Do TN consumers face a electricity tariff hike?

One of the major campaign planks of the AIADMK was that the power situation in Tamil Nadu is dismal and that the people and (more so the) industry are having to bear the brunt of the shortage.

Ironically, if the situation is to be remedied, it is inescapable that the consumers in Tamil Nadu will have to brace for a large increase in power tariff.

Additional capacity

For sure, supply of electricity will improve. In the current year itself, there is every likelihood of additional generation capacity of 2,300 MW (including the State's share of the Kudankulam project) coming on stream.

But given the financial distress that TNEB and its two subsidiaries — TANGEDCO and TANTRANSCO — are in, and given the comfortable majority that the AIADMK has in the Assembly to carry out its will, there is no way that consumers in the State will escape a steep hike in tariffs.

Look at the numbers. As on March 31, 2009, the TNEB had accumulated losses of Rs 16,774.47 crore. Then, the TNEB re-valued its assets and adjusted a huge part of the losses against the increased value of assets. Even then, the total accumulated losses up to October 31, 2010, work out to a mammoth Rs 18,345 crore.

On November 1, 2010, TNEB was restructured into the parent company, TNEB, and two subsidiaries (one to take care of generation and distribution, and the other for transmission). These latter two entities have made losses between November 2010 and now. After all, in an election year the utility had hardly a choice but to purchase costly power from other States though selling electricity at subsidised tariffs.

Feedback Ventures, TNEB's consultants for the restructuring exercise, suggested that the accumulated losses of Rs 18,000 crore (up to October 31, 2010) can be recovered through regular tariff revisions.

After 2003, the TNEB never sought tariff revisions although input costs had been going up steadily. It did file a petition for raising tariffs in January 2010, but followed it up with another in July seeking to withdraw revision of tariffs for certain classes of domestic consumers. The Tamil Nadu Electricity Regulatory Commission, which fixes tariffs, passed an order that came into effect in August. But that hike is grossly insufficient. It has been estimated that the tariff hike of last year will result in additional revenue generation of Rs 1,928 crore for 2010 and 2011, while the deficit for the period would be Rs 9,418 crore.

(Incidentally, that order of TNERC has been challenged by Tamil Nadu Electricity Consumers' Association (mainly of industrial consumers), which has argued that it is unfair to hike tariff for only one class of consumers — the industry — while subsidising the others. The Association's leading advocate, Mr N L Rajah, calls for “rationalisation of tariffs”, or across-the-board hike, for the sake of equity.)

Rising input costs

Meanwhile, input costs have been spiralling up. Roughly, while the TNEB (and its subsidiaries) earns Rs 1,600 crore a month, it spends more than double that.

So, Tamil Nadu consumers are going to have to pay more for energy.

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