Shafali Jain et al.
/ (IJAEST) INTERNATIONAL JOURNAL OF ADVANCED ENGINEERING SCIENCES AND TECHNOLOGIES
A Non-Parametric Approach for Performance
Assessment of Generation Utilities in India
Shafali Jain, Tripta Thakur,
Research scholar, Electrical Associate Professor, Electrical
Department, MANIT-Bhopal, Department, MANIT-Bhopal,
India-462003 India-462003
shafalijain9@yahoo.co.in, tripta_thakur@yahoo.co.in,
Abstract— The technical efficiency of 30 Indian state owned
Generation Utilities were investigated using Data Envelopment
Analysis for the time period 2007-08. The above study provides
ES
the efficiency scores of electric utility so that they can rank
themselves, identify their shortcomings, set targets, and try to
achieve these targets. Input variables are: installed capacity, coal
consumption, oil consumption, auxiliary consumption and energy
losses and outputs are energy generated and Energy sold. In
addition, slack evaluation and target evaluation for input
variable has been carried out. The average overall efficiency is
84.83 % and nearly one third of the utilities lie below this
average level. The above studies provides the scope for the
improvement of internal efficiency of the state owned
Generation Utilities which is always win to win situation for the
A
utilities and consumers and especially relevant to the India as it
needs addition in electricity generation to meet the growing
demand.
Index Terms—Data Envelopment Analysis (DEA), State-
owned Generation Utilities, Efficiency score, Slack analysis.
IJ
I. INTRODUCTION
S
ince the early 1980’s, many countries have implemented
electricity sector reforms. The main objective is to improve
the efficiency of the sector even though the organization of the
power sectors and the approaches to reform vary across the
countries. The electric power industry which had been
maintained as a vertically integrated system in the past, the
restructuring of electric power industry in many countries in
the world has been performed in the way so as to raise
efficiency by introducing competition [3]. The restructuring of
electric power industry in India kept pace with the worldwide
trend and started with the purpose of decreasing the electricity
price and to bridge the demand-supply gap
ISSN: 2230-7818 @ 2010 http://www.ijaest.iserp.org. All rights Reserved.
Vol No. 1, Issue No. 1, 023 - 029
Arun Shandilya,
Professor, Electrical Department,
MANIT-Bhopal
India-462003
arunshandilya@yahoo.com
T
through the introduction of competition and improvement of
efficiency, but did not proceed as it planned. At this stage it is
essential to have documentation of the effects of such reforms.
Such documentation has been done in developed countries,
however from a few case studies: the experience of
developing countries remains much less researched. This
documentation can be made by performance evaluation for the
structural change in electric power industry. We will be able
to find out the direction of the structural change in electric
power industry in India by analyzing the efficiency level of
power generation companies in India. Such a review of
performance of existing utilities is a need for the success of
any reform program. Based on efficiency analysis,
benchmarks can be set, and targets for improvement may be
identified. The efficiency evaluation is also necessary for
generating competition and for sector regulation.
This efficiency evaluation can be through by a number of
approaches. Among many possible efficiency measurement
methods, DEA is one method that has been used especially for
the complicated systems with lots of inputs and outputs for
benchmarking since its introduction by Charnes, Cooper and
Rhodes in 1978 based on previous work by Farrell on
production efficiency. This paper presents a case study which
provides efficiency scores of generation utilities for the year
2007-08, so that they can rank themselves, identify their
shortcomings, set targets and tries to achieve those targets. In
addition, slack evaluation and target evaluation for input
variable has been carried out.
II. METHODOLOGY
DEA has been applied to calculate efficiency of different
types of DMUs including schools, hospitals and power plants
etc. A DMU is an entity, which we measure the efficiency
levels, to be compared with other entities in the population.
DEA calculates an ―effici ent frontier‖ uses mathematical
programming [15]. A benchmark, against which the
comparative performance of all other firms or organizations
that does not lie on the frontier can be judged, is created
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 Shafali Jain et al. / (IJAEST) INTERNATIONAL JOURNAL OF ADVANCED ENGINEERING SCIENCES AND TECHNOLOGIES
through this frontier. The efficient frontier is formed from the
observed performances of the participating firms in the
sample, determined by the relationships between the inputs
and outputs of the firms in the sample. The technique was
suggested by Charnes, Cooper and Rhodes and is built on the
idea of Farrell [16].
There can be a number of input/output variables for
evaluating the efficiency of electric utilities. The most
important job in this efficiency analysis is the right selection
of inputs and outputs. No universally applicable rational
template is available for selection of variables [1]. In the
context of efficiency measurement, the inputs must reflect the
resources used and the outputs chosen must represent the
activity levels of the utilities. . A study of standard literature
reveals significant insights into the choice of variables. The
most widely used variables based on international experience
have been outlined in the literature.
. Input variables chosen for DEA model are: installed capacity
(MW), coal consumption (Million tonnes), oil consumption
(Kilo litres), auxiliary consumption (GWh) ,energy losses
(GWh) and the outputs are units generated (GWh) and energy
sold (GWh) as shown in Table I.
Input
TABLE I
Installed capacity
coal consumption
oil consumption
ES
Output
Units generated
Energy sold
auxiliary consumption
energy losses
A
In this methodology, efficiency can be evaluated either on
an input-oriented or output-oriented basis. For this paper, an
input-oriented or input-minimizing approach was chosen since
the purpose of the analysis was to suggest benchmarks for
efficiency and reduction of inputs chosen in order to produce
a given output. There can be two DEA models: CCR and BCC
model and both of these models are applied in this analysis.
IJ
The CCR model was suggested by Charnes et al. (1978), and
hence is named as CCR model and assumes constant returns
to scale (CRS) assumption. If assuming data on K inputs and
M outputs for each of N firms, then for the i-th firm these are
represented by the column vectors xi and yi respectively. The
K×N input matrix, X, and the M×N output matrix, Y,
represent the data for all N firms. A measure of the ratio of all
outputs over all inputs would be obtained for each firm, such
as uˈyi /vˈxi, where u is an M×1 vector of output weights and v
is a K×1 vector of input weights [15]. The optimal weights are
obtained by solving the mathematical programming problem:
maxu,v (uˈyi /vˈxi),
st uˈyj /vˈxj ≤ 1, j =1,2,….N,
u,v ≥ 0. (1)
It is required to calculate values of u and v, such that the
efficiency measure for the i-th firm is maximized, subject to
ISSN: 2230-7818 @ 2010 http://www.ijaest.iserp.org. All rights Reserved.
Vol No. 1, Issue No. 1, 023 - 029
the constraints that all efficiency measures must be less than
or equal to one. The difficulty in this ratio formulation is that
it has an infinite number of solutions. This can be avoided by
imposing the constraint vˈxi = 1, which provides:
maxµ,v (µˈyi ),
st vˈxi = 1,
µˈyj - vˈxj ≤ 0, j =1,2,….N,
µ,v ≥ 0, (2)
where the notation is changed from u and v to µ and v, to
stress that this is a different linear programming problem.
Equation (2) is known as the multiplier form of the DEA
linear programming problem. By the duality in linear
programming, equivalent envelopment form of this problem
can be derived as:
minθ,λ θ ,
st -yi + Yλ ≥ 0,
θ xi – Xλ ≥ 0,
T
λ ≥ 0, (3)
where θ is a scalar and λ is a N×1 vector of constants. The
efficiency score for the i-th firm will be the value of θ
According to the Farell (1957) definition, it will satisfy: θ ≤ 1,
with a value of 1 indicating a point on the frontier and hence
the firm is technically efficient firm.
If the utilities do not perform at optimal scales, this CCR
model can be modified to take into account variable returns to
scale (VRS) conditions by adding a convexity constraint. BCC
model was suggested by Banker, Charnes and Cooper (1984)
investigates whether the performance of each DMU was
conducted in region of increasing, constant or decreasing
returns to scale in multiple outputs and multiple inputs
situations. The CCR efficiency can be decomposed into the
Pure technical and scale efficiency components by this BCC
model, thus investigating the scale effects. According to this
model an inefficient firm is only ―ben chmarked‖ against firms
of a similar size.
The CRS linear programming problem can be easily
modified to account for VRS by adding the convexity
constraint: N1ˈλ=1 to (3) to provide:
minθ,λ θ ,
st -yi + Yλ ≥ 0,
θ xi – Xλ ≥ 0,
N1ˈλ=1
λ ≥ 0, (4)
where N1 is an N×1 vector of ones. This approach forms a
convex hull of interesting planes which envelope the data
points more tightly than the CRS conical hull and thus
provides technical efficiency scores which are greater than or
equal to those obtained using the CRS model. The VRS
specification has been the most commonly used specification
in the 1990s.
III. DATA COLLECTION AND COMPILATION
DEA was used to derive the benchmarks based on the
comparison of the 30 SOEUs in which 8 entities were the
SEBs, 7 entities comprised various electricity departments
(EDs), and 15 entities comprised the unbundled SOEUs. The
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 Shafali Jain et al. / (IJAEST) INTERNATIONAL JOURNAL OF ADVANCED ENGINEERING SCIENCES AND TECHNOLOGIES
Vol No. 1, Issue No. 1, 023 - 029

physical data for various states were obtained for the different
years from ―G eneral Review‖ published by CEA [11].
Descriptive statistics of the data for year 2007-08 is
presented in Table II in the form of mean, median, standard
deviation, minimum and maximum values. To increase the
validity of the proposed model, the assumption of the
―isotonicity‖ relationship, i.e. an increase in an input must not
correspond with a decrease in an output, was examined
amongst the input and output variables using correlations [1].
TABLE II
DESCRIPTIVE STATISTICS
IV. ANALYSIS OF THE RESULTS
1) Efficiency Scores
CCR model measures the overall efficiency which is the
efficiency measured against the CRS frontier. The results are
presented in Table IV. It is evident from Table VI that Indian
Electric Generation Utilities display significant variations in
efficiency levels. The total efficiency had a mean score of
84.83 % for all the utilities and nearly one- third of utilities lie
below this average value. Eleven utilities turned out to be the
best practices. The remaining 19 utilities exhibited varying
degree of inefficiencies. It is also observed that all the utilities,
with the exception of the best practices and five utilities –
Sikkim, Assam, Manipur, Arunachal Pradesh and Mizoram,
exhibited decreasing returns to scale suggesting that the
utilities exceeded their most productive scale size. This
outcome supports the unbundling policy of the GoI, as

T
envisaged in the Electricity Act. Five Utilities –Sikkim,
Variables Mean Median
Standard
Min Max
Assam, Manipur, Arunachal Pradesh and Mizoram, exhibited
Deviation
increasing returns to scale, which indicates that these utilities
are smaller than the most productive scale size.
Installed
Capacity 3256.29 1754.05 3809.6 30.67 14580.46
The management of the utilities, in general, does not have
Coal
ES control over their scale of operation. Therefore, it is quite
Consumptio appropriate to assess efficiency relative to the VRS frontier.
n 6640.3 926 9444.78 0 39385
Oil So, the technical efficiency of utilities is measured against the
Consumptio VRS frontier.
n 96543.91 8848 239836.16 0 1124510
Auxiliary To explore the scale effects, the BCC formulation
Consumptio that assumes a VRS by taking into consideration the sizes of
n 910.78 195.94 1240.48 0 4704.08
utilities was employed. This formulation ensures that similar
Energy 129.7
Losses 6201.84 4344.56 6661.42 4 28827.76 sized utilities are benchmarked and compared with each other.
The results are presented in Table IV. The number of utilities
Units
Generated 14477.57 5427.61 18407.74 21.08 72770.46 that appear as efficient entities increased to 24, while
169.5 remaining 6 utilities showed inefficiencies. The average
A
Energy Sold 16547.84 10956.17 18604.46 1 67930.96 technical efficiency is 97.9 %. The results indicate the
possibility of restructuring of several utilities that display low
scale efficiencies (Table IV). The low value of scale
The results indicate that the variables do not violate the efficiencies and the fact that these utilities exhibit decreasing
isotonicity assumption. The values of correlation coefficients returns to scale indicate that these have considerable scope for
(Table III) indicate that the variables are reasonably improvements in their efficiencies by resizing (downsizing)
correlated: neither too less of correlation nor too high a their scales of operations to the optimal scale defined by more
IJ

correlation. productive utilities in the sample.

TABLE III

INPUT/OUTPUT CORRELATIONS

Total
Coal Oil Auxiliary Units
Variables Installed Capacity Energy Losses Energy
consumption consumption Consumption Generated
Sold

Installed Capacity 1

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 Shafali Jain et al. / (IJAEST) INTERNATIONAL JOURNAL OF ADVANCED ENGINEERING SCIENCES AND TECHNOLOGIES
Vol No. 1, Issue No. 1, 023 - 029

Coal Consumption 0.939243 1

Oil Consumption 0.800981 0.790358 1

Auxiliary Consumption 0.946876 0.99216 0.753904 1

Energy Losses 0.898126 0.940558 0.746714 0.929716 1

Units Generated 0.988273 0.956928 0.813343 0.965917 0.92134 1

Energy Sold 0.977838 0.935366 0.765371 0.94689 0.92744 0.974358 1

TABLE IV

RESULTS OF CCR AND BCC MODEL

S.No. Utility Total efficiency Technical efficiency Scale efficiency Returns to scale Benchmarks

T
1 Haryana 0.682 0.826 0.825 DRS 9 4 5 18 8
2 Himachal Pradesh 1 1 1 - 2
3 Jammu & Kashmir 1 1 1 - 3
4 Punjab 0.969 1 0.969 DRS 4
5 Rajasthan 0.846 1 0.846 DRS 5
6 Uttar Pradesh 0.644 1 0.644 DRS 6
7
8
9
10
11
12
13
Uttrakhand
Delhi
Gujarat
Madhya Pradesh
Chhattisgarh
Maharashtra
Goa
1
0.837
1
0.668
0.774
0.855
1
ES 1
1
1
0.818
0.805
1
1
1
0.837
1
0.817
0.961
0.855
1
-
DRS
-
DRS
DRS
DRS
-
7
8
9
8 16 9 4 21
4 9 15 26
12
13
14 Andhra Pradesh 0.88 1 0.88 DRS 14
15 Karnataka 0.909 1 0.909 DRS 15
16 Kerala 1 1 1 - 16
17 Tamil Nadu 0.835 1 0.835 DRS 17
A
18 Puducherry 1 1 1 - 18
19 Bihar 1 1 1 - 19
20 Jharkhand 0.508 0.941 0.54 DRS 16 18 2 8 4
21 Orissa 0.862 1 0.862 DRS 21
22 West Bengal 0.885 1 0.885 DRS 22
23 Sikkim 0.787 1 0.787 IRS 23
24 Assam 0.884 1 0.884 IRS 18 2
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25 Manipur 0.485 0.994 0.488 IRS 13 27 18

26 Meghalaya 1 1 1 - 26
27 Nagaland 1 1 1 - 27
28 Tripura 1 1 1 - 28
29 Arunachal Pradesh 0.751 0.985 0.763 IRS 2 13 27
30 Mizoram 0.388 1 0.388 IRS 30

inefficient units can be carried out. For this purpose BCC

2) Slack Analysis
The piece-wise linear form of the nonparametric frontier in
DEA can cause a few difficulties in efficiency measurement.
The problem arises because of the sections of the piece-wise
linear frontier that run parallel to the axes that do not occur in
most parametric functions [15]. In such cases, even the
efficient point is on frontier, one can reduce the amount of the
input used and still produce the same output. After the slack
evaluation, directions for improvement of the relatively
model has been used.
The slack analysis results are shown in Table V in which
only input slacks are shown, as input-oriented approach is
used in this paper only input slacks are mentioned, as the
model used in this paper is input-oriented. It is evident that
slacks for efficient utilities with an efficiency score of 100 %
are obviously zero. Even inefficient utilities, the slack

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 Shafali Jain et al. / (IJAEST) INTERNATIONAL JOURNAL OF ADVANCED ENGINEERING SCIENCES AND TECHNOLOGIES
Vol No. 1, Issue No. 1, 023 - 029

values might not be present. There are 3 DMUs having slack 3) Evaluation of target values
in the installed capacity, 4 having slack in coal consumption, 1 For each inefficient utility target value for input variable
in oil consumption, 3 in auxiliary consumption and 4 DMUs is calculated so as to make them efficient and shown in the
have input slack in energy losses. The results shown in the
Table IV shows that some of the utilities are technically
inefficient, which indicates excess resources are used by them
than required to produce the given level of output. Slack TABLE V
evaluation for the input variables is carried out to determine
the amount of inefficiencies.
SLACK ANALYSIS

Slack 4
Slack 1 (Installed Slack 2 (Coal Slack 3 (Oil (auxiliary Slack 5 (energy
S.No. Utility capacity) consumption) consumption) consumption) losses)
1 Haryana 0 247.534 0 0 0
2 Himachal Pradesh 0 0 0 0 0
3 Jammu & Kashmir 0 0 0 0 0

T
4 Punjab 0 0 0 0 0
5 Rajasthan 0 0 0 0 0
6 Uttar Pradesh 0 0 0 0 0
7 Uttrakhand 0 0 0 0 0
8 Delhi 0 0 0 0 0
9 Gujarat 0 0 0 0 0
10
11
12
13
14
15
16
Madhya Pradesh
Chhattisgarh
Maharashtra
Goa
Andhra Pradesh
Karnataka
Kerala
ES 0
0
0
0
0
0
0
2391.401
2001.218
0
0
0
0
0
0
0
0
0
0
0
0
0
82.782
0
0
0
0
0
2899.024
0
0
0
0
0
0
17 Tamil Nadu 0 0 0 0 0
18 Puducherry 0 0 0 0 0
19 Bihar 0 0 0 0 0
20 Jharkhand 0 772.065 0 0 0
A
21 Orissa 0 0 0 0 0
22 West Bengal 0 0 0 0 0
23 Sikkim 0 0 0 0 0
24 Assam 55.919 0 0 63.548 1110.468
25 Manipur 19.54 0 0 0.332 114.264
26 Meghalaya 0 0 0 0 0
27 Nagaland 0 0 0 0 0
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28 Tripura 0 0 0 0 0
29 Arunachal Pradesh 14.242 0 756.182 0 93.399
30 Mizoram 0 0 0 0 0

Table VI. The target values for installed capacity, coal

consumption, oil consumption, auxiliary consumption, energy
losses for Haryana, Madhya Pradesh, Chhattisgarh,
Jharkhand, Manipur, and Arunachal Pradesh are lower than
their respective original or actual values. Let us take the case
of Haryana; the input installed capacity and coal consumption
should be reduced by 17 % and 20 % respectively for making
it technically efficient. The mean technical efficiency of all the
utilities is 97.9 % which means utilities could reduce their
inputs by 2.1 % without reducing their outputs.
4) Summary of Peers
For each inefficient utility, DEA identifies a set of efficient
utilities that form a peer group for that inefficient utility.
There are 26 utilities which have efficiency score of one and
are technically efficient. The optimal input-output mix is
given by the efficient utility that forms a peer for inefficient
utility [2]. For example Gujarat, Punjab, Rajasthan,
Puducherry and Delhi form the peer group for Haryana. For
utilities having efficiency score of one, their peers are they
themselves.

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 Shafali Jain et al. / (IJAEST) INTERNATIONAL JOURNAL OF ADVANCED ENGINEERING SCIENCES AND TECHNOLOGIES
Vol No. 1, Issue No. 1, 023 - 029

TABLE VI

INPUT TARGET EVALUATION

Original values Target values

Installed Coal Oil Auxiliary Energy Installed Coal Oil Auxiliary Energy
Capacity consumptio consumptio Consumptio losses Capacit consumptio consumptio Consumptio losses
S.No. Utility (MW) n (000'MT) n (KL) n (GWh) (GWh) y (MW) n (000'MT) n (KL) n (GWh) (GWh)
1 Haryana 3159 7819 38534 1168.1 8924.6 2610.7 6213.7 31842 965.3 7374.8
Himachal

T
2 Pradesh 926 0 0 6.7 1026.6 926.3 0 0 6.7 1026.6
Jammu &
3 Kashmir 625 0 1718 5.1 5070.3 625.7 0 1718 5.1 5070.3
4 Punjab 4861 10994 16303 1623.8 8834.2 4861.3 10994 16303 1623.8 8834.2
5 Rajasthan 4519 12339 22997 1983.2 12575.6 4519.6 12339 22997 1983.2 12575.
6 Uttar Pradesh 5077 16985 63082 2244 15036.4 5077.4 16985 63082 2244 15036.4
7 Uttrakhand 1734 0 0 17.82 2624.5 1734.8 0 0 17.8 2624.5
8
9
10
11
12
13
14
Delhi
Gujarat
Madhya Pradesh
Chhattisgarh
Maharashtra
Goa
Andhra Pradesh
932
8351
4483
2814
14580
78
9452
1718
22274
11999
7994
39385
0
17587
ES 11901
479022
32274
24136
1124510
64247
35782
315.8
3166.6
1348.3
926.5
4704
7.19
2491.1
6556.3
15650.8
13066
4503
28827.7
684.8
14110.8
932.4
8351.3
3668.4
2265.8
14580.4
78.05
9452
1718
22274
7425.2
4434.6
39385
0
17587
11901
479022
26403
19431
1124510
64247
35782
315.8
3166.6
1103
663.1
4704
7.1
2491.1
6556.3
15650.8
7790.5
3625.3
28827.7
684.8
14110.8
15 Karnataka 7625 7875 201647 1347.3 7960.9 7625.9 7875 201647 1347.3 7960.9
16 Kerala 2287 0 112394 64.1 2554.2 2287 0 112394 64.1 2554.2
17 Tamil Nadu 10606 17476 621024 2401.4 12187.4 10606.2 17476 621024 2401.4 12187.4
18 Puducherry 32 0 0 16.3 129.7 32.52 0 0 16.3 129.7
19 Bihar 590 134 4 3.7 4186 590.4 134 4 3.7 4186
A
20 Jharkhand 1754 3796 5795 453.4 3432.4 1650.3 2799.5 5452 426.6 3229.6
21 Orissa 2498 2650 1889 330.7 7358.9 2498.4 2650 1889 330.7 7358.9
22 West Bengal 6590 18184 36268 2610.3 7100.7 6590 18184 36268 2610.3 7100.7
23 Sikkim 44 0 22 0.01 151.5 44.11 0 22 0 151.5
24 Assam 446 0 0 76 1599.2 390.3 0 0 12.5 488.8
25 Manipur 50 0 384 0 344.2 31 0 381 0.6 227.9
26 Meghalaya 189 0 0 2.1 538.7 189 8 0 0 2.14
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27 Nagaland 30 0 0 0.02 228.8 30.6 0 0 0.02 228.8

28 Tripura 148 0 0 8.7 297.8 148.3 0 0 8.7 297.8
Arunachal
29 Pradesh 61 0 1745 0.2 347.3 45.9 0 962 0.2 248.7
30 Mizoram 69 0 639 0 144.6 69.3 0 639 0 144.6

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 Shafali Jain et al. / (IJAEST) INTERNATIONAL JOURNAL OF ADVANCED ENGINEERING SCIENCES AND TECHNOLOGIES
Vol No. 1, Issue No. 1, 023 - 029

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T
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ES
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