Regulatory strategy and restructuring - Model for Gujarat power sector

True reform and restructuring of any state electricity board in India would have to address the enormous leakage of revenue from the system. This woul d call for privatisation of distribution, and change in the institutional m echanism for the administration of the subsidy. Rather than the detailed re gulatory mechanisms which are being pushed by the central government and th e regulators, light and price-cap type regulation would suit India better A model plan for change is put forward for the Gujarat State Electricity Boa rd, which is quite general and could easily apply to other SEBs. A complete separation of distribution from generation is neither necessary nor desira ble. Existing IPP contracts would have to be extinguished and methods to ca rry out the same are suggested. The danger of mounting regulatory risk, eit her shutting out private power production, or resulting in massive tariff i ncreases taking place are real.