A Non-Parametric DEA Approach for the Performance Evaluation of Indian Electricity Distribution Sector

Abstract

Considered the weakest link of Indian power sector, the distribution segment has been battling various challenges such as controlling aggregate technical and commercial (AT&C) losses, ensuring financial viability, providing electricity access to all households and reducing inefficiencies in power generation and planning. Recent phenomena such as significant surplus base load capacity in many states (resulting in huge burden of fixed charges), around 40 GW of stranded generation assets, rapid reduction in prices of renewable (solar PV and wind) along with similar reduction being witnessed in battery storage systems are posing newer challenges for the typical distribution companies (DISCOMs) business model. The sector has started receiving greater attention and investment with the restructuring of the state electricity boards. Several new initiatives have been introduced to reduce aggregate technical and commercial (AT&C) losses along with a definitive regulatory framework. Electricity Act 2003, National Electricity Policy 2005 and National Tariff Policy 2006 are important regulations governing the sector today with an aim to bring competition in the sector and improve the services to the end consumers. So the aim is to evaluate the relative efficiencies and benchmark of various electricity distribution utilities operating in different states in India by applying popular and effective performance evaluation method data envelopment analysis (DEA). Efficiency evaluation results with performance improvement schemes will also be provided. Based on these results, inefficient utilities can improve their performance by making strategic plans for performance improvement.