Efficiency of electricity distribution utilities in India: a data envelopment analysis

The study makes an effort to measure the relative efficiency of electricity distribution utilities (DUs) of 17 unbundled states in India using a Frontier tool, viz. data envelopment analysis. The model with constant returns to scale is applied to evaluate the relative efficiency of different sample DUs. The input-orientation measure has been used to calculate the efficiency score of 40 DUs for the year 2012-2013. It is observed that there is existence of inefficiency in 29 out of the 40 sample utilities. These inefficient utilities have the potential to become efficient utilities by benchmarking against the most efficient utilities. In order to supply the same output, these utilities need to reduce their use of inputs to the level of most productive scale size. The regulators need to pay special attention to enhance the efficiency of these inefficient DUs by exploring alternative approaches like incentive-based regulation.