From Dabhol to Ratnagiri: The Electricity Act of 2003 and Reform of India’s Power Sector


India’s economic reforms and growth over the past two decades have catapulted it into the international spotlight, where its successes have been as loudly celebrated as its failures condemned. The earliest of those reforms opened up India’s power sector to foreign investment. The initial enthusiasm for such investment was quickly dissipated by Enron’s Dabhol power project in India, a poster child of sorts for disastrous foreign investments generally and a black mark on the Indian power sector. It was not until the Electricity Act of 2003 that the central government stepped in to overhaul the power sector in India, with some passages focused on foreign investors and others addressing structural and substantive problems miring the sector since before independence. This Note examines the Electricity Act of 2003 in light of these reforms, using the Dabhol power project as the backdrop for discussion. It studies the legislative history shaping the power sector until the Dabhol project, the ways in which the sector’s inefficiencies contributed to Dabhol’s demise and the criticisms leveled as a result of Dabhol. It then analyzes the Electricity Act of 2003 in terms of its attempt to address those criticisms, specifically focusing on its implications for international project finance and electricity sector privatization. It suggests that ultimately, the Electricity Act of 2003 should benefit foreign investors and serve as an example for other developing countries seeking to reform their power sectors.