‘Tamil Nadu Generation and Distribution Corporation’s revamp cannot be deferred’
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The Tamil Nadu Generation and Distribution Corporation (Tangedco) has created huge liabilities for the long term and a complete restructuring cannot be postponed, the White Paper released by Finance Minister Palanivel Thiaga Rajan said.
The outstanding debt of Tangedco as on March 31, 2021 is ₹1,24,974.49 crore. Including loans from the State government, the debt stands at ₹1,34,119.94 crore, according to the report.
The losses of Tangedco are caused by both high costs and low recoveries. There has been a sustained increase in costs over the last 10 years, it added.
“In the case of domestic consumers, on an average Tangedco recovers ₹2.23 per unit. Domestic tariff subsidy is on an average ₹1.09 per unit as against the total cost of supply of ₹9.06 per unit leaving a large under recovery gap of ₹5.74 per unit. With 32,639 million units of electricity supplied to the domestic sector, the total loss on account of domestic supply is ₹18,735 crore in the year 2020-21, the report added.
On the revenue side, there has been no revision of tariff for the past 7 years.
Against the average cost of ₹9.06 per unit, the recovery from 18% of the electricity supplied to the agriculture sector is nil, while the subsidy payout is ₹3.32 per unit. Hence, Tangedco does not get fully subsidised for the full cost of supply to agriculture which is ₹8,225 crore and the cross subsidisation is beyond the permissible 20%.
Over the years, there has been a steady decline in Tangedco’s share in supply to industries, mainly due to cheaper alternatives like captive power plants, and open access to third party consumers through power exchanges. This was possible due to the weak legal regulatory regime for captive power plants and was accelerated due to high industrial power tariff. The high tariff has also made Tamil Nadu uncompetitive as an industrial destination vis-à-vis other major States. The White Paper noted that even as Tangedco was unable to recover its operational costs, it kept huge bills pending with mounting interest costs.
“There was also excessive capital expenditure with high-cost borrowing. This resulted in a vicious cycle of huge pendency of bills, increased interest payments and poor recovery from the capital assets created. As the focus was on short term survival and cash management, huge liabilities have been created for the long term. A complete restructuring cannot be postponed much further,” it added.
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