Decomposition of Malmquist Productivity Index (MPI) Using Technical and Financial Parameters: A Case of Indian Electricity Distribution Utilities- A state-wise analysis

In this paper, Malmquist Productivity Index (MPI) has been used to measure productivity change of electricity distribution companies (Discoms) of 30 states in India (state-wise clubbing of individual Discoms in each state) by decomposing productivity change into two parts namely technical efficiency change and technological change/frontier shift. The panel data for the period 2006 to 2015 has been taken for analysis. Result indicates that electricity distribution utilities are experiencing negative change in TFP (Total Factor Productivity) by an average of 1.1% from 2006-2015 while average technical efficiency progress is 1% and technological progress is (-)2.1% for the same time period. Therefore, productivity can be improved by decreasing technological inefficiency. Malmquist Productivity Index is further interpreted to find out the source of productivity change and managerial implications by further analyzing the components of technical change by following Yao Chen and Ali (2004) approach.