chapter - ii review of literature and research methodology

25CHAPTER - IIREVIEW OF LITERATURE ANDRESEARCH METHODOLOGY2.1 Review of LiteratureSince power cannot be stored for marketing but must be sold the instant it isproduced, it was generally assumed that power sector had to be vertically integratedmonopoly of generation, transmission and distribution. And since power was vital forevery country, it was also assumed that the monopoly had to be in the hands of thegovernment. Theoretically, in a country where generation, transmission and distributionare in the hands of Public Sector Undertakings (PSUs) it could be expected that theinvestment requirements consistent with adequate and reliable supply, would be fullymet by the undertakings or through government planning/budgetary process. But thisdid not happen during the last few decades and the quality and reliability of supply ofpower deteriorated in most countries. Yet the dogma that electricity supply, like otherpublic services, should be provided by the state, persisted in most countries. When thestate provided this service, it had to cross-subsidy between different classes ofconsumers, to achieve the stated socio-economic objectives of the state. Introduction ofsubsidizes made the electricity market inefficient and lack of competition led to moreinefficiencies. When the state supplied electricity, there was inadequate pressure to payfor the service. Cross-subsidies left to very high tariff for some classes and often whenthese tariffs became unviable, the state itself allowed setting up captive power plantsleading to uneconomic and unviable fragmentation of the grid and unnecessaryinvestments in the unviable units. To introduce private capital, some countriesprivatized new generation but that led to more problems as the transmission/distributionsector continued to be inefficient, making entry of private capital in generation verydifficult. The privatization of the power sector is a recent, but internationallywidespread trend which has placed greater reliance on market forces and lessdependence on government in the allocation of resources. The privatization of the

26power sector has been made possible after recognition that the sector could beseparated into generation, transmission and distribution sectors and even these sectorscan be broken into several companies, without compromising the economic advantagesof a vertically integrated government monopoly, which earlier existed in mostcountries. The over-capitalized investments made by the governments in the electricitysector (generation, transmission and distribution) had resulted in high levels of reserveplant margin (coupled with poor availability) combined with high debt levels and lowreturns. Monetary restraints and debt placed pressures on most governments to reducegovernment expenditures and provide for better service to the people. It has now beenrecognize that introduction of private capital in the power sector, if properly structuredand implemented, and lead to following advantages:Improve public finances through sale of state assets and elimination of subsidiesgradually.Improve performance of power entities by introducing competition betweendifferent players, primarily by creating a wholesale power market, giving higherreturns to those supplying power at lower rates.Lower consumer tariffs through creation of institutional framework for dealingwith consumer concernsAttract more investments, including foreign investment.Develop wider private share in key economic activityImprove revenue realization at all levels, thus making services more efficient.A number of studies have examined the effects of ownership and competitionon industrial performance, though mainly for developed countries. The main aspects ofeconomic performance studied have been labor and total factor productivity, costs ofproduction, profits and other financial ratios and prices the conclusions of these studiesare not completely consistent. This is true of those studies that have looked specificallyor in part at the experiences of the developing economies.

27Ros (1999), in his research examined the effects of privatization or competitionon key telecommunication variables , such as network expansion and efficiency Usinga fixed-effects model , the researcher found that during the 1986—1995 time period,those countries that have at least 50% of the assets of their main telecommunicationprovider in the private sector have significantly higher main lines per 100 inhabitantsand to a lesser degree have higher growth in the main lines per 100 inhabitants.Privatization is positively associated with main lines per employee and growth in mainlines per employee. While competition is not found to affect network expansion, it isfound to positively affected efficiency as measured in main lines per employee. Theresearch also found that those countries that have at least fifty percent of the assets oftheir main telecommunications providers in the private sector and permit competitioneither in local , long-distance or international services have higher level of efficiencythan those countries that have either just privatized or permit competition.Ramamurti (1997) reports a staggering 370 percent increase in labourproductivity on the privatized Argentine railway. Just how far can privatization bepushed, and with what consequences? This research concludes that even large,unprofitable firms in developing countries faced with marketing failures can beprivatized, but the gains of doing so depends on how badly the state enterprise wasperforming to begin with, and the potential for introducing competition in the marketand for the market. The broader lesson is that when both market failures andgovernment failures are present, a public-private solution is preferable to a purelyprivate or a purely public solution. Privatization is not a panacea but potentially apalliative, when it comes to reducing subsidies or coping with regulatory failures.Babalola (1999) in his research appraised the performance of Nigerianelectricity sector to find out the influence of ownership structures upon performanceand productivity. The empirical analysis use two approaches for measuring efficiencyi.e. econometric and techniques and the non- parametric programming. Data relates toNigerian electricity industry from 1970-95.The empirical evidence suggest that that thegovernment involvement that curtail managerial autonomy might be an impediment toefficiency and performance. The research concluded that change of ownership and

28presence of regulator positively impacted the scale efficiency of the industry.Galal et al (1994), is a seminal contribution to the welfare analysis ofprivatization. In contrast to most empirical studies research on privatization,liberalization and regulation it focuses on welfare changes and not just on productivityand profitability or other business performance indicators. The methodology of thestudy is a social-cost benefit analysis. This is needed to compare the performance of thecompany after divestures with what the performance would have been under publicownership. The study was done to evaluate the welfare effects of one of the mostfamous episodes in privatization history in the 80’s, probably the one that actuallyshaped this policy in UK and rest of the world: the divesture of British Telecom. Thestudy concluded that the net social benefit is not robust and BT story is far from beingwarranted as success in welfare terms.Boubakri and Cosset (1998), in their study using a sample of 302 privatizedfirms across 43 countries over the period 1980-200, observed that share issueprivatization produce economically significant positive domestic market adjustedreturns. The finding further suggest that investors are relatively pessimistic at thebeginning of the privatization process because they are concerned about governmentpolicy uncertainties after privatization and hesitate to fully incorporate potentialprofitability gains into their expectation for quite sometime thereafter. As per theresearch policy makers have to realize that investment in reputation building to boostinvestors confidence is important to reap highest benefits from the privatizationprocess, and help to achieve local stock market and over all economic growth.Boubkari also found more improvements in efficiency and output for firms in thecountries where stock markets are more developed and where property rights are betterprotected and enforced. Economic growth and foreign ownership are found to be otherkey determinants.Pasco-Font (2001) in its study tried to assess the income distribution effects oftransformation and to determine which type of households bear the greater portion ofthe burden or enjoy the benefits of price changes brought in by privatization in Peru.

29For this purpose complementary methodologies are followed viz. concentration curves,demand equations for utilities under study to calculate the welfare changes associatedwith the consumption of utilities. The study found that welfare gains reduced becauseof the jump in tariffs necessary for the viability of the sector. But the presence of newfirms entering the sector will bring rate down. In this respect, the role of regulatorbecomes vital for creating the necessary conditions that allow the new firms to enter themarket.Dewenter and Malatesta (2000), present empirical evidence on the relativeprofitability, leverage and labor intensity of government-owned and privately-ownedfirms. Cross-sectional analysis of a sample of very large firms indicates that thoseowned by governments are significantly less profitable than those held privately. Theyare also more highly leveraged and more labor intensive. They conducted a time seriesanalysis of privatized firms and find little evidence that privatization enhancesprofitability. In our sample profitability improves immediately before privatization. Theevidence on subsequent improvement is mixed. Some measures of profitability aresignificantly less after privatization than just beforehand. The evidence suggests thatgovernments efficiently restructure at least some firms before selling them, but that theactual change of ownership does not give rise to further efficiency gains subsequently.Bhaskar and Kahn (1995) discover increased labor productivity in the privatizedBangladesh jute industry. In their research the researcher uses firm level data from jutemills in Bangladesh for the year 1983-1988 to analyze the effects of privatization uponemployment and output. The privatization programme provided an almost controlledexperiment on the economic effects of a change in ownership. 31 of the 62 mills in thissector were privatized, with the rest remaining in the public sector. The selection of themills that were privatized was exogenous, as it was not based on the current financialperformance. The findings of the study are that privatization has large and significantnegative effect employment significantly, while the reduction in output is notsignificant.Petrazzini and Clark (1996) report that deregulation and privatization were bothassociated with significant improvements in the telephone density in 26 developing

30countries, although there appeared to be no obvious impact on service quality. Inappraising the performance of the electricity sector in developing countries it isimportant to take to account of the effects of ownership, competition and regulation,perhaps along with other institutional factors.Using 11 political variables, Bergara et al (1997) composed political indexes toexamine the effects of regulation. The empirical study of cross-nation analysis shedlights on the impact of political institutions and the ability of the governments tocommit to stable and non-opportunistic regulatory policies on the utility sectorperformance. They found that well-defined and credible political institutions werepositively and significantly related to electricity generation capacity. Policy makers indeveloping countries seeking to attract foreign investors to large sunk and politicallysensitive sectors should recognize that contractual terms, tax incentives and subsidiesonly function to an extent that they are credible. In the absence of substantiveconstraints on the government reneging on contract terms, investment will remain offshore.Bortolotti et al (1998) in their study reviews the main econometric and casestudy evidence on the impact of privatization on economic performance in developingcountries. The researcher compared the performance of 12 large firms, mostly airlinesand regulated utilities, in three developing economies, Chile, Malaysia, and Mexico,and one developed country, the UK. The study attempted to control for the counterfactual and used a performance methodology linked to social welfare maximization;although the study stops short of full equilibrium modeling. It endeavored to exploreboth the changes in economic efficiency and welfare aspects of privatization by lookingat the price and output changes and the impact on producer and consumer surplus.According to research privatization can improve economic performance, butperformance improvement lies on other structural reforms. Thus empirical evidence isconsistent with the notion that privatization works best in developing countries when itis integrated into broader development framework.Zhang.Y. et al (2005) in their study provides an econometric assessment of theeffects of privatization, competition and regulation on the performance of electricity

31generation industry using panel data for 36 developing and transitional countries, overthe period 1985-2003. Electricity sector in both developed and developing countrieshave been subject to restructuring to introduce private capital and increase competition.The study identifies the impact of these reforms on generating capacity, labourproductivity in the generation sector and capacity utilization. They used a fixed effectspanel data model. They found that establishing an independent regulatory authority andintroducing competition before privatization is correlated with higher electricitygeneration, higher generation capacity and in the case of the sequence of thecompetition before privatization, improved capital utilization. The main conclusions arethat own their own privatization and regulation do not lead to obvious gains in theeconomic performance, though there are some positive interaction effects. By contrastintroducing competition does seem to be effective in stimulating performanceimprovements.Jamasb et al. (2004) in their study proposes a set of indicators for developing acoherent framework for studying the electricity reforms for studying electricity reformsin developing countries. The researchers classify approaches to analyzing electricityreforms into three broad categories: (i) econometric methods (ii) efficiency andproductivity analysis methods, and (iii) individual or comparative studies. According tothem, efficiency and productivity analyses are suitable for measuring the effectivenesswith which inputs are transformed to outputs, relative to best practice. Jamasb et al.(2004) also maintain that single or multi-country case studies are suitable when indepth investigation or qualitative analysis is needed. The proper study of economicreforms requires an analysis of its impact and an assessment of the role of those factorsthat were influential in determining its outcome. Any such analysis generally involvemeasuring (and there by quantifying) specific aspects of cause and effect. Almostinvariably, this involves using both quantitative and qualitative indicators.Steiner(2001) carried out a panel data analysis including electricity price, ratioof industrial to residential electricity price, ratio of industrial to residential electricityprice, capacity utilization rate and reserve margin. Using these variables, she tired tomeasure the competitive aspects and the cost efficiency of the reform. She also looked

32at some reform elements separately, including unbundling wholesale power pool, thirdparty access to transmission and privatization. The study found that electricity marketreforms generally induced a decline in the industrial price and an increase in the pricedifferential between industrial customers and residential customers, indicating thatindustrial customers benefit more from the reform. She also found that unbundling isnot associated with lower prices but is associated with a lower industrial to residentialprice ratio and higher capacity utilization rates and lower reserve marginsThe study by Ruffin (2003) dealt with the institutional determinants ofcompetition, ownership and extent of reform in electricity reform process. Theinstitutional determinants of competition, ownership and extent of reform in electricityreform process. The institutional determinants employed are different measures ofjudicial independence, distributional conflict and economic ideology. The study of across-section OLS regression analysis of set of models with observations of up to 75developed and developing countries that reformed their electricity reform scores thatreflect the extent of the reform. The study found that the relation between judicialindependence on the one hand, and competition and ownership on the other isambiguous i.e. the coefficients are often insignificant or when significant, their signshifts across models. Besides, greater distributional conflict was found to besignificantly correlated with a higher degree of monopoly. Moreover, the resultsshowed that the relation between economic ideology favouring competition and privateownership was generally positive and significant. The results also pointed out that thereis appositive relationship between judicial independence and reform scores.Phadke et al. (2003) studied the electricity reforms in India and suggests that thechange in ownership through privatization alone cannot bring efficiency in the sector.The researcher in his paper suggested that the success of electricity reforms in Indiawill depend critically upon the existence of some sort of restraining or discipliningmechanism in the sector, in the absence of which current efforts will likely result intransition from inefficient public ownership to profit gouging monopolies oroligarchies. In principle, such a mechanism should be strong, independent and effectiveregulatory oversight over public or private monopolies or significant competition

33among large number of public and private entities. But it is important to examinewithout bias, and as thoroughly as possible, the feasibility and effectiveness of boththese sector disciplining mechanisms before making any claims regarding thedesirability of privatization. The researcher also argues that issues related to protectingthe environment, extending access to poor and other off-grid populations and strategicconcerns related to import dependence and foreign-private ownership need to beaddressed up-front in order for reforms to be in broader public interest.Bacon & Jones (2001) in their study on privatization & liberalization ofelectricity sector in 14 developing countries viz. Albania, Argentina, Bolivia, BrazilColombia, Coted’ivorie, Georgia Hungary, India, Kazakhstan Mali Panama Thailand,Turkey and Ukraine concluded that competition for the right to enter the power marketon contractual or regulated terms plays an important role in developing countries,notwithstanding the limited scope for sustaining competitive power pools. Likewise, alimited transparent and soundly structured process for sale of stakes in the powerentities will yield the best terms for the long term efficiency of the power sector. Thesequencing of reforms is crucial to their long term sustainability. First the legal andregulatory framework should be in place before privatization of the restructured powersupplier. Second, major restructuring should precede the creation of private ownershiprights to avoid problem with stranded assets. Third, the scope for introducingcompetition to the whole sale power market should be incorporated into the initialstructure reforms to the power market rather than relying only in regulatoryinterventions.Nepal & Jamasb (2009) The research quantitatively explores high-level linksbetween power sector reforms and wider institutional reforms in the economy for a setof 27 diverse countries in rapid political and economic transition since 1990. Panel-dataeconometrics based on bias corrected dynamic fixed effect analysis (LSDVC) isperformed to assess the impact of reforms on macroeconomic and power sectoroutcomes. The results indicate that power sector reform is indeed a more complicatedprocess than initially perceived. The results also show that power sector reform isgreatly inter-dependent with reforms in other sectors in the economy. They concluded

34that the success of power sector reforms on outcomes in developing countries willlargely depend on the extent in which countries are able to synchronize inter-sectorreforms in the economy.Michael et al. (2003) suggested that in order to achieve success in the reformsthe measures like adoption of a legal and regulatory framework based on the principlesof efficiency through competition market governance structure including anindependent regulator based on the principles of transparency and non-discriminationhave to be taken. A review of the power, water and transport sectors along with certainlegal and regulatory issues relating to PPI was carried out in eight countries : UnitedKingdom, Australia , Hungary, Brazil, Philippines, Argentina, Malaysia and ThailandThe International experiences with competitive wholesale power markets has beenmixed. While some markets have seen supplies drop and prices skyrocket (as in the USstate of California), others have managed to attract higher private investment after themarket reforms. Throughout the process it is crucial for the government to publish theoverall policy on power market reform, and where possible the timetable and the scopeof each step in the process so that investor can assess risks before investments. Inaddition existing investors will seek reassurance from the government that theirinvestments will be protected during the transition period.Fiorio et al. (2007) questioned the widespread believes that public ownershipcan be impediment to other reforms and that it to production inefficiency. To test forthus a reform paradigm in general, they considered electricity prices and survey data onconsumer satisfaction in the EU-5. Their empirical finding rejected the prediction thatprivatization leads to lower prices, or to increased consumer satisfaction. They alsofound that country specific features tends to have higher explanatory power and theprogress toward reform paradigm and is not systematically associates with lower pricesand higher consumer satisfaction.Based on the literature review on cross-country studies related to electricitymarket reforms, we may argue that evidence on impact of the reform process is quitelimited and will take more time to emerge. Therefore there exists a huge research gap inthis area

352.2.1 Need of the Present StudyIndian economy is growing at a rate of more than 8% per annum. In order tosustain this growth it is essential to have a strong power infrastructure to support itLack of power will make high growth unsustainable. However, in India the demand andsupply gap is widening; where demand is more than supply. The researcher intends toexplore the reforms, and which reforms could be undertaken by the Indian governmentin future so that it overcomes demand supply gap and doing the same efficientlykeeping in mind the limiting natural resources to achieve sustainable development. It isto make energy use smarter so that we get more out of existing potential supplies whilelooking to develop new resources. Many countries have undertaken reforms in thissector and have been quite successful in their implementation. Study of theirexperiences would prove very fruitful for Indian power sector.Some of the reasons for the shortage of supply are as follows: -The growth in the installed capacity is not enough to meet the growingdemand.Lack of optimum utilization of existing capacityInefficient use of electricity by the end consumer.Inadequate inter-regional transmission results in huge T&D losses.Technical losses account for about 8 to 10% losses. Loss due to theft andtechnical metering is about 12to 14%.Average cost of power is greater than average cost of revenue obtained.Skewed tariff system subsidizing agricultural and domestic consumers atexpenses of industrial consumers.Political interference and no firm policy on disconnectionTo reduce this gap Indian government has already undertaken certain reforms. Itwas like setting your own house in order. The reforms include:-Establishment of independent Electricity Regulatory Commissions (CERC& SERC) to develop markets and fix tariffs.

36Freedom to set up captive generation capacity including group captive.Intent to unbundled SEB’sPrivate players encouraged in power generation.To overcome the problem of high tariffs, policy for selection of generatorson competitive bidding.Mega projects policySetting up of power trading corporation Open access to consumers over 1 mw by 2009New hydel policy to provide thrust to hydro generationEnergy conservation Act in placeSettlement of outstanding PSU bills with states.These reforms were just the beginning and are not enough. These reforms havenot addressed many other problems likeVirtually no time-of-day-prices (SPOT MARKET)Load duration curve.Different regulations (center vs. state ERC’s)Incase of RLDC’s vs. Transco, how should load dispatch be handledPower importUsage of information & Technology and many more.These reforms are just the beginning and are not enough to handle the powercrisis. Power sector has many more challenges to face. If India aspires the status of adeveloped county it will have to overcome the problem of power shortage2.2.2 Scope of the StudyThe purpose of study is to overview the evolving policy environment andregulatory framework of India and Argentina electricity sectors and to makecomparison of the effects of privatization , competition & regulation on variousvariables between two countries so as to device the ways through which the problems

37of Indian electricity sector can be addressed in its second generation reforms.Using an original Panel Dataset for the period 1991-2008, the research providesthe analysis of the effects of privatization, competition & regulation in Power Sector ofIndia & Argentina. The starting year of the study is 1991, as the reforms started in India& Argentina from this year. The final year 2008, represented the last year for which thedata were available at the time the research was conducted.The sample countries are India & Argentina. Argentina was chosen as a samplecountry because the restructuring process of the electricity sector that started in 1992fares among the most successful, both when compared to other sectors in Argentina andwhen compared to other electricity sector reforms in the world. It shares many of thefeatures of developing country’s electricity system. Like India, it is a Federal state andthe provinces retain a large degree of over the regulation of local utilities including thepower to privatize local distribution utilities and to set residential prices. Argentinashares the political and macroeconomic instability like of India but is perhaps unusualin its capacity for designing and running sophisticated economic institutions such asthose required by a deregulated electricity market. Argentina has GDP growth of 7%as of India which is in the range of 7%-8% and faced the same challenges as beingfaced by India like power shortages, thefts, transmission , distribution losses, crosssubsidies,political interferences, inefficient use of power and lack of regulatorymechanism for free trade of power. The experience of Argentina in its implementationof power sector reforms provide fruitful experiences which can be incorporated in thesecond generation power reforms of India.The performance indicators used in this study are labour generation per capita,installed capacity per capita, installed generation per capita, net consumption per capita,electricity shortages, distribution losses and foreign direct investment. These indicatorscapture the extent of electricity available to the economy, labour generation andcapacity utilization in the generation of electricity. There were many other indicators aswell that could not be included due to non availability of data.For finding the effects of privatization and competition on the performanceindicators correlation techniques have been used. To assess which form of

392.2 .4 (i) HypothesisIn the last twenty years the electricity power sector in both developed anddeveloping countries has been subject to restructuring. Although the approaches toreform have varied across countries, the main objective has been to improve theeconomic efficiency of the sector by introducing private capital, liberalizing marketsand introducing new regulatory institutions. In economic theory, ownership and thedegree of competition are both important factors in determining output levels, costs ofproduction and prices. More formally, the capital market and the product marketdetermine the levels of allocative and productive efficiency. Therefore, privatization,competition and more effective state regulation of monopoly activities should lead toimproved economic performance. This depends, however, on the reforms beingappropriately designed and implemented. A country implementing reforms can sufferfrom serious institutional weaknesses, meaning that the planned reforms may notproduce their intended benefits. Thus, the impact of privatization, competition andregulation on the electricity sector may produce different results depending on thedesign and its implementationSince India & Argentina both, have carried reforms, but the methodology has beendifferent. In order to determine which method has been more powerful in bringing thedesired changes, the following hypothesis have been setH1: Privatization will bring in economic & productive efficiency in the powersector.H1.1 Privatization by way of green field projects than divestures will lead to higherlabour generation per capita.H1.2 Privatization by way of green field projects than divestures will lead to higherinstalled capacity per capita.H1.3 Privatization by way of green field projects than divestures will lead tohigher installed generation per capita.H2: Competition will stimulate both technical and productive efficiency in thepower sector.H2.1 Competition by not restricting the market share will lead to increase inconsumption per capita.

40H2.2 Competition by not restricting the market share will lead to decrease inenergy shortages.H2.3 Competition by not restricting the market share will lead to decrease indistribution losses.H3: A sound policy and regulatory framework and efficient supporting nstitutionsto enforce the relevant laws and regulations are imperative for FDI to enterand thrive2.2 .4 (ii) Reference PeriodUsing an original panel dataset for the period 1991-2008, the research providesthe analysis of the effects of privatization, competition & regulation in power sector ofIndia & Argentina. The starting year of the study is 1991, as the reforms started in India& Argentina from this year. The final year 2008, represented the last year for which thedata was available at the time the research was conducted. The role of privatization,competition and regulation has been examined during this eighteen years time span.2.2.4 (iii) Research DesignSince the study is about describing the state of affairs in the electricity sector asit exists at present and has no control over variables, therefore the researcher hasundertaken Ex-Post facto research. Given that, the research involves comparisonbetween India & Argentina Electricity sectors, a Cross- National Policy SectorApproach (NPSA) is used.2.2.4 (iv) Data BaseThe data base for the present research is secondary which includes publisheddocuments of proven authenticity.Data source for the present research is secondary and has been derived fromvarious authentic documents. The indicators generation per capita, installed capacityper capita & net Consumption per capita were calculated based on data from U.S.Energy Information Administration, Asia Pacific Energy Research Centre (APERC),World Development Indicators published by the World Bank and from the database ofthe Ministry of power, Govt. of India & Ministry of power, Govt. of Argentina. Theemployment data used to calculate labour efficiency were compiled from the database

42Where P 1 = value of variable in year 1P 0 = value of variable in year 0(P 1 -P 0 )X100 = Percentage change in the variable during different periods of timeP 0n = Total number of years(iii) CGR = Compound Growth raten=Antilog ∑ Log Xi =1n-1(P 1 -P 0 )Where X = X100 is the Percentage change in the value of variableP 0in time period from 0 to 1n= Total time period(iv) Standard Deviation (S.D)n∑ (X i - X) 2i =1n-1WhereX = Arithmetic mean of variable X in= Number of observations(v) Pearson’s coefficient of correlation ( r )r=SS xySS x SS yWhereSS xy =n∑ (X i -X) (y i -y)i =1nSS x = ∑ (X i -X) 2i =1

43nSS y = ∑ (y i -y) 2i =1(vi) The formula for t value for testing for the existence of correlationt = r- ρ1-r 2n-2with the hypothesisH 0 : ρ = 0 (there is no correlation)H 0 : ρ 0 (there is correlation)Where ρ = Population correction coefficient (hypothesized =0)(n-2) = Degree of freedom(vii) The formula for t value for testing of hypotheses for the mean (one sample t-test)t = X- μSnx = Sample meanμ = Population meanS = Standard deviationDespite the above mentioned analytical tools, for interpretation purpose, thehelp of charts, diagrams, pie-chart, bar charts has also been sought wherever feltnecessary.2.2.5 Limitations of the studyThere are number of limitations in the research which are acknowledged asunder:-1. To begin with, the sample is composed of India & Argentina for which weobtained data on Privatization, Competition and Regulation to create ourvariables. There may be sample selection bias in the data provided by thesample countries. We have no reason to believe that this should be the case, butcannot of course rule it out.

442. Endeavour has been made to produce satisfactory measures of privatization,competition and regulation; more work would be valuable at an internationallevel to obtain superior measures especially on the effectiveness of regulation.3. Performance indicators like Quality of service could not be estimated becauseof lack of data.4. The impact of reforms on prices charged for electricity generated could not beestimated, as there is lack of sufficient comparable data across our sample ofcountries to carry out such an analysis.5. The time-period for the study has been taken from 1991-2008, but due to nonavailabilityfor some years has made some limits to the study.6. The effects of privatization, competition and regulation on performance are notseparately modeled, leaving open the possibility that economic gains attributedto privatization may have resulted from other structural reforms.2.2 .6 Organization of the studyThe whole study has been presented in six chapters. Chapter I deals with theintroductory part in which conceptual and theoretical backdrop of Electricity SupplyIndustry. In the present chapter characterstics of electricity, The life cycle of electricpower, genesis of Electricity Supply Industry(ESI),Regulator, drivers for reforms inelectricity sector, process of liberalization of ESI & liberalization paradigm , expectedeffects of liberalization has been included. The purpose of this chapter is to havereadymade information about Electricity Supply Industry (ESI) and the reason forreforms in the industry.Chapter II is devoted to the review of previous related studies and researchmethodology applied in the present study. In order to augment the knowledge base andderive analytical tools, umpteen reviews of books, articles, research studies, papers,theses, which are of relevance to the study has been done with analytical and criticalaspects. In the same chapter, the need, scope, objectives of the present study have beenhighlighted. In the research methodology section of the present chapter the hypotheses,reference period, design of the research, database, data analyses tools including

45statistical tools, limitations of the study and its organization has been included.Chapter III is committed to the study of Power sector development in Indiawhich includes overview of the power sector before 1991, evolution of electricityreforms in India, the Enron affair, Orissa model of reforms & challenges before Indianpower sector to have first hand knowledge of the changes in power sector in India withthe implementation of reforms. The present scenario of power sector has also beenproduced in this section. In the same chapter a bird eye-view has been taken of theElectricity Act 2003, Open –access and Power trading in India. The objective of thischapter is to look into the policy and planning aspects of the Government regardingpower sector in India.Chapter IV is dedicated to the study of experiences of power sector reformsundertaken across globe with special focus on Argentina. It includes overview of theArgentinean power sector before 1991, evolution of reforms, the industry restructuringand privatizing plan , the structure and regulation of industry segments and challengesbefore Argentinean power sector. It also includes the detailed lessons from theArgentinean electricity sector reforms. The objective of this chapter is to look into theexperiences of the Argentinean power sector reforms so as to incorporate fruitfulexperiences in Indian power sector.Chapter V is related to the analytical part of the study. In this chapter the effectsof privatization, competition and regulation has been analyzed. The performanceindicators selected for the study are labour generation per capita, installed capacity percapita, installed generation per capita, net consumption per capita , reduction inelectricity shortages, reduction in distribution losses and foreign direct investment. Thereference period of the study is 1991-2008.In this segment three main hypothesis andtheir sub hypotheses has been tested. The first hypotheses relates to privatization andfinds the correlation between privatization and labour generation per capita, installedcapacity per capita, installed generation per capita in case of India & Argentina.Thereafter an attempt has been made to find out which form of Privatization is better byapplication of one sample T-test. Similarly in the second hypotheses correlation

46between competition and net consumption per capita , reduction in electricityshortages, reduction in distribution losses has been found in India & Argentina. Asimilar attempt has been made to find out which form competitions is better byapplication of one sample T-test. The last hypothesis relates to effect of regulation inattracting foreign direct investment. For this purpose t-test has been applied.Chapter VI throws a light on the findings and conclusions of the analysis. Thisalso includes the suggestion part. The last part of the study is for annexure,bibliography and references.