The political economy of public utilities : a study of the Indian power sector

Abstract

In this paper, we attempt at an analysis of the political economy of
\nthe Indian power sector with special reference to Kerala in the light of a
\ngeneric model of the political economy of public utilities we develop in
\nthe first part of the paper. The model seeks to explain the political
\neconomy of the rent seeking drives in a non-Smithian imperfect regime
\nof self-interest maximisation, with a regulatory structure of the public
\nutility described in a framework of the principal-agent relationship. In
\ncontrast to the usual neo-classical monolithic representation of principal
\nand agent, we characterise each entity in a Marxian-Kaleckian vein, as a
\ncomposite set of conflicting sectional interests. This helps us develop a
\ncomprehensive perspective of the politico-economic implications of the
\nrelationship among the public, government and utility.
\nBased on this generic model, we seek to analyse, in the second
\npart of the paper, the political economy of the power sector in India,
\nwith emphasis on Kerala. We also attempt, wherever possible, to estimate
\nthe costs of corruption involved in the administration of the power sector.
\nJEL Classification: E11, H10, H4, L94, N4, P16
\nKey Words: India, political economy, rent seeking, principal-agent,
\npublic utility, power sector