Significance of TN’s power tariff hike
The move by the Tamil Nadu government to hike the electricity tariff is remarkable on several counts. Being a politically-sensitive issue, successive governments had avoided revising tariffs, with no revision since 2014. Performing under one umbrella, the power generation and distribution utility has ratcheted up a massive loss of Rs 1.13 lakh crore by March 2021, while its debt ballooned to Rs 1.54 lakh crore in the absence of annual financial support from past governments. The TN government, struggling to improve revenue resources, has reached a point where mindless funding of the state-run Tamil Nadu Generation and Distribution Corporation Ltd (Tangedco) is no longer an option.
The Central government has meanwhile given an ultimatum to several state-run power companies to undertake immediate reforms. Though the hike looks substantially high, it’s barely making up for the loss, primarily because of the ever-increasing transmission and generation costs. Though TN has an impressive array of renewable power plants such as wind and solar, Tangedco heavily depends on thermal power and purchases from private companies to meet the rising demand.
Over the years, the cash-strapped utility has found it difficult to spend on infrastructure works such as substations and transmission lines, the lifeline of an electricity network, leaving consumers in the lurch. The state has a vast potential for solar power and needs to focus on generation as a long-term strategy. Apart from the tariff revision, the Stalin government is also investing in enhancing the transmission and distribution lines.
A consortium of consultants led by EY India is handholding Tangedco to improve its overall performance. Unfortunately, the state that tops the list of wind power production and is a model for others to emulate has a long way to go in terms of overall performance. Consumers will be ready to pay for quality power if it is made available without any interruption. Tamil Nadu needs more electricity to power its dreams of becoming a $1-trillion economy. The state needs to create a conducive environment for companies to erect power plants.