An Empirical Analysis of Impacting Factors of Profitability with reference to Selected Indian Power Sector Companies

Hamsa Lakshmi Anandan

Abstract


Electricity is considered to be the most convenient and versatile form of energy. It is classified as a secondary source of energy because anyone of the primary sources like coal, gas, petroleum, hydro-power, wind and solar energies may be used to produce electricity. Due to its more adaptable nature, it is a preferred source of energy at the consumer ends. However, energy being a scarce and valuable resource, great emphasis is laid on its optimal use. Per capita consumption of electricity is also considered as an indicator of economic prosperity. Therefore, to study the Economics of Electricity Supply is an important. Power sector reforms in India were initiated in early 1990s. Initially, the reforms were taken at the electricity generation level. After the initiation of liberalization process as a part of the New Economic Policy of 1991, private as well as foreign direct investment was allowed in the power generation business. Moreover, various types of policy and structural changes such as establishment of independent regulatory authorities have been undertaken as a part of power sector reforms in the country. Some of the major recommendations were the metered supply can ensure proper and efficient use of electricity, the entire system to be more transparent and accountability of the authorities to plug the technical and financial losses, proper cost benefit analysis, tender based contracts and regulations.  From this background the present study examines the major contributing financial variables towards overall profitability of the power generating and distribution companies in India.  To carry out the study a sample of top ten listed companies in BSE were taken up and major contributing finance variables were collected from the CMIE Prowess database and factor analysis was used to examine their contribution.  It is observed that the selected variables totally contribute about 80.20% towards profitability to the selected companies.


Keywords


Power Generation and Distribution Companies, State Electricity Board, Power Sector Reforms, Foreign Direct Investment, Power sector Diversification

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References


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