Search interesting materials

Friday, March 29, 2024


IIHS Urban Fellows Programme

The Indian Institute for Human Settlements (IIHS) invites applications for the ninth batch of the Urban Fellows Programme (UFP). The UFP is a nine-month, full-time, residential, interdisciplinary programme based at the IIHS Bengaluru City Campus.

The UFP is a unique space that combines classroom teaching, site-based applied learning, live projects and external internships to introduce learners to diverse forms of urban practice. Its interdisciplinary framework encourages learners from different disciplines, and practices diversity across multiple facets. Alumni of the UFP work in a wide range of sectors and organisations, driving urban transformation across India.

The UFP will run from August 2024 to May 2025 and recent graduates and young professionals from varied educational backgrounds or practice domains are eligible to apply. The UFP is committed to providing scholarships to all deserving candidates through a needs-blind process.

This video gives an overview of the UFP and this video explains how the UFP is unique.

Admissions close on 15 April 2024. For queries, you can write to or contact +91 99012 55788, 96064 84336 (10:00 am to 6:00 pm India Time, seven days a week).

For more information, please visit the UFP website.

Thursday, March 21, 2024

Rethinking innovation policy in India: amplifying spillovers through contracting-out

by R. A. Mashelkar, Ajay Shah, Susan Thomas.

Independent India valued science and rationalism at an early stage of social and economic development. The objectives of building the scientific temper and harnessing the power of science and technology were clearly articulated, for example, in the 1958 Science Policy Resolution. These objectives pertain to improvements in the people, in the society. 

The practical aspects of government expenditures on innovation, and the construction of organisations doing frontiers work, emphasised government organisations. The government used taxpayer resources, built science organisations, hired scientists as civil servants, and developed capabilities within these organisations

In a new paper, Rethinking innovation policy in India: amplifying spillovers through contracting-out, we reopen the objectives of innovation policy in India, applying modern knowledge of public economics and public administration to obtain fresh insights.

We start at the foundations of innovation policy, with new clarity on the questions of why (what motivates state intervention in innovation?), what (in what areas should government intervention into innovation take place in India?), how (what mechanisms should be used when spending public money?) and how much (at what point do the incremental gains to society equal the incremental costs).

The market failure that motivates this field is the problem of spillovers, where the full gains from innovative activity by one person are not captured by her, leading to systematic under-investment into innovation by her. There is a case for public expenditure, where taxpayer resources are spent on innovation, but the expenditure needs to be done in a way that induces spillovers into the society.

We undertake four detailed case studies: the US National Aeronautics and Space Administration (NASA), the US National Institutes of Health (NIH), innovation policy in French defence procurement and CSIR's New Millennium Indian Technology Leadership Initiative (NMITLI). In each case, we understand how tradeoffs are made between `make' and `buy'. Make involves building state organisations, scientists as civil servants. Buy involves contracting-out innovative activities into the society, to private firms and particularly to high-spillover sites of universities and research organisations (whether public or private).

While doing more contracting-out is appealing from the first principles of innovation policy -- the purpose is to obtain greater capabilities in the society, not in the state -- there are many difficulties in implementation. We suggest the strategy for implementation which involves (a) Changes to the GFR; (b) Changes to the founding documents of government innovation organisations; (c) Changes to procurement rules and internal process manuals; (d) Resource planning for a gentle reform trajectory; and (e) a sketch of the required project planning.

Many elements of innovation policy in India have been moving in a similar direction. Three recent initiatives should be pointed out. The Union Interim Budget of 2024-25 envisages a Rs.1 trillion fund that would be channeled to research and innovation in the private sector. The `National Research Foundation' has been setup with a law that came to force on 5 February 2024. The K. Vijay Raghavan Committee report, submitted in early January 2024, has important ideas on improving the working of DRDO. There is a harmony between the philosophy of these three moves, and the ideas of this paper. Conversely, the detailed work of this paper can be useful in translating these initiatives from concept to implementation.

R. A. Mashelkar, FRS, was Director General of CSIR. Ajay Shah and Susan Thomas are co-founders of XKDR Forum.

Monday, February 26, 2024

The electricity chokepoint in Tamil Nadu public finance

Charmi Mehta, Radhika Pandey, Renuka Sane and Ajay Shah

Each state in India can be visualised as an entity in itself. Vast magnitudes of finance will be needed to put the states on an energy transition pathway. While this pathway will be different for every state, the electricity sector is likely to be the recipient of much of these funds. The investibility of the electricity sector is thus an important field of study.

Many states in India face fiscal distress and many states in India have difficulties in the electricity system. In a new paper, 'The electricity chokepoint in Tamil Nadu public finance', we bring the two streams of knowledge together for the state of Tamil Nadu, and offer fresh insights for fiscal policy and for electricity policy.

The formal toolkit of a `debt sustainability analysis' (DSA) is brought to the standard Tamil Nadu fiscal data. This involves a first stage of comparing a group of fiscal indicators against normative benchmarks, and a second stage of forecasting the debt/GSDP ratio and the interest payments to revenue receipts ratio (IP/RR ratio) for five years; till FY 2028. These results, which we term the `baseline DSA' translate the mainstream intuition towards Tamil Nadu's fiscal difficulties into tangible numbers and forecasts.

A consolidated financial picture is drawn by integrating the two electricity sector utilities -- TANGEDCO and TANTRANSCO -- fused into the Government of Tamil Nadu debt stock. This yields a modified DSA that we term a `Corrected DSA'. This is done to acknowledge the implicit guarantee that state governments hold towards the debt of state-owned entities. This modified picture is thus a truer depiction of the fiscal problems of the state.

The fact that large debt servicing expenditures were successfully achieved for the last decade has helped create a confidence that the fiscal strategy of Tamil Nadu is deplorable but feasible. Of essence in the fiscal outlook of every highly indebted entity is the problem of sustainability. There are three concerns:

  1. Sustained large scale borrowing, from the financial system, may potentially face difficulties through the risk appetite of lenders, changes in regulations, systemic crises in the financial system, etc.
  2. The most important assumptions that shape the results of this paper are the nominal interest rate ($r$), estimated at 7%, and nominal GSDP growth rate ($g$), estimated at 9%. This has a $r-g$ of -2: it is a very positive environment from the viewpoint of fundamental fiscal dynamics. In the future, if $r-g$ becomes less benign, the debt dynamics could change significantly.
  3. The conventional notion of fiscal stress is phrased in terms of bond default. In India, fiscal distress is known to manifest itself as unplanned budget cuts (that disrupt the working of the government), defaults on payments to private firms, and even the deferrals salaries or pensions. We look back upon three instances when state governments faced high fiscal stress in 2001, and find that the present projections for Tamil Nadu for FY 2028 are partially similar to these values.

The fiscal knowledge of this paper has implications for electricity policy. The electricity system requires two large blocks of investment. A big block of capital is required to rebuild the grid for the post-carbon world. And, a big block of capital is required for the investment in renewables and storage that are required to sustain economic growth in the post-carbon world. Of particular importance is the economic upside from exploiting that remarkable natural resource which is found off the coast of Tamil Nadu in the form of offshore wind generation. These investments will not arise in the environment of chronic fiscal stress in the electricity system.

The electricity knowledge of this paper has implications for fiscal policy. Through simulations where electricity subsidies remain constant or they are completely eliminated, we find that the electricity system is material in solving the fiscal problem. Thus, we extract the electricity subsidy problem from the sector, and place upfront its impact on the public finance parameters and the development trajectory of the state. A complete electricity sector reform versus business-as-usual translates into an FY 2028 outcome for the debt/GSDP ratio of 32.47% vs. 43.53%, and an IP/RR ratio outcome of 19.71% vs. 26.12%. These are large differences. They encourage us to prioritise electricity sector reform as a part of the medium-term fiscal strategy.

Charmi Mehta and Ajay Shah are researchers at XKDR Forum. Radhika Pandey is a researcher at NIPFP. Renuka Sane is a researcher at Trustbridge.

Saturday, February 24, 2024

The consequences of criminalising cheque bouncing

by Shubho Roy and Ajay Shah

Many countries (e.g. New Zealand, Poland, Germany, Norway) have discontinued paper cheques. In other countries (e.g. the U.K., the U.S.), the use of cheques is declining. But in India, the use of paper cheques in India has stabilised in terms of value and number over the last five years. This is despite the extent to which digital and instantaneous payments are now feasible. Why might this be the case?

Prior to 1988, cheques were primarily used as a tool of payment. In that age, there were delays in clearing. Paper cheques had to be transported to the bank branch where the cheque issuer had an account. In that branch, the issuer's signature would be verified against a sample. If the signatures matched, the balance would be cleared (assuming the issuer had adequate funds). This process took seven working days, even when the issuer and recipient had banks in the same city. If the parties were in different cities, the process would take 15 working days, on average.

Today, a cheque issuer can send a secure document showing that the issuer's bank account has adequate funds to honour the cheque. However, in 1988, there was no such system, and the cheque recipient faced the risk that the issuer was writing a cheque that her account could not honour.

Some technical mistakes can always happen, where a person fails to anticipate the date on which funds are required and there are unpredictable delays in the money moving in and out of the account. Alongside this, many unscrupulous people knowingly wrote bad cheques. This made sellers mistrust cheques and prefer cash. While cash as a payment mechanism has the virtues of instantaneity and privacy, it comes with difficulties on physical security.

The 1988 change of the law

In this setting, the Parliament criminalised the bouncing of cheques in 1988. Now, the cheque writer could be sent to jail if the cheque did not clear. The law also stated that every cheque is presumed to be written to clear a debt. This change helped the recipient of cheques because the recipients did not have to prove any underlying transaction. The recipient only had to demonstrate that the cheque was not honoured.

In 2016, the Supreme Court ratified the practice of using cheques as collateral in the case of Sampelly Satyanarayana Rao v Indian Renewable Energy Development Agency Limited. Sampelly Satyanarana Rao (Mr. Rao) had written post-dated cheques as security for a loan from the Indian Renewable Energy Development Agency (IREDA). Mr. Rao did not take the loan personally but wrote the cheques as a director in the company that borrowed the money. The borrower company failed to pay the instalments when they became due. In response, IREDA (the creditor) initiated criminal proceedings against Mr. Rao under the 1988 law. Mr. Rao defended the claim by stating that the cheques were written before the creditor (IRDEA) disbursed the loan amount. IREDA pointed out that the cheques were deposited after the borrower (the company) had failed to pay the instalments, and therefore, the penal provisions of the 1988 Act applied. The Supreme Court agreed with the creditor and allowed for the criminal prosecution of Mr. Rao. This judgement provides legal certainty to the use of post-dated cheques as security. This date, i.e. 2016, is an important milestone in the journey, over and beyond the amendment of the N. I. Act in 1988.

The role of cheques in India today

The threat of imprisonment restored some faith in cheques. Anecdotally, it seems to have worked well in the initial years after the amendment. Cheques became more acceptable in commercial transactions and helped reduce frictions in economic activity. Many a cheque recipient was willing to take the risk of delivering goods without waiting one or two weeks for a cheque to clear.

These considerations do not exist in the present landscape. Instantaneous payment systems are ubiquitous in India, ranging from small value payments to the largest amounts possible. Any problem of trust between buyers and sellers can be readily solved by resorting to NEFT or RTGS. By this reasoning, the number of cheques written in India should have declined sharply. It has not.

People responded to incentives

Alongide this, the rest of the Indian legal system which enforces contracts works poorly. Ordinarily, a loan dispute would be resolved as a contract dispute through civil law, and, in some cases, bankruptcy law may be involved in situations where the debtor is insolvent. In 2020, in enforcing contracts, India ranked 163 out of 190 countries, while its overall rank was 63 (a difference of 100 ranks). India's rank in resolving insolvency was 52. Hence, creditors are unconfident about ordinary credit enforcement mechanisms.

One strand of credit enforcement systems is seizing assets that are pledged as collateral. This tends to work poorly in India. While the SARFAESI Act of 2002 is reasonably effective in getting collateral into the hands of the lender, many assets are hard to sell. Many land titles have encumbrances, and the land market works poorly, which hinders the recovery rate.

These weaknesses of the ordinary (civil) credit enforcement systems made criminal proceedings under S.138 attractive to creditors. Under S.138, a debtor faces up to two years of imprisonment if the debtor is convicted. In reality, the creditor does not even have to wait for the end of the litigation to get the debtor imprisoned. The debtor can be arrested at the beginning of the litigation so that the debtor can be produced before the court. In some cases, the debtor can also be imprisoned for the duration of trial under S.138. In contrast, a civil case proceeds without the debtor, if the debtor chooses not to appear. Most people will pay up to avoid being imprisoned, which gives heart to creditors.

When faced with legal difficulties around land title, it is better for the creditor to threaten imprisonment, and have the borrower solve the problem of selling the land, instead of seizing collateral and then facing legal difficulties in liquidating them.

As a consequence, after the new law was established in 1988, creditors started using cheques as a security. Creditors frequently demand that the debtor provide post-dated cheques for loan amounts. These cheques are payable deep into the future -- sometimes extending to multiple years. In such cases, both parties are aware that the cheque drawer does not have the money in the bank account at the point in time when the cheque was signed. Creditors sometimes demand a separate cheque for each instalment of loan repayment. Consequently, a debtor for a five-year loan may write 60 post-dated cheques. On a similar note, landlords sometimes asked for post-dated cheques for the payment of rent at multiple time points in the future.

Modern economies do not have a debtors prison: the choice of filing for bankruptcy is always there, in which case the creditor gets a low recovery rate. On one hand, in India, there is no legal framework for personal bankruptcy. When threatened with jail time, the borrower may reach into her web of relationships, and borrow from the community. This increases the resources available to the lender.

Weighing the pros and cons

The introduction of S.138 has thus exerted many complex impacts upon the working of the economy.

An increased level of violence in society
More people go jail, and more threats of incarceration are bandied about. This is a less civilised society.
Increased interest in lending
When lenders are given greater certainty about recoveries, they are likely to be more willing to lend to persons that might otherwise be excluded from the credit market.
Diminished interest in borrowing
When borrowers are shown the possibility of jail time, they will be more cautious and avoid borrowing. That has its own welfare consequences.
Conditions for state failure
The prospect of jail time is a `high stakes' situation where the policing system gets to make decisions which have a high impact upon the life of a citizen. This increases the incentives for corruption.
Hindering the emergence of a modern economy
All advanced economies have moved away from debtor's prison, and evolved civil mechanisms around borrowing, collateral and bankruptcy. These pathways reduce the extent of violence in society and increases user confidence in borrowing.
The threat versus the cash
Jail time is indeed a potent threat and creates strong incentives for the borrower to obtain cash, either by borrowing from someone else or by liquidating opaque assets. But once a person goes to jail, all future payments to the lender are stopped. With more civil processes of collatoral and bankruptcy, there is the strategy of keeping the delinquent active in economic life, and obtaining a stream of cashflows to the lender.
Incentives for policy makers
Lenders that got comfortable with the use of S.138 were less inclined to persuade policy makers of the need for the institutional apparatus of the credit market.


The introduction of S.138 into the N.I. Act in 1988 was a response to a problem of the time. Some other countries, like Taiwan, had also criminalised cheque bouncing. However, most countries have walked back since then because credit systems have improved and the use of cheques have declined. In those countries, cheques are not used as collateral for loans.

There is a strong argument for repealing this section. The consequences of such a repeal will, however, also be far reaching, particularly in the context where the institutional apparatus for contract enforcement remain weak. It is interesting to look at the list, presented above, of the consequences of criminalising cheque bouncing. We can then ask: Which of these would flip around and arise, in reverse, when cheque bouncing is de-criminalised.

Shubho Roy and Ajay Shah are researchers at XKDR Forum.

Friday, February 23, 2024


Upcoming Conference: Electricity Reforms in the Economic Strategy of Tamil Nadu

XKDR Forum and TrustBridge Rule of Law Foundation, are hosting a conference on 'Electricity Reforms in the Economic Strategy of Tamil Nadu', on 29 February 2024, in Chennai.

Tamil Nadu is one of the most important states in India from the perspective of energy transition. It was one of the first states in India to have achieved almost universal electrification and was also at the forefront of the transition to renewables - both wind and solar - in the country. The session hosts a discussion on a roadmap for reforms in the electricity sector, bringing together the team's year-long research towards identifying problems and strategies for the state's energy transition and economic growth.

Program Design:

11:00 - 11:45: Electricity Reforms in the Economic Strategy of Tamil Nadu

Presenter: Ajay Shah, XKDR Forum

11:45 - 13:00: Open Discussion

Moderator: Akshay Jaitly, Trilegal and TrustBridge Rule of Law Foundation

13:00 onwards: Lunch

Date: 29 February 2024 (Thursday)
Time: 11:00 am - 1:00 pm
Location: Taj Coromandel, Chennai.

The event is in-person and you can register here!

Monday, January 15, 2024

Solarisation in agriculture in Tamil Nadu

by Susan Thomas, Renuka Sane, Ajay Shah.

Highly subsidised electricity for farmers is an important problem faced in the working of the electricity sector. With falling prices of solar panels, there is the possibility of government subsidising solar panels established by farmers.

This could potentially induce welfare gains in several directions.

  1. The fiscal burden imposed by the subsidy could decline.
  2. The pricing distortion in electricity (where commercial / industrial / domestic buyers are overcharged) could decline.
  3. Farmers could earn a revenue selling their surplus electricity to the grid.
  4. Farmers could become more thoughtful in their extraction of ground water when they face an opportunity cost, in the sense that the electricity that is not used to pump water is a revenue generator for them. This would yield welfare gains by diminishing the `tragedy of the commons' in ground water.

These possibilities turn on careful calculations. Whether some or all of these gains are obtained depends on insolation, the magnitude of water required, the energy cost of extracting the water, the cost of solar panels and the price paid by the grid. There will not be one answer within a state, and therefore there will not be one optimal policy within a state. (Similarly, the economic possibilities from such pathways will vary greatly across the breadth of the country).

In a recent paper, Solarisation in agriculture in Tamil Nadu: A first principles evaluation, we try to engage in this careful calculation for one district (Erode) in Tamil Nadu. We analyse a corner solution: one where the government pays for the full cost of the solar panel. 

The results turn on the price at which the surplus energy, that comes from the farmer to the discom, is sold. If the discom is able to sell this energy at the (high) prices that are charged to the commercial and industrial ("C&I") customers, then the corner solution is financially efficient for the grid. At lower prices, the proposition is less attractive.

 One important parameter that influences the results -- the price of solar panels -- is likely to decline in the future. Hence, we simulate the scenario with lower costs. We find this expands the class of situations where solarisation in agriculture is useful.

This paper is about one district (Erode) in Tamil Nadu. The methods adopted are general and could be applied to other locations in India. The answers are likely to vary considerably depending on the precise setting. There is value in discovering how this varies across India.

This is a field with many intricacies in implementation. These include the mechanism of selling surplus electricity, the choice of the tariff paid to the farmer, the problems of (the lack of) metering of electricity connections to farmers, the trustworthiness of the government on timely payments to farmers, the financing mechanism for the capital cost the puzzles of operations and maintenance at the level of one farmer, and the path to a sound monitoring and evaluation of such programs. These are much studied areas where considerable research has taken place. These discussions will improve through using the carefully constructed numerical estimates, on a per-district basis, all across the country.

Saturday, January 13, 2024

Survey-based measurement of Indian courts

by Pavithra Manivannan, Susan Thomas, and Bhargavi Zaveri-Shah.

Public institutions do not face a market test. Achieving state capacity is about establishing checks and balances. The traditional idea is to instrument the operations, and construct an operational MIS, which is released into the public domain. Through this, deficiencies of the working of the organisation are visible to researchers and the public. The other pathway is to ask the persons who interact with the state institution about what they feel, to elicit their perceptions. This is an important pathway to obtain evidence and thus create feedback loops. For instance, citizen surveys are commonly used to assess the quality and impact of public services such as health and education (UNDP 2021, Clifton et al, 2020, OECD-ADB 2019).

In the legal system, perception surveys of court users can generate useful knowledge about how well courts function in their delivery of justice (National Center for State Courts, 2005). Ongoing surveys of user experience of courts can help measure the performance of a component of the entire legal system, and in assessing the impact of interventions made for reforming the legal system.

Surveys of court users and the public on their perception of the judiciary have been prevalent in developed countries from the 1990s, and are gaining currency in India (eg., Dougherty et al, 2006; Rottman and Tyler, 2014; Staats et al, 2005; Daksh 2016). Such surveys seek to capture the perceptions of court users on qualitative metrics (Manivannan et al, 2022). Such metrics can be used to evaluate the functioning of a single court, or compare alternative courts.

On one hand, perceptions are not reality. On the other hand, the views of end-users of the justice system are particularly important because, ultimately, the justice system exists to serve end-users whose interests and preferences may differ from those of judges and lawyers. We can readily discern certain difficulties in survey-based measurement of perceptions:

  1. There are many different users of a court, who differ in their extent of knowledge. Litigants who see a court case as a disruption of their daily lives, may see things differently when compared with lawyers, for whom courts are part of their professional lives.
  2. A person who loses a case is likely to be unhappy with his experience of the court and vice versa.
  3. Different individuals might be working on non-comparable cases, and their subjective experience of the court is then not comparable.
  4. It is not clear what is an objective benchmark of sound performance. A perfect court may be prohibitively expensive. Users of courts may have normalised a variety of difficulties; their `satisfaction' may only flow from learned helplessness.
  5. It is important to narrowly measure a court or a group of courts, and make claims about the narrow unit of observation, as opposed to bigger claims about the Indian legal system.

In 2023, we conducted two pilot surveys to evaluate their utility as feedback loops for courts.

One survey was administered to understand the functioning of five alternative forums that can be approached to adjudicate matters of debt disputes: the Bombay benches of the National Company Law Tribunal (NCLT), the Debt Recovery Tribunal (DRT), the Bombay High Court (Bom HC), the Metropolitan Magistrate (MM) courts (which adjudicates criminal proceedings for cheque bouncing cases), and the Alternative Dispute Resolution (ADR) process.

To help improve data quality, the survey was conducted on practitioners who had multiple instances of interacting with the five courts. By selecting practitioners that have had repeated instances of approaching these forums to resolve disputes, the survey results are less vulnerable to the 'loser' effect. To obtain comparability, we presented a hypothetical, canonical problem of debt dispute resolution to each survey respondent. We then asked them to rank the five forums on five dimensions of court performance, namely, efficiency, effectiveness, predictability, independence, cost and convenience, and calculated the average rank for each forum on each of these dimensions.

The second survey was conducted with litigants at the DRT, with the objective of understanding the functioning of this court. For this, we deployed a team of four, who visited the premises of the Bombay bench of the DRT. The team administered a survey questionnaire on individuals, in order to evaluate the performance of the DRT on the above mentioned five dimensions. The participants were asked to rate their experience at the DRT on a five-point scale.


Survey design
We used a combination of qualitative (in-depth expert interviews and open-ended comments) and quantitative surveys (multiple choice and scaled questions). Qualitative surveys with experts provide more contextual insights, enable comprehensive analysis. They helped validate our founding conjecture, the idea that there was a class of disputes which could go to multiple different forums. However, these surveys were time-intensive and it was difficult to obtain the interest and involvement of experts.
Survey mode
We administered the survey in both online and offline formats. Surveying litigants on court premises was challenging in two ways. First, litigants do not always accompany their lawyers to courts, especially in disputes of larger sizes involving firms. Second, one forum may deal with multiple type of disputes (civil v. criminal; mergers v. insolvency). This poses difficulty in identifying a litigant with a desired case-type.

The questionnaire used for the surveys and the responses collected can be found here.

Results: The perceptions of practitioners

The practitioner survey involved eliciting their choice of forum for the following hypothetical, canonical problem:

Q is a large public listed company. It has availed of a working capital loan of Rs. 7 crores from N, a small sized NBFC, repayable within three years with simple interest @16% p.a. Q and N are 100% domestically owned. As collateral for the loan, Q has granted N a floating charge over some of its movable assets, for example, its machinery or its inventory. One year into the loan, Q defaults on its loan to N. The outstanding amount exceeds Rs.1 crore. Post-dated cheques issued by Q towards interest payment bounce due to insufficient funds. The collateral is not sufficient to cover the outstanding amount. You are advising N.

The survey respondents were asked to make two assumptions, namely, that the limitation period is the same across all the courts; and that all courts have jurisdiction.

We collected responses from 18 respondents, of which 16 were lawyers and two were key managerial personnel at an asset reconstruction company and a debt restructuring advisory firm. Six of our respondents had between 20 to 30 years of experience in this area, eight of them had experience of less than 20 years, and two of them had more than 30 years experience in this field. They had significant experience with many of the venues of interest: 14 had experience with the NCLT and the Bom HC, 11 with the DRT and ADR process, and 5 with the MM Courts.

We aggregated the ranks assigned by the respondents to each of these forums on the parameters of independence, efficiency, effectiveness, predictability and access, and averaged them to arrive at an overall rank for each forum. The specific statements on which the respondents ranked the forums and their ranks are presented in Table 1. The forums are arranged in increasing order of the average rankings on each parameter. The NCLT was ranked the highest on the parameter of Efficiency, followed by ADR, the Bom HC, the DRT and the Metropolitan Magistrate. On the other hand, the Bom HC was ranked as the most preferred forum of choice on the parameter of independence.

Table 1: Preference ordering of five debt enforcement forums
Metric Survey Statement Ranking
1 2 3 4 5
Efficiency Most likely to dispose of my matter in a timely manner NCLT ADR Bom HC  DRT MM Courts 
Effectiveness Easiest to recover the amount awarded in the judgement decree.   NCLT Bom HC  DRT, ADR  MM Courts
Predictability  (i) Expected sequence of stages in my matter was clear. NCLT ADR Bom HC  DRT MM Courts 
(ii) Hearings are most likely to be held as scheduled. ADR NCLT Bom HC  MM Courts  DRT
Independence   Decisions are most likely made based on the merits of the case. Bom HC  ADR NCLT MM Courts  DRT
Access (i) Can afford to take my case to this forum. MM Courts  DRT NCLT Bom HC  ADR
(ii) Ease of navigation; staff helpfulness; website; ease of filing process ADR Bom HC  NCLT DRT MM Courts 

Table 1 contains new insights on a specific court on each attribute. For example, while the Bom HC and the ADR process are perceived to be most unbiased, they are perceived as more expensive to access. ADR is perceived to be most predictable, but less effective on actually getting the relief. The NCLT, on the other hand, is perceived to be more efficient and effective, when compared to the other forums, but less likely to also be unbiased. The DRT and the Metropolitan Magistrate courts are perceived unfavourably on all aspects, except affordability.

Results: The perceptions of litigants

The in-person survey conducted at the DRT observed 55 persons, who were presently a party to a dispute at the DRT. Among these, 24 were debtors, 19 were creditors, and 12 belonged to the residual category, such as court/privately appointed receivers and auction awardees. Of these, 30.6% were at early stages (admission), 28.6% were at advanced stages (such as post-admission or pending last hearing), and 22.4% were awaiting a final hearing or pronouncement of judgement.

Litigants at the DRT had more positive perceptions than practitioners. Litigants ranked the DRT the highest on predictability of the hearing: most litigants agreed that when a hearing for their case is scheduled at the DRT, it will be held on the scheduled date. About 67-69% of litigants perceived the DRT to be an affordable and unbiased forum to resolve their dispute. More creditors ranked it higher (85-89%) on these two metrics than debtors (58-62%). However, 52% of litigants did not think that the DRT resolves cases in a timely manner.


Good performance by the judicial branch in a country is essential. As with all aspects of public policy, this requires the loop of evidence, identification of difficulties, creative policy proposals, policy reforms, and measurement of the gains. In the legal system, generally, evidence and measurement involves quantitative measures. In this article, we have shown a case study where survey-based evidence was useful. This constitutes a useful additional pathway to measurement of the legal system.

Litigants are the ultimate end-users of courts, so their views matter greatly, but their information set may be limited. Legal practitioners have better information through repeated interactions and potentially observation of multiple venues, but their views may not capture the views of the litigants themselves. In the future, it would be useful to go further, by way of surveying the general public, measuring the view of persons who have not experienced litigation at a given location.


Shaun Bowler, Joseph L. Staats, and Jonathan T. Hiskey (2005). Measuring Judicial Performance in Latin America, Latin American Politics and Society.

Judith Cliftona, Marcos Fernandez-Gutierrez and Michael Howlett (2020). Assessing public services from the citizen perspective: What can we learn from surveys?, Journal of Economic Policy Reform.

Daksh (2016). Access to Justice Survey, A DAKSH report.

David B. Rottman and Tom R. Tyler (2014). Thinking about judges and judicial performance: Perspective of the Public and Court users, Onati Socio-legal Series.

Devendra Damle and Tushar Anand (2020). Problems with the e-Courts data, NIPFP Working Paper Series 314.

George W. Dougherty, Stephanie A. Lindquist and Mark D. Bradbury (2006). Evaluating Performance in State Judicial Institutions: Trust and Confidence in the Georgia Judiciary, State and Local Government Review.

Institute of Social Studies and Analysis (2021). Satisfaction with Public Services in Georgia, United Nations Development Programme.

National Center for State Courts (2005). CourTools: Trial Court Performance Measures.

Pavithra Manivannan, Susan Thomas and Bhargavi Zaveri-Shah (2022). Evaluating contract enforcement by courts in India: a litigant's lens, XKDR Working Paper No. 16.

Pavithra Manivannan, Susan Thomas and Bhargavi Zaveri-Shah (2023). Helping litigants make informed choices in resolving debt disputes, The Leap Blog.

OECD-ADB (2019). Government at a Glance Southeast Asia, Serving Citizens: Citizen satisfaction with public services and institutions, OECD Publishing, Paris.

Pavithra Manivannan and Susan Thomas are researchers at XKDR Forum, Mumbai. Bhargavi Zaveri-Shah is a doctoral candidate at the National University of Singapore. We thank Surya Prakash B.S., Renuka Sane, and Anjali Sharma for their suggestions on the design of the surveys. We acknowledge the very diligent assistance by Nell Crasto and Balveer Godara, students at Kirit P. Mehta School of Law, NMIMS Mumbai, on conducting the litigant survey. We are grateful to all the survey respondents for their generous participation, and thank Mahesh Krishnamurthy, K.P. Krishnan, Sachin Malhan, Harish Narsappa, Rashika Narain, Geetika Palta, Siddarth Raman, Ajay Shah, and Arun Thiruvengadam for their comments and suggestions on this work.

Offshore wind in Tamil Nadu: from potential to reality

by Akshay Jaitly, Charmi Mehta, Renuka Sane and Ajay Shah.


The world of renewables is comprised primarily of solar and wind. Of these, solar electricity suffers from the limitation of dwindling away in the evening, at precisely the time at which electricity demand rises. This makes wind particularly important. There is a good deal of onshore wind generation in India. What is different and potentially superior about offshore wind?

  1. Wind speeds tend to be higher offshore than on land. A wind turbine operating at a wind speed of 24 kph can generate twice as much energy as a turbine operating at a wind speed of 19 kph (American Geosciences Institute, 2023).
  2. The wind offshore tends to be more consistent, with higher power capture for a greater number of hours per day.
  3. Onshore wind requires land resources. Offshore wind is built in the open sea where land rights are cheaper, and it is easier to go to bigger blades.
  4. Offshore wind does not impose noise pollution upon the human population.

These benefits, of course, come with a problem, that construction of windmills in the high seas is more difficult when compared with building on land. Windmills are best placed at locations with high wind. Figure 1 shows that Tamil Nadu is a hot spot for offshore wind in India. It is interesting to notice that Sri Lanka is also a hotspot for offshore wind (Figure 2).

Figure 1: Wind speeds off the Indian coast

Source: India Wind Potential Atlas (NIWE, 2019).

Figure 2: Wind speeds off Sri Lanka.

Source: Technical Assessment by World Bank, IFC and ESMAP (2020).

There is an analogy between offshore wind in Sri Lanka, and hydel resources in Nepal and Bhutan. Given the correct arrangement of foreign policy (Subramanian, 2023), the Indian private sector can possibly play a leadership role in building electricity generation in Sri Lanka, as has been the case with Bhutan.

Putting these facts together, there is an important natural resource in Tamil Nadu, and its vicinity, through which vast renewable electricity generation can become possible, given the correct configuration of policies and state institutions that create conditions of investibility. We can dare to hope that very large offshore wind generation can take place off the coast of Tamil Nadu, which would attract energy-intensive firms to operate in the region, and enabling sale of electricity into locations far from Tamil Nadu.

Public economics for offshore wind

We can imagine an uncoordinated rush by the private sector to venture out into the seas and put up wind turbines. They would jostle with each other to build on the best sites. Each wind turbine would have to face the problem of transmitting energy to the mainland. There are three areas where policy makers can be useful:

  1. Ownership of the sea-bed and property rights: In a world without clarity on property rights, the private sector would experience conflicts when building wind turbines. There is a negative externality as multiple construction projects which are physically near each other impose a certain amount of chaos upon each other, and the presence of a windmill diminishes the energy production of nearby windmills.The sea-bed should be treated as a scarce natural resource, akin to the electromagnetic spectrum. There is a role for the state in establishing property rights, and auctioning off ownership of the sea-bed to private persons. The coercive power of the state would be used to create property rights for private persons, following which private persons would trade in blocks of sea-bed (akin to transactions in privately owned land or on the electromagnetic spectrum), and the government would enforce against encroachment. The negative externality problem during construction can be addressed by modified property rights which decongest each construction site for the construction period, by expanding the notion of property rights associated with each geographical location, to exclude other persons for the period of construction.
  2. Economics of transmission: Each wind turbine would have to face the problem of transmitting energy to the mainland. Every generation company would benefit from more convenient access to high capacity transmission lines. There is a natural monopoly problem in the transmission infrastructure - it is likely that a single transmission company will emerge within each geographical area. There is merit in using state power to coerce this firm on open-access rules (so it cannot deny transportation to any private person) and on price regulation.
  3. Data as a public good: The government can add value by spending taxpayer money to construct a dataset on wind speed and releasing this into the public domain. This activity involves no use of coercive power, other than the coercion that undergirds taxation. The government would merely release data on a website as a public good, and in no way preclude private persons from expending resources to create data on their own. For the government released data to be credible, it would have to be collected by trusted agencies, experienced in offshore wind data collection; the role for the government should be one of only contracting-out the construction of the data.

While electricity in India is largely a state subject, the sea-bed falls under the union government jurisdiction through Article 297 of the Indian Constitution through which the Parliament has enacted the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976. Thus we can envision a two-part policy story for offshore wind, where the union government auctions off blocks of sea-bed, and the state government deals with everything connected with electricity. Once the energy reaches landing stations at the shore, it is just ordinary electricity and fits into the mainstream electricity market exactly as with onshore wind turbines.

How the Indian journey has unfolded

The union government has decided that offshore wind production will commence in Gujarat and Tamil Nadu. A union government agency named the National Institute of Wind Energy (NIWE) plays an important role in this field including that of being the designated counterparty for contracts. It plays a expansive role, akin to an offshore wind central planner. Transmission will be run by a union government PSU, the Power Grid Corporation of India Limited (PGCIL). No role is envisaged for state governments.

In 2018, NIWE published its first tender for an offshore wind block auction off the Gujarat coast. However, it did not receive bids and consequently had to be called off after multiple extensions (Deshpande, 2021). Since 2022, the Union Government has released (i) a national Strategy Paper for the Establishment of Offshore Wind Energy Projects and (ii) a draft tender for Sea bed leasing for offshore wind energy projects which pertains to locations off the coast of Tamil Nadu. These releases help improve policy predictability.

The proposed contracting model

Project costs in offshore wind are high, particularly in contrast to developing renewable energy plants onshore. Costs also vary as per the depth of waters and distance from shore. Operating offshore wind turbines involves higher maintenance requirements (Koch, 2012). First movers face higher costs on account of uncertainty and the inevitable mistakes.

NIWE has proposed three alternative contracting models in its strategy paper. Model A is for projects where surveys and assessments have been completed, and the site is ready for development. Model B is model A without viability gap funding ("VGF?). Model C is a fully bundled model with end-to-end responsibility placed upon the project developer, including site identification. The tender released (for the sea bed off the coast of Tamil Nadu) follows model A (NIWE, 2023). Table 1 summarises this proposed contract design.

Table 1: Risk-responsibility allocation across proposed offshore wind contracting models
Factors Risks/responsibility Model A
Government support Bridging financing gaps VGF (Union; unallocated)
Transmission charges Waived
Strategic and commercial risks Identifying sites for offshore wind farms Gov (Union)
Site assessment surveys Gov (Union)
Local factors Transmission infrastructure Gov (PGCIL)
Evacuation of power Gov (PGCIL)
Licenses Private
Power offtake guarantees None

Site characteristics have a substantial impact upon the prospective return on equity. The MNRE/NIWE supplies its assessment of each site. A careful examination of the data released by MNRE/NIWE is required. Potential developers may invest significant time and resources in constructing private sector data if there are limitations in the government-released data.

The selected bidder must set up the turbines offshore and connect each turbine to the offshore agglomeration facility (which will be constructed and managed by PGCIL). While the model mentions accessing VGF from the union government, the mechanism is not adequately spelled out. Is this policy strategy conducive to investibility?

i. Site selection and exclusivity:

Site selection is best done by potential wind farm developers. Developers face the consequences of, and are best placed to take decisions on sites when faced with a certain amount of data. They will commission the creation of additional data optimally. Under Model A, sites have been selected by NIWE. We expect that serious developers will construct their own datasets and may chafe at the locations pinned down by NIWE.

The next issue is that of exclusivity. Developers like to have a certain exclusive period, where no other construction takes place, in order to reduce the complexities of coordination across multiple construction projects. The exclusivity period for the sea-bed is set to five years, with a maximum extension of one year. The average time taken to set up a mid-size offshore wind farm, globally, is four years. In India, this is likely to attain a higher value (MOSPI, 2023).

Auctioning the exclusivity period itself can be a way to decide what a 'sufficient' period should be. In countries where confidence in offshore projects has been high, auctions are witnessing site tenures being awarded based on an auction in which the highest bidder wins the site (Exeter, 2022). For example, the Round 4 auction for sites (held in 2021) in England and Wales saw the highest bidder paying Euro 1bn upwards in option fees, payable annually (for ten years) for exclusive sea-bed rights on an 8 GW of offshore wind.

ii. The problem of transmission:

In offshore wind contracts in Northern Europe, the evacuation infrastructure for the electricity is generally created by the developer (and in some cases such as in the UK, later carved out and sold to a third party) or contracted out (separate from the offshore windfarm contract) to a private transmission service provider. Under Model A, this function has been assigned fully to the state-owned transmission company - PGCIL. PGCIL has no prior experience in developing transmission for offshore wind and it carries the burden of being a public sector organisation.

Whether managed by PGCIL or some other firm, regulation is required so that future developers are provided access to non-discriminatory evacuation infrastructure and services, perhaps using common carrier principles. While one block / site is up for auction today, numerous offshore plants will come up in the future in close vicinity. There may be shortages or exorbitant pricing of transmission, particularly in the absence of non-discriminatory access.

In addition to the risks from power evacuation, risks from unscheduled downtimes can induce losses, and contract terms will determine who bears this risk. For example, in Germany, the costs of curtailments/incapacities were transferred to the consumer. In contrast, costs remained with the project owner in China despite their lack of control over the risk (Gatzert, 2016). The government's decision to manage the complete evacuation responsibility may prove problematic in the event that higher transmission losses or shutouts imposes important risks upon the developer. If the preference is for power evacuation to be managed by PGCIL, contractual provisions on liquidated damages must adequately cover for downtimes that are not caused by the fault of the developer and other transmission losses.

iii. Regulatory burdens

Unlike transmission and distribution, power generation has no market failure problem. It is hence important to envisage a contract design that harnesses private sector expertise, without added layers of government involvement. At present, establishing an offshore wind farm will require a set of seventeen different clearances and licences from a host of ministries, including the prerequisite of block approval from the Ministry of Defence. Seven of the seventeen clearances are necessary even before one can make a bid, and the rest are post-award. The sector also includes a specific licensing regime that extends to how new offshore assets connect and interact with the grid. This requirement for multiple permissions detract from the vision of property rights in the hands of a private person.

Further, approvals and no-objection certificates may be required from State Governments for transmission and evacuation infrastructure-related provisioning and any other clearances as may be legally required to establish and operate offshore power plants - as in the case of oil and gas pipelines (NIWE, 2022a, NIWE, 2022b).

It might be useful to consider if some project-related (as opposed to bidder related) approvals can be obtained ahead of time and made part of the bid package. This will reduce risk for bidders and may lead to more attractive bids.

Lastly, as with any nascent industry, policy and regulatory frameworks are likely to evolve and change over time - and existing concessionaires should be contractually protected from this through adequate 'change in law' and 'change of scope' provisions.

Under the present policy strategy, offshore wind generation requires the firm to have a high level of government engagement, and exposure to policy risk. This problem may encourage foreign firms to find local partners and enhance the required rate of return, i.e. hamper investibility.

iv. The role of the union government:

The present policy strategy suggests a offshore wind industry that is run out of the union government. This vision will sit uneasily with the primary role of the state government in electricity regulation and the electricity business once the energy hits the shore. Since vessel availability and transport infrastructure are critical to offshore wind farm development and often contribute to delays, cost overruns ((Koch, 2012), and litigation, the State's port infrastructure can be adapted to facilitate project management. Proximity of the Thoothukudi port to the proposed site is an advantage, and logistics facilities such as (i) storage areas for component assembly and manufacturing, and (ii) berth infrastructure can be developed to support upcoming offshore wind plants (Auroville Consulting, 2022). Such thinking is downplayed in a union-dominated policy process.

Assessing the outlook

Our analysis suggests that there is a considerable gap between the natural resource potential for offshore wind in South Asia and its tangible translation into RE capacity. The sea-bed lease tender was released in September 2023 with a deadline of 28 November 2023. In our knowledge, no bids have emerged.

Electricity is a concurrent list subject under the Indian Constitution, with both the union government and the state government having the right to make law over aspects of the sector. Sea-bed jurisdiction appears to clearly lie with the union. It would make sense to rely on the state government to a greater extent.

There are significant manufacturing and transportation challenges associated with the bulky parts of offshore wind facilities. Both Tamil Nadu and Gujarat are strong in manufacturing, and are natural sites where a private industry could develop that will undertake this manufacturing, and play a role in offshore wind sites hundreds of kilometres away.

The arguments presented earlier in this article show that thinking from first principles, the role of the state in this field is (a) Establishing property rights with auctions of chunks of sea-bed, including a special kind of exclusivity during construction; (b) Ensuring open access and price regulation for the natural monopoly of transmission; (c) Possibly adding value by constructing and releasing a robust dataset with wind speed. There is merit in evolving the policy strategy towards these three pillars.


American Geosciences Institute. 2023. What are the advantages and disadvantages of offshore wind farms?, National Academy of Sciences.

Deshpande, T. 2021. Why India's Offshore Wind Energy Potential Remains Untapped, IndiaSpend. 26 November 2021.

NIWE. 2023. Strategy for Establishment of Offshore Wind Energy Projects, Ministry of New and Renewable Energy, Government of India. September 2023.

Koch, C. 2012. Contested overruns and performance of offshore wind power plants, Construction Management and Economics, 30:8, 609-622.

Infrastructure and Project Management Division, Ministry of Statistics and Programme Implementation. 2023. Quarterly Report on Mega Projects.

Laido et al. 2022. Impacts of Competitive Seabed Allocation for Offshore Wind Energy, University of Exeter. April 2022.

Gatzert et al. 2016. Risks and risk management of renewable energy projects: The case of onshore and offshore wind parks, Renewable and Sustainable Energy Reviews, Volume 60. July 2016.

Auroville Consulting. 2022. Unlocking Offshore Wind in Tamil Nadu. Sustainable Energy Transformation Series.

Subramanian, A. 2023. Answers in the offshore wind.The Indian Express. 23 March 2023.

Akshay Jaitly and Renuka Sane are Co-founder and Research Director, respectively, at TrustBridge Rule of Law Foundation; Charmi Mehta and Ajay Shah are Research Associate and Co-founder, respectively, at XKDR Forum.

Wednesday, January 10, 2024

Evaluating capital market responses to cybersecurity incidents in Indian listed companies

by Sayan Dasgupta, Renuka Sane and Karthik Suresh.

In a previous report on the Information Technology Act, 2000 we described the infirmities in the laws and institutions that govern cybersecurity threat detection and response in India. However, two questions persist. Firstly, what is the true scale of the cybersecurity problem among Indian firms? Secondly, what are the financial and reputational consequences of a cybersecurity breach at an Indian firm?

It is difficult to find answers to the first question in the public domain. But when it comes to the second question, we can gain some insights by looking at how investors respond to the news of cybersecurity incidents whenever such details are made public. In the United States, the results of these studies range from a slightly negative effect on stock prices following the announcement of an incident (e.g. Cavusoglu et al, 2004 estimated an average 2.1% loss in the first two days after disclosure) to no significant effects (e.g. Kannan et al, 2007). Amir et al (2018) however observed that there is a significant difference between the fall in stock prices for firms that disclosed the cybersecurity incident (0.7% decline in one month) vs. firms that withheld this information (3.6% decline in one month).

It is important and interesting to understand the current state of play. How many Indian listed companies made public disclosures of cybersecurity incidents? How did investors in these companies respond to this news given the limited information they had? We attempt to provide some insights into this question by conducting an event study of stock price movements that follow cybersecurity incidents in Indian listed companies. We found that there was a significant negative effect on stock prices given the prior system of disclosures.

Why is it important to make disclosures of cybersecurity incidents?

A cybersecurity incident can be a costly negative externality. In 2022, IBM surveyed 49 Indian companies and estimated the loss they suffered from a single data breach to be USD 2.32 million (INR 184.5 million). A firm suffers direct costs (e.g. costs of data recovery) as well as indirect costs (e.g. loss of trust and goodwill) due to a cybersecurity incident. These costs, along with the reluctance to divulge details about its vulnerabilities to competitors, mean that firms are not incentivized to share information on their cybersecurity incidents.

There are two reasons why firms should make disclosures about cybersecurity incidents. Firstly, consumers have a reasonable expectation of privacy. In India, the Supreme Court in the Puttaswamy decision traced this expectation of privacy to one's right to life and personal liberty. On these grounds, data privacy legislations, such as Article 34 of the EU General Data Protection Regulation and Section 8 of the Digital Personal Data Protection Act, 2023 require firms to disclose details of data breaches to their users. Secondly, securities laws are concerned with whether cybersecurity risks are "material information" that should be disclosed to investors. The concept originated in the United States --- the US Supreme Court in TSC Industries v. Northway held that a given piece of information is "material" if there is "a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote".

Specifically on materiality, the US Securities and Exchanges Commission (SEC) issued non-binding guidance in 2011 and 2018 which provided the format in which a listed entity or market participant should report on cybersecurity risks. However, in March 2023, the SEC proposed a framework for compulsory disclosures of cybersecurity risk and preparedness. In India, SEBI's general disclosure requirements on materiality are found in Regulation 30 read with Schedule III of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("LODR Regulations"). Sub-part B, no. 6 requires the listed entity to report "disruption of operations of any one or more units or division ... due to natural calamity (earthquake, flood, fire etc.), force majeure or events such as strikes, lockouts etc." While it was not explicitly mentioned that cybersecurity risks are to be reported, many listed companies (example) made such disclosures anyway. In June 2023, specific reporting requirements for cybersecurity incidents were added to the LODR regulations which we describe in the discussion section.


Our list of cybersecurity incidents comes from two datasets that provide firm-specific incident information. The first dataset --- the "CISSM Cyber Attacks Database" --- is based on the work of Harry and Gallagher (2018). It is hosted by the University of Maryland (UoM). It has a set of 285 incidents that took place in India between 2014 and 2023. Of these, 45 incidents took place in companies listed in India. This dataset includes detailed information on the type of data that was compromised, the method of attack, and the responses of the affected companies. This data was collected by deploying a customised script that queries a list of news websites for articles or news items on cybersecurity incidents which are collected, sorted and stored. Another script then categorizes these incidents into various types.

The other dataset, called the Data Breach Investigations Report (DBIR), is hosted by Verizon. It has information on the type of breach (e.g., malware, hacking, social engineering), the target of the breach (e.g., government, enterprise, small business), the method of attack (e.g., phishing, spear phishing, watering hole attack) and the impact of the breach (e.g., data loss, financial loss, reputational damage). The DBIR dataset accepts information from a broad set of user-reported sources which are manually sorted by varying levels of confidence. The dataset has 83 incidents that took place in India between 2009 and 2017, of which 11 incidents took place in Indian-listed companies. 8 of the 11 incidents are already mentioned in the UoM database, so we are left with 3 unique entries in the DBIR. We manually categorized these three incidents based on the typology provided by Harry and Gallagher (2018).

The distribution of the different types of cybersecurity incidents is as follows:

Type Description No. of incidents
Data attack This type of attack covers the manipulation, destruction, or encryption of data in the target network. 7
Exploitation of application server This type of attack uses a misconfiguration or vulnerability to gain access to data in a server-side application (e.g. a database) or the server itself. 27
Exploitation of network infrastructure This type of attack covers the theft of data through direct access to network infrastructure such as routers, switches and modems. 1
Denial of service This type of attack is meant to degrade or deny access to other parts of the firm's network. 3
Message manipulation This type of attack covers interferences with the target's ability to accurately communicate information to its customers. 3
Combination of methods 5
Undetermined 2
Total 48

In total, our dataset has 40 unique companies and 48 incidents that took place between June 2013 and March 2023.

For stock prices, we retrieved the NSE daily closing prices for all the affected companies from CMIE Prowess for the period between 1 March 2013 to 31 July 2023.


The event study methodology (ESM) is commonly used to measure stock price reactions to certain events (Fama et al, 969). We use the ESM to analyze the stock price consequences of cybersecurity incidents. Price reactions are represented by abnormal returns, which are stock returns adjusted for the normal daily stock price and market. We use the eventstudies package developed by Anand et al (2014) for our analysis.

This methodology involves the following steps:

  1. Identifying the event date: The event dates are the dates on which each of the cybersecurity incidents were made public i.e. the date of the news article.
  2. Calculating the abnormal returns: The abnormal returns for the affected companies are calculated on the event date and 45 days before and after the event. Abnormal returns are the difference between the actual returns of the affected companies and the expected returns of the market. The expected returns are calculated using the market model.
  3. Statistical tests: They help us determine whether the abnormal returns are statistically significant. The abnormal returns are used to test whether the cybersecurity incidents had a significant impact on the stock prices of the affected companies. The statistical tests are conducted using a variety of methods such as the t-test and the Wilcoxon signed-rank test.
  4. Analyzing the results: The results of the event study are analyzed to determine (i) the magnitude of the impact of cybersecurity incidents on stock prices, (ii) the factors that influence the impact of cybersecurity incidents on stock prices, and (iii) the implications of the results for investors, companies, and regulators.


Event study results covering all incidents

Fig 1: Event study results for all 48 incidents.

We observe a significant decrease in the cumulative abnormal return (CAR) after the event date. The average decrease in the first month after the event was 3.48%. At its lowest, the CAR was -8.06%. However, with a widening 95% confidence interval, there is some uncertainty about the true effect of the cybersecurity incident on the stock prices of the companies. The sample size is low and the information available regarding the nature and magnitude of the incident is limited.

Event study covering incidents of the type "exploitation of application server"

Fig 2: Event study results for 27 incidents which were of the type "exploitation of application server".

The majority of the cybersecurity incidents were of the type "exploitation of application server". We conducted another event study on this set of incidents. However, we do not see significant results. In the first month after the event, the CAR increased by an average of 9.79%.


Our list of 48 incidents is certainly not exhaustive. Many cybersecurity incidents may not have been reported. Given that the majority of our data comes from news sources, some disclosures may have been made long past the incident date.


We began by asking about the financial and reputational consequences of a cybersecurity breach in a listed Indian firm. The trends in our analysis show that investors do tend to react negatively to the news of a cybersecurity incident.

As time progresses, we may be able to find more conclusive answers to both questions. This is thanks to some recent changes in the disclosure regime which will give us the true picture of cybersecurity incidents at Indian listed companies. In November 2022, SEBI in its consultation paper proposed amendments to these regulations. The consultation paper notes that cybersecurity incidents "may impact the operations and/or performance of the listed entity" but also recognizes that the "immediate disclosure of such events may not be desired since the entity may be vulnerable to further attacks". SEBI therefore proposed that the disclosures be made on a quarterly basis in the corporate governance report where the listed entity mentions the root cause of the incident as well as the remedial measures that they undertook. In June 2023, these proposals were adopted by amending Regulation 27(2) of the LODR regulations. Given the recent amendments to the SEBI LODR regulations, the quality of information on cybersecurity incidents could become richer. This could inform further studies which could deploy more sophisticated methodologies that control for other factors that could affect stock prices and remove the variation caused by them before performing the event study.


Chirag Anand, Vimal Balasubramaniam, Vikram Bahure and Ajay Shah, eventstudies: an R package for conducting event studies and a platform for methodological research on event studies, NIPFP Macro/Finance group, 2014.

Hassan Cavusoglu, B. K. Mishra, and S. Raghunathan, The Effect of Internet Security Breach Announcements on Market Value: Capital Market Reactions for Breached Firms and Internet Security Developers, International Journal of Electronic Commerce, Vol. 9 (2004), no. 104, pp. 70--104.

Karthik Kannan, Jackie Rees and Sanjay Sridhar, Market Reactions to Information Security Breach Announcements: An Empirical Analysis, International Journal of Electronic Commerce, Vol. 12 (2007), no. 1, pp. 69--91.

Eli Amir, Shai Levi and Tsafrir Livne, Do Firms Underreport Information on Cyber-Attacks? Evidence from Capital Markets, Review of Accounting Studies, Vol. 23 (2018), issue 3, no. 11, pp. 1177-1206.

Charles Harry and Nancy Gallagher, Classifying cyber events: a proposed taxonomy, Journal of Information Warfare, Vol. 17 (Summer 2018), no. 3, pp. 17-31.

Eugene F. Fama, Lawrence Fisher, Michael C. Jensen and Richard Roll, The Adjustment of Stock Prices to New Information, International Economic Review, Vol. 10, no. 1, pp. 1--21.

Sayan Dasgupta and Karthik Suresh are researchers at XKDR Forum. Renuka Sane is a researcher at TrustBridge. We thank Ajay Shah, Geetika Palta and Siddhant Bharti for their useful comments.

Tuesday, January 09, 2024

The difficulties of asset monetisation in the transmission sector

by Akshay Jaitly, Charmi Mehta, Rishika R, and Ajay Shah.


About 95% of nationwide transmission assets in India are presently owned by the government company, Power Grid Corporation of India Limited (PGCIL). A transformation of electricity transmission systems is required to achieve decarbonisation, reflecting the distributed geography of renewables generation in India, and the eventual de-commissioning of present coal-based power generation. Several estimates suggest a total required investment, for electricity transmission, of over INR 2 trillion over the next five years.

Given the public finance and managerial constraints in the Indian state, private investment is critical to achieve the required investments. Land, compliances and clearances impede pure private greenfield transmission projects, so one method there is for the government to do development and then monetise the assets. Existing assets are relatively straightforward to operate and risk-free, with a steady stream of user charges, where private sector participation is then readily achieved.

While attempts at attracting private investment in this field have taken place from 2006, the outcomes so far have been poor. One response to this was in October 2022, where the Ministry of Power issued guiding principles for states to monetise 14% of transmission assets that are currently owned and operated by state-owned transmission utilities. This involved a new contracting mechanism: the "Acquire, Operate, Maintain and Transfer (AOMT) model".

This is the temporary transfer of asset ownership (i.e. not a sale) to private firms in exchange of an upfront payment. Firms are expected obtain cash from the operations (user charges) of the asset, depending on the model deployed for monetisation. Asset monetisation has twin benefits for governments - first, it provides short-term liquidity to the public sector entity in the form of upfront payment for the asset(s); and second, it allows the government to delegate the operations and maintenance (O&M) to the private sector, enabling public sector entities to harness private sector capabilities and reduce their scope.

How previous asset monetisation models worked

Asset monetisation has been used as a contracting model for O&M since 2018 when the National Highways Authority of India (NHAI) began using the toll-operate-transfer (TOT) model, which draws on ideas from Australia, North America and Europe. Besides this, InvITs have been used in the transmission sector. There is significant knowledge and experience around InvITs and TOT contracts in India: they constitute the baseline against which the new AOMT can be understood. Table 1 provides a comparison of the three models on key features.

Table 1: A comparison of key features across contracting models - InvITs, TOT and AOMT.

InvITs Toll Operate Transfer AOMT
Description Transfer of assets to listed registered trusts regulated by Securities Exchange Board of India which issues units to multiple investors. Comparable to equity for a limited time period. Temporary transfer of asset ownership for an upfront payment from the private party who is granted this concession. The private party is also granted rights to collect user charges, and other charges to finance the O&M of the asset. Temporary transfer of ownership of assets for upfront payment from the private party, in turn allowing them to operate and maintain the asset, and generate revenue from it.
Regulation of investment vehicle Trust to be registered by SEBI; existing licences applicable SPV/ investor entity regulated by contract terms Transmission licence transfer/re-registration to be approved by State electricity regulator
Regulation of user charges Approved by electricity regulator and governed by Transmission Service Agreement As per National Highway Toll Determination Rules Approved by electricity regulator and governed by Transmission Service Agreement
Mode of returns Returns from dividends, interest and capital gains on units Toll charges Transmission charges (varied across states)
O&M Public Private Private
Ownership Pooled; investors Single or consortium Single or consortium

The Toll-Operate-Transfer model in Indian Highways

In 2018, the NHAI bundled approximately 500 km of highways for the first auction, and potential investors were to bid the upfront payment they would make for the bundle. In return, investors receive the right to operate the highway and collect tolls generated from it during the concession period. This model provides the awarded party autonomy on operations and revenue generation, eliminating the involvement of the public authority in O&M.

The NHAI has so far attempted to monetise ten bundles (rounds) of assets with varied rates of success. The lack of bids, undervalued bids, and low price recovery led to auctions being stalled, bids annulled and fresh auctions being called, several times. Most recently, the 9th and 10th TOT bundles up for auction were halted as they did not meet the reserve price set by NHAI. Despite using a familiar model, the implementation has not yielded positive outcomes. Large value disputes in highway contracting, low standards of public disclosure and the inability to make accurate revenue growth projections are some of the reasons for its substandard outcomes.

The InvIT model in the transmission sector

In 2020, the PGCIL became the first publicly owned company to set up its own investment trust (InvIT). The PGCIL InvIT holds transmission assets worth INR 7500 crores and it opened for subscription in early 2021. Within two days of the offer, 59% of the units were subscribed. When the session was closed, PGCIL benefited from a 3% premium over the issue price and the initial public offer was subscribed 4.83 times. During this period, investor perception was also positive with analysts predicting that the InvIT would yield steady long-term returns. PGCIL eventually auctioned 27.41 crore units, earning INR 2,736.02 crore in May 2021. However, concerns with the lack of transparent price discovery and taxation norms on long-term capital investments have prompted PGCIL to rethink its InvIT plans. Additionally, the retention of O&M as a function of the public sector entity may create a hesitation to investment by private entities.

Neither of the two distinct asset monetisation models that India has experimented with achieved the outcomes it set out to achieve. On one hand, InvIT provides a diversification of risk but O&M remains with the government. On the other hand, TOT provides autonomy over O&M but ownership is not diversified. This serves as a case study for the design of new models for asset monetisation, and whether it can address the concerns of previous models used.

There is no reason why an InvIT structure cannot be augmented to also include the contracting out of O&M functions to a private entity. This will bring in private sector efficiency and allay the fears of investors. There are two ways in which the InvIT could be presently undertaking O&M: (i) it is possible that PGCIL is charging the InvIT a fee and doing the O&M, or (ii) O&M staff may have been transferred with the assets and the InvIT is doing its own O&M. Either way the function is retained with the government, making it a potential point of concern for investors. To eliminate this friction, a third model is preferable, where O&M functions of an InvIT are contracted out. This could have been a plausible design option since InvITs have been around for a while, instead of opting for a fully different model.

Concerns about the AOMT

The importance of private investment in transmission is well taken. The question lies in the pathway to a solution. We recognise the immense complexities of getting up to a well-functioning institutional mechanism. We also recognise that different sectors may warrant different approaches to doing the same things. There are two main concerns with the AOMT model:

  1. The contract design is not suited to state government assets due to problems of state-level electricity governance; the overall lack of control on streams and decisions of revenue (user charges) is a factor that models should solve for; and
  2. The unfamiliarity with the model among state governments (and asset monetisation generally). There are two existing mechanisms for doing this, with precedents and understanding within infrastructure, finance and government establishments: InvIT and TOT. These represent natural pathways to take for electricity transmission assets.

It has been over one year since the introduction of the model and it has seen no uptake from states so far. States have expressed concerns with the design and feasibility of the model. When the Ministry of Power proposed AOMT, there was a need for a first principles argument and public consultation, about why a third strategy was proposed. They needed to show the difficulties that would arise through the three existing pathways, and how the modifications chosen under the AOMT model addressed these difficulties.


Ministry of Power, Guiding principles for Asset Monetisation in the Transmission sector for state governments, October 2022.

Utpal Bhaskar, Power firms finalize models for asset monetisation plan, Livemint, 2022.

KPMG, Global Infrastructure Asset Recycling and Infrastructure Capital, June 2020.

Charmi Mehta and Bhargavi Zaveri, Monetisation lessons from NHAI, The Business Standard, March 2021.

Surya Sarathi Ray, NHAI cancels two projects on low bids, Financial Express, March 2022.

P Manoj, NHAI annuls highest bid of Sekura Roads for ToT Bundle 10 as it was below reserve price, The Economic Times, Sept 2022.

Charmi Mehta and Susan Thomas, Identifying roadblocks in highway contracting: lessons from NHAI litigation, The LEAP Blog, July 2022.

Shreya Jai, PowerGrid's asset monetisation via InvITs gets Cabinet go-ahead, Business Standard, Sept 2020.

Sundar Sethuraman, PowerGrid Infrastructure Investment Trust ends debut trade at 3% premium, Business Standard, May 2021.

Sunil Shankar Matkar, PowerGrid InvIT IPO opens: Should you subscribe?, MoneyControl, April 2021.

Utpal Bhaskar, PGCIL drops second InvIT tranche plan, LiveMint, Jan 2023.

Akshay Jaitly is co-founder of Trustbridge Rule of Law Foundation and Trilegal, Charmi Mehta is a researcher with XKDR Forum, Rishika R is a researcher with Trustbridge Rule of Law Foundation, and Ajay Shah is co-founder of XKDR Forum.