Senior officials of the Tamil Nadu Generation and Distribution Corporation (TANGEDCO) at their headquarters on Wednesday heaved a sigh of relief after Chief Minister Jayalalithaa announced her government's nod for revising the power tariff.

Ms. Jayalalithaa, in her speech, reiterated her government's decision to continue with the free supply scheme for farmers, weavers and those covered under single bulb connection. A senior official of TANGEDCO said the organisation's proposal envisaged the average increase of around Rs. 1.50 per unit. Approximately, Rs. 8,200 crore would be the additional revenue if the proposal was approved by the Tamil Nadu Electricity Regulatory Commission (TNERC). Besides the Chief Minister agreed to provide Rs. 2,000 crore as share capital assistance. These measures would definitely help in improving the finances of TANGEDCO.

Explaining in detail the rationale behind the move, she said the present outstanding debt of the TANGEDCO was Rs. 42,175 crore. “If the situation persists, the total debt would be Rs. 53,000 crore by the end of this financial year. Besides, a sum of Rs. 10,000 crore has to be settled towards dues to power suppliers and contractors.”

When credit rating agencies had downgraded the ratings of TANGEDCO and the Reserve Bank of India had advised banks not to give loans, there was no way the TANGEDCO could raise funds from the open market, she said. In the last year of her previous regime (2005-2006), the total loss of TANGEDCO was Rs. 4,911 crore. This had gone up to Rs. 40,659 crore as on March 31, 2011. In the previous financial year, the power purchase bill came to Rs. 19,032 crore. She also pointed out that TANGEDCO had taken a loan of Rs. 21,385 crore for 2010-2011, of which the repayment of loan and interest accounted for Rs.15,000 crore.

A senior official of TANGEDCO said the cost of production was Rs. 5.31 per unit, whereas the actual realisation was Rs. 3.81 only. When the State's electricity demand was of the order of 10,000 megawatt (MW) to 11,000 MW, the shortage was 3,500 MW. The power utility had to purchase 1,500 MW-2,000 MW to meet the shortage from several sources such as private power producers. At present, 30 million units were being purchased on a temporary basis at an average cost of Rs. 7 per unit.