CHENNAI: Ernst & Young (EY), a private consulting firm appointed by the state government in 2021, has submitted a report suggesting the splitting of the state-owned power utility, Tangedco, into three separate companies.
Tangedco's debt stands at Rs 1.4 lakh crore and the report is aimed at managing the situation, sources said. The report has said Tangedco should be broken into three companies -- each one exclusively responsible for power generation, distribution, and renewable energy.
Speaking to TNIE, additional chief secretary Ramesh Chand Meena, who is in charge of the energy department, said the government is yet to take a call on the issue. Many power distribution companies (discoms) across the country have already divided the power sector into generation and distribution segments. For Tangedco, the challenge lies in investing more in power generation due to the need to acquire coal from north Indian states and the huge transportation costs involved. The energy department is deliberating on ways to address these issues.
A senior Tangedco official said Ernst & Young has come up with the suggestion after analysing private competitors, trends in gross and net profits as well as expenditure. The official said they will present a comprehensive report to the government after a thorough examination of the recommendations. Furthermore, the Union government is insisting that all discoms should be profitable.
Speaking to TNIE, R Murali Krishnan, legal adviser for trade union BMS's electricity division, said most of the debt is caused by the distribution end such as line loss, subsidies, free electricity and the like. "The generation wing is unnecessarily forced to bear the liability of transmission and distribution companies. Even in 2003, the idea of splitting discoms was proposed," he said.
The Tamil Nadu Electricity Regulatory Commission (TNERC) had, in 2017, also suggested dividing the electricity board into separate distribution and generation companies. "However, no steps were taken by the state government then," Krishnan said.
States like Delhi, Uttar Pradesh, Madhya Pradesh, Gujarat, Karnataka, Andhra Pradesh and a few others have witnessed favourable outcomes after the division of their distribution and generation companies. When power generation becomes a distinct utility, it can more effectively compete with private utilities and make technological advancements, he added.
Krishnan also brought attention to the significant role played by private power generation companies in the state, accounting for 50% of the capacity. "If Tangedco is made into three entities, state-owned power generation can thrive and perform effectively," he said.
A Sekkizhar, state general secretary of the TNEB employees federation, opposed the idea. He said, "If the electricity board is divided, private generation companies will dominate the sector. As of now, Tangedco has no windmills or solar plants. Hence, the power utility has to focus on increasing its own power generation."