Cost-effectiveness of alternative investment strategies for the power sector in India: A retrospective account of the period 1997–2002

This paper focuses on the profitability of investments in the power sector in India seen from a micro-economic viewpoint followed by macro-extrapolation. We will compare the profitability of various investment strategies that serve as an alternative to the simple expansion of the generating capacity. In a system where maintenance has long been neglected, these measures also turn out to be cheaper than capacity addition and should be given preference in a period of scarcity of funds. Improvement in the use of plants and reduction of technical and non-technical losses are profitable, but these measures are not implemented enough under the present public system in India.We will then briefly link up these findings with some of our earlier works to show that these inefficiencies arise because State Electricity Boards have long relied on technical and administrative procedures that were designed during a period of expansion and not on efficiently decentralised and information-based management as should be the case in the present mature phase.