Disinvestment and Technical Efficiency of State-Owned Utility Sector Enterprises in India

The Indian utility sector is currently experiencing a phase of disinvestment, driven by various factors like advancements in technology, the ever-changing landscape of global energy markets, shifts in governmental policies, and evolving consumer preferences. In light of these circumstances, it becomes crucial to assess the utility sector’s condition and its existing efficiency level. The present study primarily examines the repercussions of disinvestment on the technical efficiency of the state-owned utility sector enterprises in India during the period spanning from 2003 to 2023. To gauge the technical efficiency, the study employs the stochastic frontier analysis (SFA). The study also investigates how factors such as the size of the firm, its age, and the disinvestment process influence inefficiencies. The findings of the study indicate that among the considered factors, the size of the firm holds the most substantial sway on inefficiency levels, while the age of the firm and the occurrence of disinvestment do not exhibit a significant impact. On average, the utility sector enterprises within the sample demonstrated a technical efficiency of around forty-five percent. This statistic underscores the need for more comprehensive and profound structural reforms to enhance economic outcomes in the sector.