Integrating the power sector in India: Reflections and suggestions
Abstract The historical development of the power generation industry in India shows a steady trend towards complete integration: ‘… The aim is to connect all the power-regions by the end of the Seventh Plan. The desirability of having a single organization to own and to operate the essential elements of the national grid needs to be urgently considered …’ ([4], p 335). This paper seeks to verify the actual desirability of integration, through economic as well as technical aspects; and to emphasize the deviations induced by a strengthened concentration and suggest corrective directions to a second-best equilibrium.
Dual v uniform prices — an application
Abstract The economic literature on non-linear pricing schemes mainly considers the case where average price decreases with quantity — indeed this pricing strategy is often referred to, especially by firms displaying non-convex production sets. However, such a price schedule seems inadequate to cope with the ‘endowments’ of most developing countries, viz severe income inequalities and binding capacity constraints. Thus, we design here an increasing-blocks tariff and show, as an illustration, how it can improve the distribution pattern of low-voltage electricity in India without depressing the producer's profit. Shadow income transfers automatically flow within the sector, without requiring the heavy informational and operational background necessary for lump-sum transfers, as advocated by second-best theory.
THE ECONOMETRICS OF NONLINEAR BUDGET SETS
TRADITIONAL EMPIRICAL ANALYSIS of consumer demand has usually made the assumption of linear budget sets. That is, the consumer is assumed to purchase any desired quantity at a constant price subject to a budget constraint. The major exception to this framework is the analysis of demand when some goods are rationed.2 In the rationed case the price is constant up to a quantity limit. In contrast to the rationed case, here I consider the situation where the price varies with the amount of the good purchased. Empirical situations with nonconstant prices come readily to mind, and, of course they have received much recent attention from theorists since Mirrlees [44] paper on optimal nonlinear taxation. The following examples are meant to give a partial listing of cases when nonlinear budget sets occur: (i) Electricity prices-Many electric utilities engage in declining block pricing. That is, the marginal price of successive KWH's of electricity decrease at a given number of points determined by total demand. Thus the budget set is piecewise linear. Houthakker [36] was the first to propose an approach to this problem. Taylor [51] analyzes the problem at length, and Hausman, Kinnucin, and McFadden [31] use an instrumental variables estimator to provide consistent estimates of the demand function.'