Electricity tariff in India : development of a suggested approach on cross subsidy determination based on cost of supply

Abstract

The development of the Indian electricity sector plays a pivotal role in the blueprint for development of the Indian economy. For more than 20 years, this sector is undergoing changes and reforms, with opening up of the sector and progression towards a competitive environment, as experienced in many other countries of the world. In spite of these developments, Indian power sector has a staggering loss of Rs.3.8 trillion. India also has the highest number of poor population in the world, which generally stretches infrastructure and public services, and specifically strains provision of electricity services to the multitude. Both the number of consumers (actual and potential), as well as the number of poor people, with low capacity to pay, combine to make Indian electricity sector reform initiative a challenging task.