In a strategic move, this is the right time to divide Tangedco into distribution and generation entities to bolster profit. Currently grappling with a staggering `1.4 lakh crore debt, Tangedco stands at the crossroads. The exercise of unbundling power generation, transmission, distribution and trading activities into separate companies were to be completed within a period of one year from 2003 as per the Electricity Act 2003.
Through this, quality of service to consumers could be improved, administration made more efficient and companies might avoid further loss. Several states have unbundled their electricity boards into power generation, transmission and distribution companies. However, some states like Tamil Nadu had asked for an extension of time when the Electricity Act 2003 was introduced.
After a long gap, Tamil Nadu issued a government order on October 8, 2008, for the reorganisation of TNEB by the establishment of a holding company (TNEB) and two subsidiary companies – Tamil Nadu Transmission Corporation (Tantransco) and Tamil Nadu Generation and Distribution Corporation (Tangedco) with the stipulation that the above-mentioned companies shall be fully owned by the government.
However, the actual formation of these companies took place only in October 2010. Though TNEB is unbundled in namesake, the administration remained with a single person. TNEB remains the holding company and the chairman of TNEB is the chairman of both Tantransco and Tangedco. Generation is not yet separated and formed as a new company.
Tamil Nadu has a large number of existing power plants, old and new, and many projects have been in the pipeline for years. We had witnessed how power plants in Mettur, north Chennai and Vallur were delayed for years when power shortage peaked in 2011-12.
This delay could be directly attributed to the absence of separate generation company and one man controlling all the activities of TNEB. It is high time the government formed a separate company for generation and appointed an efficient and experienced officer as chairman and managing director. He should be given full independence. We can see substantial improvement in generation of power to eliminate shortage in the state forever.
Distribution is the face of all electricity boards as it directly comes into contact with consumers.
Consumers are concerned with the quality of service provided by distribution entities. Major reforms in power sector should start from distribution. That is why larger states had formed more than one distribution company based on their size. Odisha, Haryana and Delhi have three companies each, Karnataka has four, Andhra and Telangana have two each. Almost all the bigger states have formed more than one distribution company. But Tamil Nadu has not unbundled the TNEB except the formation of Tantransco and Tangedco under TNEB.
Distribution can be divided into many companies based on the size of the state and the total number of consumers. Tamil Nadu, with more than three crore consumers, can easily be divided into four distribution companies with 75 lakh customers each.
When I was in Tamil Nadu Electricity Regulatory Commission, we had advised the government to form three or more separate distribution companies. But the advice was not acted upon. Each company should be made independent and compete with each other in service providing and profit making, etc.
They should be headed by efficient officers. This can easily bring in a proper and relevant system and a sense of financial discipline. Competition among these companies would encourage better management and customer satisfaction.
This is the need of the hour and the government should act fast.
Footnote is a weekly column that discusses issues relating to Tamil Nadu
S Nagalsamy is former principal accountant general, Tamil Nadu, and former member TNEB and TNERC