Tangedco, Tamil Nadu government failed to make use of UDAY, says CAG report 

It points to the deficiencies in the utility’s financial and operational parameters 

The Comptroller and Auditor-General’s report on the Tamil Nadu Department of Electricity has faulted the State government and Tamil Nadu Generation and Distribution Corporation (Tangedco) for the failure to make a financial turnaround using the Ujwal DISCOM Assurance Yojana (UDAY). The report, effective for the year ending March 2020, has crunched the financial and performance data of Tangedco from 2015-16 to 2019-20.

It points to the deficiencies in the financial and operational parameters of Tangedco: no revision in tariff; high cost of power purchase; low plant load factor; no reduction in transmission losses; the widening gap between average cost of supply (ACS) and average revenue realised (ARR); and above all, the absence of effective monitoring of the key performance indicators of UDAY.

UDAY, launched in November 2015, envisaged reforms aimed at improving the finances and operational efficiency of the State power distribution companies (discoms). However, the scheme has not achieved what it was intended to, the report said.

The State government, a party to the tripartite agreement of the Memorandum of Understanding (MoU) with the Central government and Tangedco, has not made good on the promise to fulfil the obligation to take over 75% of the debt. As it took over 34.38% of the debt, Tangedco continued to be burdened with a loan of ₹30,502 crore and an additional interest burden of ₹9,150.60 crore during 2017-20. The State government also derailed the process of issuing bonds at a lesser interest for the remaining 25% of the debt of ₹7,605 crore of Tangedco. As a result, the utility was bearing a high cost of interest, amounting to ₹1,003.86 crore, the report said.

UDAY was aimed at reducing the cost of power generated by improving the plant load factor of the thermal power stations of Tangedco, thus cutting down on the power purchase from external sources. But the report, comparing the data for the pre- and post-UDAY periods, points to the increasing cost of generation and a lower plant load factor of the thermal power stations than the target set by the Tamil Nadu Electricity Regulatory Commission. The report says the cost of generation per unit had increased to ₹3.94 from ₹3.49 in 2015-16 and the cost of power purchased per unit went up to ₹4.94 from ₹4.32. The plant load factor of the four main thermal power stations averaged only 56.80% against the norm of 80%. Tangedco has also failed to take the help of NTPC, which was mandated to improve the operational efficiency of the thermal power stations.

The report lays bare Tangedco’s inability to revise the tariff to increase the revenue to match the cost by filing tariff petitions with the Tamil Nadu Electricity Regulatory Commission every year. Except for the tariff petition filed once in January 2017 seeking a revision, it reduced the tariff for domestic consumers, causing a revenue shortfall of ₹6,574.97 crore and forgoing a portion of the tariff subsidy payable by the State to the tune of ₹6,505.69 crore.

To top it all, Tangedco had not reduced the transmission losses from 4.11% in 2015-16 to the target of 3.89% in 2019-20, owing to the delay in the commissioning of substations and transmission lines. The delay in consumer indexing and geographic information system mapping of losses by March 2020, due to poor supervision and monitoring at the top level, prevented UDAY from making any operational and financial impact on Tangedco.