Competitive Mechanisms in Indian Power Sector: Some Reflections on Trends and Patterns

With the enactment of Electricity Act 2003, competition in the Indian power sector received a new nomenclature and is considered instrumental in driving the sector in a sustainable trajectory. An exploratory analysis of the development of the electricity market is carried out to understand the finer nuances of emerging competitive paradigm of the sector, its critical aspects, evolving trends and patterns and future outlooks. The analysis reveals that competition, as it has evolved over last decade or so, manifests a growing trend of an efficient, liquid and complete market phenomenon. The article also identifies key anomalies and distortions inhibiting the seamless growth of competition in the Indian power sector. More action is required in certain directions, such as enhancing liquidity of the market, addressing transmission congestion problems and dealing with open access constraints, controlling market power, giving teeth to the electricity regulatory commissions and importantly, addressing political economy concerns. It concludes that in order to carry forward the momentum, a cautious approach needs to be adopted and necessary ancillary measures are to be undertaken.