Tamil Nadu for another power tariff hike

Chief minister J Jayalalithaa spent more than one-third of her 20-minute televised address talking about the health of the Tamil Nadu Electricity Board and the inevitability of a power tariff hike. Left unsaid was how much that would be. Hours after Chief Minister Jayalalithaa stressed the inevitability of a hike in electricity tariff, the Chairman and Managing Director (CMD) of the Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO), Rajeev Ranjan, filed a petition seeking a hike in tariff with the Tamil Nadu Electricity Regulatory Commission (TNERC).

By evening, the indication was clear: People who consume more than 500 units in two months will have to pay more. “The hike has to be substantial,” said an official, “because the losses are huge.” Sources told TOI that TNEB has proposed a hike of 1.50 per unit, which would bring in additional revenue of 8,200 crore, but not quite enough to bridge the deficit of 9,500 crore. Once the Tamil Nadu Electricity Regulatory Commission approves TNEB’s proposal after a public hearing , the increased tariff would come into effect in a couple of months.

For this, the chief minister said, the government would bring in an investment of 2,000 crore through bonds. While officials are working out the nitty-gritty of the tariff revision, Jayalalithaa made it clear that the government can no longer pump in money to keep TNEB afloat.

“The gover nment has paid 2,016 towards subsidy in advance and 1,055 crore as bonds.

We have also provided 500 crore to purchase power from the external market. The state government does not have sufficient money to give the electricity board, and the central government is not willing to provide 1,000MW which we requested for,” said Jayalalithaa.

The lower strata will continue getting the subsidy. Farmers, weavers and single-hut consumers would continue to get power free of cost. “Other than high-end domestic consumers (who consume over 500 units every two months) others will continue to get subsidy.” she said. Funds from the bonds will be to improve infrastructure and hasten generation projects, she said.

TNEB officials said the purchase of a huge quantum of power on a daily basis had caused substantial financial strain, with the accumulated losses going up from 4,911 crore in 2005-06 to 40,659 crore on March 31, 2011. During 2008-09 , the revenue was 17,644 crore and the expenditure 25,414 crore – a deficit of 7,771 crore. In 2009-10, the income was 18,846 crore and expenses 28,526 crore – a loss of 9,680 crore. In 2010-11 , the income was 22,341 crore and the expenses 33,291 crore – a loss of 10,950 crore.

Successive governments shying away from tariff revisions has not helped the power entity. In the domestic sector, power is supplied for anything between 70 paise and 4.70 against generation cost of 5.31, causing a loss of 3,500 crore. In the a g riculture sector, which consumes 12,201 million units annually, the expenditure on power is 6,500 crore, but the government subsidy is only around 250 crore. The TNEB’s outstanding debt rose from 9,300 crore in 2005-06 to 40,300 crore in 2010-11.

“The accumulated losses are mainly due to borrowing from banks to meet expenses and repay loans and for power purchase. We pay 400 crore in interest,” said an official.

To repay old debts, TNEB took loans of 21,385 and paid nearly 15 crore as dues and interest. “Now as TNEB has received poor credit ratings , banks are not willing to give loan. The Reserve Bank of India has instructed all financial institutions to refrain from providing loans to the ailing power utility,” the chief minister said.



Mechanical engineer with experience in Power Plant maintenance , operation and auditing for ISI marked products. MBA in Power Management from National Power Training Institute, Faridabad. Working as Consultant for Bridge to India Pvt. Ltd. Expertise in: 1) Power sector regulations 2) Financial Modelling 3) Project Development solar PV plants 4) Strategic consulting 5) Report writing

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