In India protection and controls are being replaced by a competitive and de-regulated open economic system during last one and half decade. This fundamental transition in Indian economy is well reflected in the electricity sector. During first phase of reforms private players (IPPs) were introduced in electricity generation to create a competitive wholesale market, which achieved some degree of success as we have a number of IPPs contributing almost 32 percent of total generation. The next step was restructuring of the state electricity boards, which included unbundling-separation of potentially competitive segments, and corporatisation. To meet the gaps in the first phase of reforms, the second phase emphasized on privatization of distribution and establishment of independent regulatory commissions to manage the competition.
The purpose of this paper is to analyze different possibilities of retail competition in Indian electricity, and what are the problems and prospects of a competitive retail electricity market in the light of present Competition Act, 2002. The paper will discuss various steps taken to introduce competition in retail electricity market and will assess the process in the light of existing international models. On the basis of this analysis the paper will recommend an ideal way of introducing competition in retail electricity market.