are both competent to enact laws on the subject. As per the Indian constitution, decision making and implementation of plans and statutory guidelines for power development is provided by the central government and state governments are primarily responsible for power generation and supply to the ultimate consumers. In the last six decades, since independence in 1947, Indian power sector has witnessed constructive structural changes both in terms of the number and structure of the institutions, redefining and refinement of institutional interface amongst various utilities supplemented by technological leaps made in galvanisation of the sector. In India, power sector is governed by the Indian Electricity Act 1910 (IE Act), Electricity (Supply) Act 1948 (E(S) Act) and Electricity Act 2003 (E Act). This paper dwells on growth of power sector in prospect of legal issues, the metamorphosis it has gone since 1887. Our endeavour is to meet the perceived value of the esteemed customer, who seeks his or her power demand be met at all time, at the most economic cost with reliability and equality. Effective regulation of the utilities (private or public) is a daunting challenge in the Indian context. The limited experience with privatisation and regulatory process

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has revealed the limitations of regulation in disciplining the private sector in affecting cost reductions. The effectiveness of regulation depends on the independence of the regulator, regulatory capacity within the commission, transparency and effective public participation. Hence, development of regulatory and public participation capacity needs to be at the forefront of further reforms. Since Electricity Regulatory Commissions (ERCs) in India are now nearing more than a decade of existence, it is opportune to review the Indian experience with electricity regulation. Against this background, an attempt has been made to look at the legal development and regulatory prospect introduced in the Indian power sector in the context of reform. The paper presents an overview of Indian power sector with brief description of historical background of national as well as international scenario. Different phases of development in the power sector starting from 1950 to till date have been highlighted. The paper focuses on acts that regulated the power sector. Efforts have been made to focus on the impact that the reforms have had on the power sector that saw the introduction of independent regulators. Functions of central and state regulatory bodies, their difficulties and challenges in power sector regulation have been analysed. Also, study has been carried out that gives the entire reform so far taken in the different states of India. Finally, the paper evaluates the entire reform process with some concluding remarks.

An overview of Indian power sector

For the purpose of power systems, the country was demarcated into five geo-political regions in the year 1964 and gradually different states within the region got integrated and by 1980s five mature regional grids Eastern Region (ER), North Eastern Region (NER), Northern Region (NR), Western Region (WR) and Southern Region (SR) were under operation. In the present scenario, NR, WR and SR suffer from severe power deficits while ER has a surplus generation and NER has a marginal surplus based on hydro reservoir levels. In 1992, ER and NER were interconnected. ERNER grid was synchronised with WR grid on 02 March 2003. Subsequently, ERNERWR grid was synchronised with NR grid on 26 August 2006 (Powergrid, 2008). Indian power system also has multiple connections at different voltage levels with neighbouring countries, like Nepal and Bhutan. Cross-border power exchanges are progressively increasing. There is wealth of experience regarding expansion of the grids and experience of operating large grids. Resources are unevenly spread with hydrocarbon deposits in the East and Central parts of India and huge hydro potential in the North-Eastern part of the Northern Grid. There is a promising availability of gas on the coastal lines. The load growth has also been uneven with widely varying per-capita income. This calls for transfer of large blocks of power over long distances. Profile of Indian power sector is given as hereunder (CEA, 2008): Two-tier structure: central sector and state sector (29 states) Installed capacity: 145 GW Average PLF: 77% Transmission lines: 0.3 Mn ckt km. Per-capita consumption: 672 kWh

Evolution of legal framework and regulatory challenges Shortages: peak 15%, energy 9% AT&C losses: 35% Rural electrification Villages: 76% (of 586,000) Households: 44% (of 138 Mn).

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The Government of India (GoI) has an ambitious mission of Power for all by 2012. This mission would require that the installed capacity should be at least 200 GW by 2012 from the present level. Fuel-wise installed capacity presently in India has been shown in Figure 1. To be able to reach this power to the entire country, an expansion of the regional transmission network and inter-regional capacity to transmit power would be essential. Inter-regional power transfer capacity of around 20,700 MW is currently available and it is envisaged to be enhanced to more than 37,700 MW by the year 2012 (MoP, 2006). Adequate transmission capacity and inter-regional links are essential for transfer of power from surplus to the deficit regions and support the development of a power market in the country.
Figure 1 Installed capacity in India fuel wise (%MW) (see online version for colours)

National and international experience

Electricity utilities in most developed and developing countries were traditionally government owned. The restructuring of utilities followed by private sector participation is a relatively recent phenomenon, beginning in the late 1980s. However, since then, several countries have undertaken reform and privatisation. The underlying reasons for change have been different in different countries while some trends have been common.

3.1 National experience

The supply of electricity commenced in India in the 1880s with the commissioning of a small 130 kW hydroelectric plant at Darjeeling, now in West Bengal. Electricity was originally provided by private companies. A thermal plant based on coal was set up in Calcutta in 1897. Kolkata was the first city to be electrified in 1897 by the Calcutta Electric Supply Corporation, while Mumbai was electrified shortly thereafter. Several other private companies provided power for smaller urban areas under franchise arrangements with the state governments. At Independence in 1947, most of these companies were nationalised. Provision of electricity was determined to be a concurrent

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subject under the constitution of India and thus a joint responsibility of the central and state governments (Singh et al., 2004). The 1948 Electricity Supply Act (ESA) charged the State Electricity Boards (SEBs) with generation, Transmission and Distribution (T&D). It also created the Central Electricity Authority (CEA), a federal entity that approved larger power sector projects and served in an advisory role, to coordinate policies across states, but the SEBs were the primary policy-makers. The Central Power Sector Utilities (CPSUs), including National Thermal Power Corporation (NTPC), National Hydro Power Corporation (NHPC) and Power Grid Corporation of India Limited (PGCIL), stepped in subsequently with larger-scale generation projects and more extensive inter-state transmission grids (Singh et al., 2004). Although the generation capacity has increased from about 1300 MW at the time of independence (1947) to 145 GW by 2008, the nation is still experiencing shortage of peak power and peak energy (CEA, 2008).

3.2 International experience

The major drives for change in developed countries, such as UK and USA, have generally been created by political thinking, objectives of efficiency, lower price levels and better service to the consumer. In contrast, drivers for change in developing countries such as in Latin America and South East Asia have been poor performance and public sector financial constraints. While in developed countries the availability of supply was not an issue, developing countries were facing increasing demand supply gaps and increasing inefficiencies. Private sector investment was seen as necessary to upgrade existing systems and to finance additional capacities. While the conditions prevailing in the power sector in Europe and USA were different from those in India, the Indian situation may be found to be closer to some of the Latin American and South East Asian countries (Ailawadi, 2006). In the electricity sector, Chile was the first to undertake electricity reforms through the Electricity Law 1982. After this, many other countries in Latin American, i.e., Argentina, Brazil and Colombia, also enacted separate electricity laws, which led to the setting up of regulatory bodies like National Regulatory Entity for Electricity (ENRE) in Argentina.

Reminiscence of the journey of Indian power sector

To come out of the all-round crisis that crippled the sector, there were several policy initiatives, which led to changes in the ownership and structure of the power sector since 1990s. This was followed by the introduction and implementation of the far-reaching reforms in the power sector of Orissa in mid-1990s. The third phase of reforms started with the enactment of the Electricity Act 2003 in June 2003. The following phases are identified in the evolution of Indian Power Sector Policy (Pani et el., 2007): Phase I: (1950s and 1960s Era of state patronage) Enactment of Electricity (supply) Act 1948 Establishment of SEBs, to generate, transmit and distribute power

Evolution of legal framework and regulatory challenges Predominately state ownership of electricity utilities Professional management of SEBs and establishment of Bharat Heavy Electrical Limited (BHEL).

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Phase II: (1970s and 1980s Era of subsidisation and populist policies) State of Andhra Pradesh (AP) started giving electricity at flat rate for agriculture from 1982. Other states followed AP. Non-metering of agriculture consumption began Concealing of theft and T&D losses under agricultural consumption figures began Establishment of central sector generation companies like NTPC and NHPC.

Phase III: (1990s Era of liberalisation) Increasing role of central government and international financial institutions in the sector policies Stage I (early 1990s): Focus on generation through private-sector Independent Power Producer (IPP) policy, which proved to be counter productive due to poorly negotiated contracts (high capital cost, unfair incentives, wrong fuel choice, etc.) Stage II (mid-1990s): Focus on restructuring of SEBs and introduction of regulatory commissions Stage III (late 1990s): Enactment of Electricity Regulation Act 1998, creating the central regulatory commission and providing legal framework for constituting state regulatory commissions.

Phase IV: (2003 till date Era of far-reaching changes) The number and reach of policy changes introduced are unprecedented. Consolidation of increased role of central government in sector policies Enactment of Electricity Act 2003 Restructuring of SEBs, delicensing of generation, open access and competition in distribution, cost reflective tariffs, limiting cross subsidies, etc., are the implications of the act.

The model followed before the implementation of the E Act was the single buyer model. All the generators, both public and private, sell to a single transmission company, which in turn sells power to the many distribution companies. Thus, the single transmission company is the single buyer of the generated power. The E-Act enables the evolution of other models such as the bulk competition and retail competition model.

Constitutional position: evolution of laws

The first legislation on this subject was the Electricity Act 1887 that provided for the protection of person and property from any risk or injury consequent to the supply and use of electricity. This Act was, however, repealed by the Indian Electricity Act 1903,

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which was replaced in 1910 by the major amending Act. Three erstwhile Acts that regulated the electricity sector in India are described in detail in the subsequent sections.

5.1 Indian Electricity Act 1910

During the budding period, the electricity was available only in urban areas and distribution was in the hands of private licensees. The facts about the Indian Electricity Act 1910 are summarised hereunder: Enacted to regulate the supply and use of electrical energy, which also regulated the procedure for grant of licences to electrical undertakings. Forbade showing undue preference to any consumer and provided that the tariff be based on the factors that influence the cost of service of electricity supply, i.e., load factor or power factor of load, total consumption of energy during any stated period or quantum and hours at which the supply of energy is required. Empowers the government to intervene in cases where licensee fails to comply with safety requirements prescribed under the act. Primarily, the act was framed keeping safety aspects of the electricity in view as it was a completely new commodity setting its foot in a society, which was predominant agrarian in its character and was not technologically savvy to adapt to its new form of technology.

5.2 Indian Electricity (supply) Act 1948

After independence, as electricity was recognised as crucial input for the development, massive expansion programmes were to be undertaken to take electricity to semi-urban/rural areas and to create infrastructure for rapid industrialisation. Facts about the act are: Enacted, which conceived the creation of SEBs. The SEBs were to work as autonomous bodies operating on quasi-commercial lines and were to perform dual functions. First, to control generation, operate grid systems; regulate private distribution licensees, operating in urban centres and supply electricity to them as bulk licensee. Second, to extend the electricity supply network in semi-urban, rural areas and other areas not served by private licensees even by cheapening of rates.

Main amendment to the Indian ESA Amendment in 1975 to open generation in central sector like NTPC, NHPC, etc. Amendment to bring in commercial viability in the functioning of SEBs Section 59 amended to make the earning of a minimum return of 3% on fixed assets a statutory requirement (w.e.f. 01 April 1985) Amendment in 1991 to open generation to private sector and establishment of Regional Load Dispatch Centers (RLDCs) Amendment in 1998 to provide for private sector participation in transmission, and also provision relating to transmission utilities.

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5.3 Electricity Regulatory Commission Act 1998

Although subsequent amendments were made to the ESA, it was the Electricity Regulatory Commission Act (ERCA) in 1998 that is having a lot of provisions: Made the first serious attempt to distance the government from tariff determination Under the ERCA, independent ERCs were created at the central level and the framework provided for voluntary creation at the state level respectively, the Central Electricity Regulatory Commission (CERC) and the state electricity regulatory commissions The ERCA sought to rationalise electricity tariffs, eliminate subsidies and provide for greater transparency in policy formulations and promote both private sector participation and efficient and environmentally sound policies.

Though the installed power generation capacity has grown up manifold till independence, the power situation in India is still not comfortable. There is a huge shortage of power. Different measures and efforts were taken since the introduction of Electricity Act 1910, Electricity (supply) Act 1948, Electricity Regulatory Commissions Act 1998 and Electricity reforms of 1990s, but they could not bring much success. Introduction of Electricity Act 2003 provides a liberal and sustainable framework aimed at development of the power sector in India. Electricity Act 2003 is said to be the culmination of the power reforms that started in early 1990s. The facts about this act have been discussed in brief in the subsequent section.

The E Act 2003: another watershed

The Electricity Acts 2003 (E Act 2003) is a 100 odd page document with 185 sections covered in 18 parts. Till now, the Electric Supply Industry (ESI) in India was governed by three enactments: the Indian Electricity Act 1910, the Electricity (supply) Act 1948 and the Electricity Regulatory Commissions Act 1998. E Act 2003 replaces these and is said to harmonise the provisions of these through a new comprehensive legislation meeting the reform-related issues. The progress of reform was not uniform and some states delayed in creating regulatory bodies and the restructuring of SEBs. Accordingly, it became necessary to enact a new legislation for regulating the electricity supply industry in the country, which would replace the existing laws. The new Electricity Act 2003 was enacted by the Parliament. It provides the roadmap for the transformation of the electric industry by taking measures conducive to its development, promoting competition, protecting interest of consumers and supply of electricity to all areas and rationalisation of electricity tariffs. Some facts about the E Act are summarised in brief hereunder (Khaparde, 2004): The act is a move towards creating a market-based regime in the Indian power sector and consolidates the laws related to generation, transmission, distribution, trading and use of electricity

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N. Kumar et al. It generally takes measures conducive to development of electricity industry, thereby promoting competition, protecting interests of consumers and supply of electricity to all areas It also takes care of rationalisation of electricity tariff ensuring transparent policies regarding subsidies, promotion of efficient environmentally benign policies, constitution of a CEA and regulatory commissions, establishment of appellate tribunals, etc., steps that shall entail impacts on every segment of the power sector, be it generation, transmission or distribution and shall introduce large-scale changes in the current power industry structure.

All the necessary powers including issue of licences are given to the regulators, which are made independent entities from the government. It is expected that the Electricity Act 2003 will bring about revolutionary changes in the Indian power sector and would bring around transformation that would act as model policy reforms for other developing countries. The act, however, does leave certain policy issues unresolved, which have to be decided by regulators in consultation with appropriate government. Evolutions of legal framework and landmark for the sector reform have been shown in Figures 2 and 3, respectively (Kapur, 2002).
Figure 2 Evolution of legal framework

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Figure 3 Landmark of reform

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Electricity sector regulation in India

Paradigm shift in the power sector policies came during 1990s with liberalisation and opening of generation for private participation, concessions for the IPPs and undertaking of reforms in the SEBs (Ailawadi, 2006). In mid-1990s, reforms of SEBs were taken up with the unbundling of the SEBs and setting up state regulatory commissions. Two early attempts at SEBs reforms were undertaken in Orissa and Haryana between the periods 19951998 and saw the setting up of first two state regulatory commissions. The state commissions were autonomy and wide powers to promote investment, efficiencies and determine tariffs in a professional and independent manner. To speed up the reforms and to provide for distancing of government from determination of tariffs, the ERCA was enacted in 1998. It created the CERC and has an enabling provision through which the state governments were required to create a state electricity regulatory commission (CERC, 2005). The concept of independent regulatory commission at the central and state level was introduced in 1998 with the enactment of central law the Electricity Regulatory Commissions Act 1998. The 1998 Act made uniform organisational framework and scope for powers for the state commissions to be set up by the state governments (CERC, 2008).

7.1 Central commission

The CERC was set as an independent regulatory commission to discharge the following main functions:

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N. Kumar et al. to regulate the tariff of generating companies owned or controlled by the central government to regulate the tariff of generating companies other than those owned or controlled by the central government if such generating companies enter into or otherwise have a composite scheme for generation and sale of electricity in more than one state to regulate the inter-state transmission of energy including tariff of the transmission utilities to promote competition, efficiency and economy in the activities of electricity industry to aid and advise the central government in on formation of National Electricity Policy and tariff policy promotion of competition, efficiency and economy in activities of the electricity industry promotion of investment in electricity industry

to license any person for the construction, maintenance and operation of inter-state transmission system to frame guidelines in matters relating to electricity tariff to arbitrate or adjudicate upon disputes involving generating companies or transmission utilities in regard to the above-mentioned matters to aid and advise the central government on any other matter referred to the central commission by the government.

7.2 State commission

The powers of the state regulatory commissions are similar to the CERC in scope with respect to their respective jurisdiction. The organisational structure and the role and responsibilities of the state commissions have been laid down to achieve some degree of commonness and consistency and for developing sustainable regulatory framework. Therefore, there are common features for the state commissions in regard to the following area: constitution and composition of the state commissions selection process and qualifications for the members of the state commissions terms and conditions of service of the members and chairman term of tenure and procedure for the removal of the members proceedings and powers of the civil court in their hearings and decisions provisions of funds and application to provide salaries and meeting other specified.

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The state commissions have specific responsibilities and to give effect to the main objectives of the act and are required to discharge the following mandated functions (Ailawadi, 2006): licensing for transmission, trading, distribution including grant of licence, amendment, revocation and suspension of licence tariff fixation including determination of terms and conditions for tariff regulation of open access in transmission/distribution/determination of surcharge on open access specifying grid code for compliance by all stakeholders in the transmission sector specifying performance standards of utilities promoting development of a market including trading in power.

State-level regulatory commissions have a very significant role in the Distribution reforms that are envisaged under the Electricity Act 2003. The state commissions have to act as the effective instrument to regulate the power utilities in the distribution to protect the interest of the consumers and also promote competition. In the initial period, the regulations have to be designed with a view to balance the following interests: to set up well-defined tariff principles norms of prudent investments operational expenses and productivity norms promote economic efficiency protecting return for the utility protect consumers from abuse by the utilities whether public or private.

Issues and challenges in power sector regulation

There are various difficulties and challenges for regulators, which need to be taken into account for efficient regulation (Ailawadi, 2006). In the developing countries, the experience has shown that a proper division of responsibilities between the government policy and the regulatory bodies is desirable through law rather than an executive decree or order. The regulatory institutions face difficulties from the government agencies, which had been performing some or most of these functions and also from lack of understanding of the role and functions of the regulatory commissions among the consumers and their relationship with other government agencies. The structure of the regulatory commissions must provide for independence /autonomy and respect for regulatory process based on sound stakeholder relationship, accountability, appellate recourse against their decisions. It must be acknowledged that the EA 2003 provides the framework for establishing

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N. Kumar et al. sustainable and sound regulations for developing confidence among all the stakeholders and also develop the power sector to bring competition for the robust power sector needed for economic development.

For the regulators to bring credibility and confidence in them from the consumers who have to be protected from the legacy and past inefficiencies, there must be a transparent and effective compliance monitoring of the promised/fixed targets for the efficiencies in loss reduction and other areas of productivity and efficiency. The main challenge for the regulation comes from the fairness in the process adopted and strong commitment to consumer protection. In India, these challenges have to be met in the distribution segment. The electricity utilities are more likely to remain regulated for a long time till retail competition becomes possible. The regulator has to keep in mind the promised benchmarks relating to tariff, reduction in T&D loss, efficiency measures and also provide for compliance monitoring. For balancing the interest of the stakeholders, the regulation has to provide for transparency and participation of consumers in the process of tariff determination and compliance monitoring of the performance standards. To lay down public policy, which has been provided in all the regulatory legislation in India, the government must take extreme care to ensure that these directives are strictly policy in nature and do not result in debilitating or adversely effecting the capacity and independence of regulation. Equity, also, demands that government must invariably consult the regulators before such directives are issued and its views respected even though no provision has been made for consultation in the E Act 2003.

Reform so far in Indian power sector

Before enactment of the Electricity Act 2003, some of the states had enacted State Electricity Reform Acts, which provided for reorganisation of their SEBs. So far, 16 states have reorganised their SEBs. Ten states namely Orissa, Haryana, Andhra Pradesh (AP), Karnataka, Uttar Pradesh (UP), Uttrakhand, Rajasthan, Delhi, Gujarat and Madhya Pradesh have done so under their State Electricity Reforms Acts. In Orissa and Delhi, power distribution was entirely privatised. Delhi and Orissa formed a number of distribution companies (Delhi-3, Orissa-4) and unbundled them. While Delhi was a success story, Orissa was a failure. The regulator in Orissa has not been fair in deciding the tariffs. There has been a problem both from the government as well as the private players side. Assam, Maharashtra and West Bengal have reorganised their SEBs under the provisions of the Electricity Act 2003. Andhra Pradesh and Karnataka formed four distribution companies each. But, West Bengal and Maharashtra adopted another model where the governments formed a single distribution company. In other words, there are various models. But, if we look at the end result, there is big no. The SEB of Assam presently continues to discharge the licensee function only for trading of electricity. Government of Tripura has corporatised its electricity department. The remaining

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states of Bihar, Jharkhand, Kerala, Punjab, Chhattisgarh, Tamil Nadu, Meghalaya and Himachal Pradesh are in the process of formulating schemes for reorganisation of their SEBs. The 100% provision of 11 kV feeders is in 23 states and only 9 states have 100% consumer metering. The level of metering in the states like Assam, Delhi and Rajasthan is almost 100%. Metering of the distribution system also needs urgent attention to collect proper charges from the consumers at large (PFCL, 2008). Table 1 depicts status of reforms so far in different states of India.
Table 1 Description Regulator Regulator functional Issue of tariff order Status of Reforms in States as compiled on 31 March 2008 States All states except Arunachal Pradesh (28) All states except Arunachal Pradesh, Goa, Manipur1, Mizoram1, Nagaland1, Sikkim (23) Andhra Pradesh, Assam, Bihar, Chhattisgarh, Delhi, Gujarat, Haryana, Himachal Pradesh, J&K, Jharkhand, Karnataka, Kerala, Meghalaya, Maharashtra, Madhya Pradesh, Orissa, Punjab, Rajasthan, Tamil Nadu, Tripura, Uttar Pradesh, Uttrakhand, West Bengal (23)

Unbundling/corporatisation Andhra Pradesh, Assam, Bihar2, Delhi, Gujarat, Haryana, Karnataka, Meghalaya3, Maharashtra, Madhya Pradesh, Orissa, Rajasthan, implementation Sikkim3, Tripura, Uttar Pradesh, Uttrakhand ,West Bengal (16) Privatisation of distribution Delhi, Orissa (2) 100% 11 kV feeder metering Andhra Pradesh, Assam, Chhattisgarh, Delhi, Gujarat, Goa, Haryana, Himachal Pradesh, J&K, Karnataka, Kerala, Meghalaya, Maharashtra, Madhya Pradesh, Orissa, Punjab, Rajasthan, Sikkim, Tamil Nadu, Tripura, Uttar Pradesh, Uttrakhand ,West Bengal (23) Assam, Delhi, Goa, Himachal Pradesh, Kerala, Mizoram, Rajasthan, Uttrakhand, West Bengal (9)

100% consumer metering

1 2

SERC notified. Steps have been initiated towards corporatisation/unbundling. 3 Corporatisation is being implemented. Source: CEA

10 An evaluation of reform process

Though ERCs have been established in India and are functioning, they leave a lot to be desired in terms of independence, transparency, even meeting the few requirements of limited reporting laid upon them. The fault lies with all the players-governments, administrations, government-owned or government-controlled utilities, and the ERCs themselves. The High Courts and Supreme Courts have, on the whole, played a sterling role in seeking to uphold the expert nature of the ERCs and intervening primarily on questions of law. While regulating state-owned utilities, the problems of poor, delayed and wrong information and non-cooperation compound the difficulties of regulating the

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electricity sector in India today. The institution of independent regulation is relatively new in India except for the office of the Chief Election Commissioner (CEC), which is a constitutional authority that took many years after being established to actually exercise its powers. Electricity is a particularly difficult area, given the concurrent jurisdiction of the centre and states, the inefficiencies and populism injected into decisions and functioning, and lack of consensus in political support and commitment. But, there are issues that have to be addressed if the mechanism of regulation is to give the desired results. Power sector reform is a long process and its impacts are both short term and long term in nature. Though one cannot pass a judgement about the outcome of the reform process, a mid-course review of developments could, however, help to learn from the past mistakes and take some mid-course corrective measures. The concerns about the reform process in most of the countries have been on the process followed, the transition management and the final destination of the reform process.

11 Conclusion
The process of reforms can neither achieve the desired results overnight, nor change be brought about overnight. Timing as well as sequencing of major reform steps has important bearings on the efficacy, acceptability, continuity and success of the reform process. The timeframe and adherence to a strict timetable for implementation of the various provisions of the Act will hold tremendous importance for the policy initiatives to succeed. Nevertheless, the industry experts are hopeful about the future of the Indian power sector subsequent to the introduction of Electricity Act 2003 that promises to usher in a new policy regime in the sector.

References
Ailawadi, V.S. (2006) Establishment of Regulatory Institution and their Functions, USAID and Ministry of Power Training Program, http://www.drumindia.org Central Electricity Authority (CEA) (2008) Annual Report, Government of India. Central Electricity Regulatory Commission (CERC) (2005) Annual Report of CERC 2004-05, New Delhi, http://www.cerind.gov.in Central Electricity Regulatory Commission (CERC) (2008) Annual Report of CERC 2007-08, New Delhi, http://www.cercind.gov.in Kapur, A. (2002) The energy industry in India: a perspective, Journal of Energy and Power of International Financial Law Review (IFLR), http://www.iflr.com Khaparde, S.A. (2004) Power sector reform and restructuring in India, Power Engineering Society (PES) General Meeting (GM), pp.23282335. MoP (2006) Annual Report, Government of India (GoI), New Delhi, http://www.powermin.nic.in Power Finance Corporation Limited (PFCL) (2008) A Government of India Undertaking, New Delhi, Report on the performance of the state power utilities for the years 2004-05 to 2006-07, http://www.pfc.gov.in Pani, B.S., Sreekumar, N. and Reddy, M.T. (2007) Power sector reforms in Andhra Pradesh: their impact and policy gaps, Governance and Policy Spaces (GAPS) Project Centre for Economic and Social Studies, http://www.cess.ac.in

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Powergrid (2008) Powergrid Corporation of India Limited (PGCIL), Annual Report 2007-08, ERLDC, Kolkata, http://www.erldc.org Singh, N.K. and Wallack, J.S. (2004) Some light at the end of the tunnel: ingredients of power sector reforms in India, Presented at the Stanford University Conference, CA 94305-6015, USA, December.

Websites
www.powermin.nic.in (Ministry of Power, India website). www.prayaspune.org (Prayaspune, India website). www.cerc.gov.in (Central Electricity Regulatory Commission, India website). www.cea.nic.in (Central Electricity Authority, India website).