The Union Power Ministry has identified the continuation of the free and subsidised power supply scheme as one of the factors adversely impacting the functioning of the Tamil Nadu Generation and Distribution Corporation (Tangedco).
While assigning a ‘B’ grade to the State power utility for the third consecutive year, the Power Ministry, in its report on the annual integrated rating of State power distribution companies, said that along with free and subsidised power supply, the “lack of further power sector reforms, as reflected in the unsatisfactory progress on consumer metering” was among the “key concerns” regarding the working of the power utility.
The issue of free power supply has been contentious ever since the AIADMK regime, led by M.G. Ramachandran, launched the scheme in September 1984. Initially, the free power scheme covered small and marginal farmers and hut-dwellers. Subsequently, it was extended to big farmers, those engaged in horticulture and fish prawn culture, handloom weavers, those running powerlooms and domestic consumers. For the current year, the State government is expected to provide a tariff subsidy of around ₹7,540 crore.
Other factors cited by the Centre are slippages in regulatory timelines such as on filing of tariff petitions; the power utility having suffered a net cash loss of ₹4,720 crore notwithstanding the improvement in cost coverage; the increasing exposure to the credit risk of the State government in view of the substantial rise in the dependence on tariff subsidy and the likely continuance of stress in cash flows for the poor capital structure and debt protection measures.
The report has called upon the power utility to improve billing efficiency, reduce aggregate technical and commercial (AT&C) losses, achieve 100% metering for consumers and bring down the cost of generation. At the same time, it has appreciated the State government for its financial support in the form of equity and tariff subsidy and for having signed an agreement with the Centre to implement the Ujwal Discom Assurance Yojana (UDAY) for the turnaround of distribution companies.
Dual functions
When asked for a comment, Power Minister P. Thangamani told The Hindu that unlike in many other States, the functions of generation and distribution were being performed by one entity in Tamil Nadu – Tangedco in the given instance. “This has naturally put us at a disadvantage,” he said.
However, he expressed the hope that the power utility would secure higher grade – ‘B+’ or ‘A’ – next year “if we achieve break even in our operations.”
Recently, the Minister informed the Assembly that consequent to the implementation of revenue augmentation and cost control measures, the losses of TANGEDCO, which stood at ₹13,985 crore during 2013-14, got reduced to the provisional figure of ₹2,975 crore in 2017-18. In other words, the per unit gap between the Average Rate of Realisation and the Average Cost of Supply went down from ₹1.97 during 2013-14 to ₹0.33 (33 paise) in 2017-18.
