A micro level study of an Indian electric utility for efficiency enhancement

In this paper DEA (Data envelopment analysis), a non-parametric approach to frontier analysis, is applied to evaluate the relative performance of 29 EDDs (Electricity Distribution Divisions) of an Indian hilly state, namely Uttarakhand. Input oriented DEA is applied to evaluate the relative overall efficiency, technical efficiency and scale efficiency of EDDs. The results indicate that numerous divisions have scope for improvement in overall efficiency. Most of the utilities are inefficient due to their scale inefficiency rather than technical inefficiency. Further Slack analysis is carried out to formulate improvement directions for relatively inefficient divisions. Particular areas are identified, which are to be improved for overall efficiency enhancement through sensitivity analysis. Different alternatives for reorganization of the EDDs are explored in order to obtain most favorable and balanced scale. The result is envisaged to be instrumental to policy makers and managers to increase the operational efficiency of the EDDs leading to higher profitability of the state electricity board.