A 2024 study on India’s electricity distribution system challenges the claim that private electricity distribution is inherently more efficient than public management. The Centre for Energy, Environment, and People (CEEP), a Jaipur-based human-centric research and policy advocacy initiative, examined 23 private distribution franchisees across the country and found that 15—more than 65 percent—had ceased operations because actual outcomes fell far short of government expectations.
The failures were striking. AES Corporation took over Central Odisha’s distribution utility (CESCO) in 1999 but abandoned it within two years after defaulting on employee salaries, failing to pay for purchased power, and neglecting its investment commitments. Reliance Infrastructure, which managed three Odisha distribution companies (discoms) from 1999 to 2015, also failed to operate them sustainably. When the state regulator revoked its licences in 2015, the company left behind unpaid dues of nearly 4,234 crore Indian rupees to the state-owned trading utility, GRIDCO.
On the other hand, there are many cases where the performance of public discoms in India is better than or similar to that of private discoms, despite most serving both rural and urban territories, unlike private discoms, which serve primarily in urban areas. According to the Indian Ministry of Power’s 14th Annual Integrated Rating and Ranking Report, of the 31 electricity distribution utilities that received the highest A+ and A ratings, 22 are publicly owned—including state-owned discoms and government power departments—while only nine are privately owned.
Not surprisingly, India’s electricity distribution sector remains overwhelmingly state-owned. Measured by both the volume of electricity distributed and the revenue generated, the private sector accounts for only about 7 percent of the market, and even that limited experience has been questioned by Indian researchers themselves.
Yet, Bangladesh’s Power, Energy and Mineral Resources Minister Iqbal Hasan Mahmud has recently cited India as a model to justify the privatisation of the country’s electricity distribution sector. While addressing a recent policy conclave, the minister said, “I want to privatise all our distribution companies.” He invited local entrepreneurs to submit proposals, saying that private operators would improve accountability, strengthen bill collection, and reduce the government’s financial burden. He further said electricity distribution in cities like Kolkata, Mumbai and Delhi was successfully managed by private companies, adding that Bangladeshi firms should also be capable of performing the same role.
Privatisation of electricity distribution usually promises to boost efficiency, eliminate power losses, and fund grid upgrades using private capital instead of taxpayer money, ultimately aiming to lower tariffs through commercial discipline. In reality, the actual outcomes often result in high consumer tariffs, slow rural electrification, and substantial public financial liabilities.
Private operators prioritise profitability and quick returns on investment, leading them to focus on lucrative industrial and urban areas while neglecting low-income and rural communities where grid expansion is not commercially viable. To secure their investments, these corporations frequently negotiate guaranteed rates of return, forcing governments to pay massive subsidies or absorb volatile currency fluctuation costs, which drives electricity prices to unaffordable levels. Furthermore, when contracts terminate or fail, governments are often left with poorly maintained distribution networks and the burden of paying hundreds of millions of dollars in termination compensation, effectively shifting private investment risks back onto the taxpayers.
A stark example is Uganda’s electricity distribution concession with Umeme Limited since 2005, ending in March 2025 as the government refused to renew it. With a 20 percent guaranteed rate of return, instead of delivering affordable energy, the deal left Ugandan consumers facing some of the highest power tariffs in East Africa. Rural access lagged behind because rural electrification was not part of the conditions of the concession agreement in the interest of keeping the newly unbundled utility commercially viable. When the contract expired, the government resumed control of the grid through Uganda Electricity Distribution Company Limited (UEDCL) and became embroiled in a costly buyout dispute, paying $118 million while Umeme sought an additional $292 million through international arbitration, bringing its total claim to $410 million.
Electricity distribution privatisation in the Philippines under the 2001 Electric Power Industry Reform Act (EPIRA) has left consumers paying some of Southeast Asia’s highest electricity tariffs, largely because private distributors such as Meralco pass volatile fuel costs and system losses directly onto consumers. Rather than fostering competition, privatisation created localised monopolies that prioritise investor returns over affordable public service. The profit-driven model has also neglected rural and remote areas, leaving many communities with chronic blackouts and unreliable infrastructure due to inadequate investment in less profitable grids.
In 2013, Nigeria unbundled and privatised its electricity distribution network into 11 regional distribution companies. The goal was to inject private capital, improve metering, reduce losses, and enhance supply reliability. In reality, the private companies lacked the technical capacity and financial capital to fulfil their promises. Instead of investing, they relied heavily on bank loan and the Nigerian government to step in with massive taxpayer-funded bailouts to keep the grid from collapsing. Despite receiving trillions of naira in public subsidies, power outages remained severe, electricity tariffs skyrocketed for consumers, and the bank and the state ultimately had to forcibly restructure and take control of the distribution companies with multiple failures.
Bangladesh’s own experience with privatisation of state-owned enterprises offers little reason for optimism. Many formerly state-owned industrial enterprises that were privatised eventually shut down, while their machinery, assets, and even land were stripped or appropriated. The expansion of private ownership in the banking sector has likewise failed to curb corruption or financial misconduct. Instead, owners of private banks themselves have been implicated in syphoning off depositors’ money through fraudulent lending. The country’s transport sector is also overwhelmingly privately operated, yet this has not delivered safe, reliable or high-quality services to the public.
The experience in the power and energy sector has been equally disappointing. Bangladesh’s liquefied petroleum gas (LPG) market is almost entirely privately owned, with numerous firms competing. However, the government has consistently failed to ensure that LPG is sold at regulated prices. Private participation in electricity generation has driven up costs by guaranteeing investor profits through costly capacity payments.
There is little reason to expect that privatising electricity distribution will produce different results. If anything, distribution is far more difficult to privatise successfully than generation. Electricity distribution combines three critical functions: commercial management, including billing, revenue collection and theft control; service quality, including outages, voltage stability and new connections; and affordability through tariff and subsidy design.
Unlike electricity generation, where competition among producers can—theoretically, at least—improve efficiency, electricity distribution is a territorial monopoly, making meaningful competition virtually impossible. Privatisation therefore does not create the market discipline needed to protect consumers or improve performance. Instead, it demands strong, independent regulation to prevent monopoly abuse and ensure service quality.
For these reasons, as in many countries with weak regulatory oversight and accountability, privatising electricity distribution in Bangladesh is unlikely to serve the public interest. Instead, it would prioritise the profits of domestic and foreign investors. Electricity tariffs could rise further, while rural and low-income communities would see less investment and poorer service. To maximise returns, private operators may defer maintenance and network upgrades, leading to deteriorating infrastructure, more billing disputes, additional service charges, higher connection and reconnection fees, more frequent disconnections, and workforce reductions.
These risks are higher because electricity distribution is a natural monopoly. Consumers cannot switch providers if service deteriorates or charges become excessive, giving private operators considerable scope to maximise profits through higher fees, restrictive conditions, and cost-cutting, with little practical recourse for consumers.
The inefficiency and corruption that plague Bangladesh’s electricity distribution system cannot be solved simply by changing ownership. Experiences of several countries show that privatisation does not eliminate poor performance where governance, regulation, and accountability remain weak. Conversely, well-managed public utilities operating under transparent governance, effective regulation, and strong accountability mechanisms can provide efficient, affordable, and reliable services. So, rather than pursuing further privatisation, the government should focus on strengthening the governance of the power sector. Improving institutional capacity, regulatory independence, transparency, and accountability in both electricity generation and distribution would do far more to protect consumers and improve service delivery than simply replacing public ownership with private ownership.
Kallol Mustafa is an engineer and writer who focuses on power, energy, environment, and development economics. He can be reached at [email protected]
Views expressed in this article are the author's own.
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