As the power distribution company Tangedco’s (Tamil Nadu Generation and Distribution Corporation Ltd) losses are causing a spike in the revenue deficit of the State, the Tamil Nadu government is taking various steps to improve the finances of the company, according to a top official.

In the Tamil Nadu Budget 2024-25, the aggregate revenue deficit is pegged at ₹49,279 crore for 2024-25, up from ₹44,907 crore (revised estimate) in 2023-24. However, both numbers would have been lower had the amount provided funding to Tangedco to cover its losses were not included. In other words, ₹49,279 crore includes loss funding to Tangedco of ₹14,442 crore, while ₹44,907 crore for FY24 includes loss funding amount of ₹17,117 crore. The amount of loss funding to Tangedco in FY23 was ₹12,315 crore.

It is gathered that the Government of Tamil Nadu has been mandated to provide an amount as loss funding to Tangedco, failing which an equivalent amount will be deducted from the borrowing ceiling fixed by the union government.

Tangedco carries accumulated losses of about ₹1,50,000 crore and loans of about ₹1,60,000 crore, according to industry sources.

‘Cause of concern’

“The current situation is cause for concern. We have been breaking our heads and burning the midnight oil to find solutions for Tangedco,” T Udhayachandran, Principal Secretary-Finance, Government of Tamil Nadu told businessline during the post-Budget interaction.

He elaborated that the government has already taken some steps. Unbundling is one of the key steps that is being implemented, while it is also planning to bring in some measures in the areas of power purchase as also to improve the efficiency of existing power stations. According to industry analysts, the average PLF of Tangedco’s thermal power stations is about 60 per cent, a major factor in pulling down the performance.

The State government will discuss the possibility of debt swaps with the lenders. Also, the state government has written to the Central Government to exempt ‘loss funding to tangedco’ amount from the fiscal deficit and borrowing ceiling of the State on the lines of UDAY (Ujwal DISCOM Assurance Yojana) scheme as this provision that is mandated now is causing a huge financial burden to the state.

“We are looking at multiple options and are reasonably confident that loss funding may not be a major issue going forward,” said Udhayachandran.

Going green

He also said the State would focus more on green energy going forward. As part of the unbundling process, a new green energy company has already been established. In addition to solar and wind energy projects, it will also implement green hydrogen and pumped storage hydroelectric power generation projects.

About 12 locations have been identified for setting up of 11,500 MW pumped storage hydro power stations in Tamil Nadu under public-private partnership with an investment of about ₹60,000 crore.

Liquor revenue

Meanwhile, revenue from the sale of liquor for 2023-24 is estimated at ₹45,492 crore (Revised Estimate) of which VAT on liquor will be ₹35,698 crore and excise portion will be ₹9,794 crore. For 2024-25, the liquor revenue is projected at ₹52,488 crore (Budget Estimate), of which VAT on liquor will be ₹41,588 crore and excise will be ₹10,900 crore.

The outstanding debt of the government is projected at ₹7,27,416 crore in the Revised Estimates for 2023-24.

The State government plans to borrow about ₹1,55,584.48 crore during 2024-25 and make repayment of ₹49,638.82 crore. As a result, the outstanding debt as of March 31, 2025, is estimated at ₹8,33,361.80 crore. This constitutes 26.41 per cent of GSDP in 2024-25. The outstanding debt as a percentage of GSDP is expected to be 25.75 per cent in 2025-26 and 25 per cent in 2026-27, well within the norms prescribed by the 15th Finance Commission.

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