Background of the Agricultural Power Supply Situation in India and Andhra Pradesh

Since independence in 1947, the power sector in India has been virtually controlled by the Government of India, which created State Electricity Boards that were responsible for the complete supply chain of power, including generation, transmission, and distribution. The reasons for this centralisation, based on socialist ideology, included no-monopoly instincts (profits were reinvested, fair-labour policy, no mark-up prices), economics of scale, control over price structure and the interconnection of State Electricity Boards to enhance system reliability (Tongia 2007). However, the State Electricity Boards turned out to be unprofitable and inefficient and, thus, required high subsidies from the Government of India and state governments to survive. The major reform process started in 1991 with a new government and an upcoming fiscal crisis. By then, the state deficit had reached 11 % of national GDP and, in order to maintain a growth rate of 8 %, high infrastructural investments were required, especially in the power sector.1 It had become clear that there was hardly any scope for the Government of India to invest sufficient amounts by itself. Therefore, with help from the World Bank, it started to open the power sector to private and foreign investment. This, however,