In wholesale markets large quantities of electricity are traded between the electricity producers and

the electricity consumers. The electricity consumers in this case are distribution companies which
buy electricity at bulk from the electricity producers and then sell it in the retail market at smaller
amounts. Electricity can also be bought by large scale industrial consumers who use it make up for
their own huge demand. The electricity sold in the wholesale markets is of a very high voltage and is
not phased down.

In retail markets electricity is sold by the distribution companies to retail consumers. Since the retail
consumers have a very low demand the electricity consumed by them is very low. The distribution
companies buy electricity from the wholesale markets and sell them in the retail markets in smaller
amounts. The voltage of electricity being sold in the retail markets is much lower than that of the
wholesale markets therefore the voltage needs to be phases down before being sold in the retail
markets.

Liberalization means removing of government control over industries. Therefore liberalization in the
energy wholesale markets means free entry and exit of players in the markets. In the sense the
electricity generators are free to sell their electricity to any industrial consumers or discoms. On the
other hand discoms and industrial consumers are free toc hoose from whom they wish to buy
electricity from.

In the retail market liberalization means that the retail consumers have a choice to choose between
different distribution companies for their electricity requirements.