The key recommendations of the World Bank`s study report on India`s Power Sector titled `More Power to India: The Challenge of Electricity Distribution` are as follows:

1. Ensure regulatory autonomy, effectiveness, and accountability for utilities and regulators: This recommendation emphasizes the need for utilities and regulators to have independence in decision-making and operations. It also highlights the importance of holding them accountable for their actions.

2. Insulate utilities from State Governments to prevent interference with internal operations: This recommendation suggests that utilities should be shielded from interference by state governments. By doing so, the report aims to create a conducive environment for utilities to function efficiently, without external influences affecting their operations.

Alert - Correct answer should be 1: Although the provided answer states that the correct option is 2 (1 and 2 only), this is incorrect. The correct answer should be option 1 (1, 2, and 3) as the third recommendation, which is to scrap the Electricity Act 2003 to improve revenue generation of the power distribution companies, is also mentioned in the report.