Across many developing countries, the power sector persistently underperforms despite years of market reform efforts. India, where de facto responsibility for the power sector rests with subnational (state) governments, provides a useful laboratory to examine why. The state of West Bengal provides an example of public sector reform as an alternative to the so-called “World Bank template” for electricity liberalization, and a lens on the political preconditions for reform success. Drawing on 30 elite interviews in 2016 alongside comparative evidence from other Indian states, this article documents the reform design and assesses its success. West Bengal’s reforms aimed at internally strengthening the utility against political interference. The study finds that this reform model delivered initial performance among the best of any Indian utility, and that successful reforms in several other states were also more statist than often recognized. However, longer-term sustainability remains challenging. While weak rural lobbies had some effect, the study explains this trajectory as the result of the transition from one-party dominance to intensified party-political competition, a finding that resonates with evidence from other Indian states. In contrast to influential political theories developed in the Global North, this suggests that party-political competition does not make Indian politicians more likely to deliver public services, but rather leads to short-termism and political capture of utilities. Conversely, under some conditions one-party dominance can encourage longer-term reforms. The study thus assesses the promise and limits of public sector reforms as an alternative to liberalization, and suggests how electoral competition can influence development priorities in Indian states.
This article was published in the April 2018 edition of World Development.