Optimal timing in the privatisation of a utility in an emerging country: the case of electricity distribution in Delhi

Privatisation of utilities in emerging countries is impeded by informational problems. We analyse privatisation of utilities as a process, focusing on the creation of information that arises both before and after the transfer of property. We take the example of the privatisation of electricity in Delhi (Section 1). We examine the interest in creating as much information as possible before the transfer of property, and propose a model based on a trade-off between the potential benefits of creating information prior to selling of assets, vs. facing the costs of delays associated with the risks of a stateʹs failure in creating this information prior to privatisation. We operationalise the model in the case of Delhi and argue that, in similar conditions, it is reasonable and profitable to invest a few years in information building (Section 2). We test the robustness of this model with what risks to be the most stringent critique: the inefficiency of the state (Section 3). We conclude that this simple model is fit for a clear and transparent decision-making on privatisation and reforms.