Adaptability of Western Style of Regulation in Developing Economies: A Case of Electricity Sector in Delhi, India

In recent times a typical ‘reform model’ comprising setting up of regulatory commission independent of government and functional unbundling of utilities followed by their privatisation, has been propagated as panacea to all ills that electricity industry is characterised with in most of the developing economies.

This model was borrowed from the Western world and is based on the premise that: Having an absolute disconnect between the political establishment and economic policy/regulatory decisions is feasible. During last decade many of developing countries have adopted this model with little adaptation and the outcomes by and large have been far different from the desirable.

The case of electricity sector in New Delhi India is a representative one that has many of the dimensions stated above. The regulator (Delhi Electricity Regulatory Commission) who is supposed to function independent of the government was perceived as ineffective in regulating the sector. The perception of consumers was that the regulator was there just to raise tariffs without even bother about quality of services. The government continues playing an active role in regulatory matters, such as tariffs, though is not suppose to do so.

The case described above (thereafter referred as Delhi Case) has raised some basic issues. Can adoption of the Western style of regulatory model address peculiar challenges being faced by developing economies in the utility services? Is absolute insulation between regulatory processes and political establishment achievable in developing economies? Is regulatory independence a guarantee for effective and impartial regulation? Is it possible to have a mechanism that is more acceptable and implementable in the context of developing economies, yet the objectives of effective regulation are achieved?

The proposed research would study and analyse the Delhi Case as representative one and seek answers to the questions mentioned above. The paper would carryout an objective analysis in light of the experiences with the Delhi case. The approach would be to look for pragmatic solutions in the context of the economic-political realities in developing countries rather than striving for ideal solutions which the textbooks often recommends