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Total Factor Productivity Analysis in the Regime of Multi-Year Tariff Policy Using Fisher Index Method


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DOI: https://doi.org/10.15866/iree.v16i2.18976

Abstract


Electricity Act 2003 mandates the implementation of the Multi-Year Tariff Policy (MYT) in order to improve the overall performance and the commercial viability of the utilities without losing the consumer interest by fetching transparency in operation. The successes of the implementation of the MYT Policy in twelve utilities across the four-states of India are analyzed. The productivity evaluation indicates the overall performance. In this article, it is examined by the Total Factor Productivity (TFP) concept using direct, quantity-based, Fisher Index over two control periods of the MYT structure for a period of 2007-08 to 2015-16, and the scope for improvement is identified. The five drivers of TFP change are identified. The study has revealed a 6.48 % average rise in the TFP during the period indicating the success of MYT. The TFP of 66.66 % of utilities has improved. The rise in the average cost of supply has reduced the TFP by 4.31% and it is a foremost source of impact. The rise in network loss has affected 33.33 % of utilities. The TFP performance of the Gujrat state is the highest, and the average TFP is 1.9. The optimal utility size for higher TFP is found to be 15 to 20 Million Units.
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Keywords


Fisher Index; Multi-Year Tariff Structure; Power Distribution Utility; Total Factor Productivity

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