  We measure firm-level productivity changes in the Indian electricity sector
during a period that witnessed several pro-market regulatory changes. Using
information collected from multiple sources we construct a unique panel of
generating firms and transmission and distribution utilities spanning the years
2000 to 2009. We employ a recently developed improvement in the Stochastic
Frontier panel method that allows controlling for time-invariant unobserved
heterogeneity. Using the method we jointly estimate inefficiency and exogenous
determinants of inefficiency. We estimate a flexible translog production model
and compute decomposition of productivity into components of changes in
technology, efficiency, scale and price effect. During this period, especially
post Electricity Act 2003, we observed a general decline in firm-level
productivity at the mean rate of -1.6% per year. A positive and large technical
change is observed in the sector at the rate of 8% per year, attributable
possibly to newer capacity addition. Except for smaller gas based generators,
inefficiency is observed to be increasing at the mean rate of 3.1% per year in
the sector. Consistent with extant findings we also document no significant
impact of un-bundling on firm-level efficiency.
