ANNOUNCEMENTS
Agricultural electricity consumption in India has been subsidized since 1960s. A part of these subsidies is recovered by electricity utilities by imposing surcharges on industrial and commercial consumers. Discontentment has grown among these consumers because of persistent and disproportionate rise in their tariffs. Besides, the continuation of subsidy regime, through its effect on revenue realisation, has implications for the financial sustenance of the entire distribution segment. Using panel data estimation techniques, our study examines the evolution of cross subsidies in India as a function of regulatory and market-based policy reforms, and state specific political factors. We find that market-based measures of privatisation and open access have contributed to the persistence of cross-subsidy regime, while providing large industrial and commercial consumers with alternative sources of more reliable and cheaper electricity supply.
