On increase in electricity tariff in Tamil Nadu | Explained

Tamil Nadu electricity tariff hike sparks controversy, government support questioned, and corruption allegations surface, impacting various sectors.

The story so far: On July 15, the Tamil Nadu Electricity Regulatory Commission (TNERC) announced an average hike of 4.83% for domestic and all other consumers. The increase came into effect retrospectively from July 1. The Commission waited for the Lok Sabha and Vikravandi Assembly byelection results before announcing the tariff increase, even as it indicated, in its tariff order of September 2022, that the new tariff will come to effect from July 1 every year. Even though the previous increase of 2.18% was made effective from July 1, 2023 for various types of consumers, the State government absorbed the burden of the increase for most of the consumers, including in the domestic category, which accounts for around 2.3 crore consumers.

The genesis for the present revision can be traced back to the TNERC’s tariff order of September 2022 when it was decided to adopt a multi-year tariff framework, beginning from FY2022-23 to 2026-27. The Commission had noted that considering the trend in Consumer Price Inflation (CPI) rates which were in the range of 4.9% to 6.3%, between 2018 and 2022, the CPI index seemed to be a convenient fit. At the time, the panel also decided that irrespective of the inflation rate, the actual annual increase would be capped at 6%.

Besides, the State government’s support to the Tamil Nadu Generation and Distribution Corporation Limited or TANGEDCO (now called Tamil Nadu Power Distribution Corporation Limited or TNPDCL) has been on the rise for the last few years. For instance, the figures of tariff subsidy and grants, which were at ₹8,876.36 crore and ₹11,671.06 crore (totally ₹20,547.42 crore) during 2021-22, rose to ₹14,976.42 crore and ₹17,127.18 crore (₹32,103.6 crore) during 2023-24. An official said the increase would fetch an additional revenue of ₹2,720 crore and that the power utility was still expected to end the year with a loss of ₹12,280 crore assuming that there is no significant increase in demand during the year.

The State government asserts that about one crore domestic consumers have been spared of the increase. There is no change in the scheme for free consumption of 100 units bi-monthly for the domestic category or the free power supply scheme for huts and agriculture.

However, Micro, Small, and Medium Enterprises (MSMEs), which are over 25 lakh in number (as per official registration) and provide employment to the local youth, have protested strongly against the increase, saying that it puts a heavy burden on them. According to the segment of open end spinning mills, the higher electricity charges mean ₹25,000 additional outgo a month. The mills would have to shell out ₹0.35 a unit as additional tariff and ₹35 per KvA (Kilo-volt Ampere) as additional maximum demand charges. The power charges went up by ₹75,000 a month last year. Such frequent increase in power cost is making the textile industry of Tamil Nadu “uncompetitive,” G. Arulmozhi, a representative of the industry, complains.

Even though many political parties have condemned the tariff increase, the government has remained unfazed.

Early this month, the Directorate of Vigilance and Anti-Corruption (DVAC) registered a preliminary inquiry into allegations of serious irregularities in the tender conditions and import of coal by the erstwhile TANGEDCO which caused a huge loss to the State exchequer. This followed the government’s nod. Arappor Iyakkam, a Chennai-based anti-corruption body, had alleged, in its complaints to the government at different points of time, that there was massive corruption in the import of coal involving TANGEDCO officials, Adani Global Pte Ltd. and others to the tune of ₹6,066 crore between 2012 and 2016. The allegation centred around both the cost and quality of power supplied.