Tamil Nadu's power tariff hike not enough for beleaguered discom: Experts

Dues to power sector comprise more than 28% of state's debt; state blamed for 'regulatory indiscipline'

Tamil Nadu is raising electricity tariffs for all customers after eight years, but experts say the state needs to make an additional 10-15 per cent hike to revive the power sector.

The DMK government last week raised rates by 12 per cent to 52 per cent. Based on the new tariff, consumers who paid Rs 170 for 200 units will pay Rs 225. Those who paid Rs 4,420 for 900 units will pay Rs 5,550. Electricity minister V Senthil Balaji said the tariff hike is a result of the previous AIADMK government not taking up power sector reforms in the last ten years.

Of the Rs 1.04 trillion state-owned discoms nationwide owe to power generation companies, Tamil Nadu’s share is 25 per cent or Rs 25,760 crore. Separately, dues to the power sector comprise more than 28 per cent of Tamil Nadu's overall debt. The Tamil Nadu Generation and Distribution Corporation’s (Tangedco) financial loss was around Rs 1.13 trillion in 2020-21, up by Rs 94,312 crore compared to Rs 18,954 crore in 2011-12. The Tamil Nadu Electricity Regulatory Commission (TNERC) will hold public hearings regarding the proposed hike after August 11.

“This tariff revision is hardly going to make any material difference to financials. Tamil Nadu will need at least 10-15 per cent additional hike to improve its financials. Due to lack of increase in tariff, discom [Tangedco] suffered adversely. The total loan has increased to Rs 1.6 trillion. It has been continuously posting losses for eight years. As a result, total accumulated losses is Rs 1.1 trillion,” said Mohit Kumar, senior vice president at DAM Capital.

“It is the worst managed state in terms of regulatory discipline. Despite availing loans under the liquidity scheme, it has failed to take any tariff hike,” Kumar said.

According to the state government, Tangedco’s loan outstanding increased from Rs 43,493 crore in 2011-12 to Rs 159,823 crore in 2021-22. In the same period, the interest on borrowed funds increased by 259 per cent to Rs 16,511 crore per annum.

In the last ten years, Tangedco’s expense on the purchase of power increased by 127 per cent to Rs 37,430 crore. Expenses on fuel increased by 21 per cent to Rs 6,610 crore. The state government said the new tariff hike will not be applicable for around 10 million consumers.