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It is an open secret that the Tamil Nadu state electricity utilities are bankrupt. All right, perhaps they are not technically bankrupt, but for many private power producers, the difference does not matter. Ask especially wind power producers in Tamil Nadu who had not been paid for many months together!

Recent announcements of power tariff increases in Tamil Nadu must have sounded sweet for the officials of TNEB. Perhaps this will start altering its financial position. I thought I’d take this opportunity to provide some factoids and nuggets about the Tamil Nadu state electricity utilities, especially in the context of their financial position.

  • TNEB is the largest SEB in the country in terms of number of consumers and one of the top five state utilities in terms of energy sales.
  • Tamil Nadu Generation and Distribution Company (TANGEDCO), the generation and distribution arm of TNEB, is facing severe financial constraints with over Rs 40,000 crore of debt and Rs 38,000 crore in accumulated losses.
  • The fundamental reason for TNEB’s alarming financial position is non-revision of power tariffs for the past ten years except for a minor change in 2010.
  • TNEB annually borrows nearly Rs 13,000 crore from financial institutions. In June 2011, it defaulted on repayment of Rs 2,100 crore, thereby ending up with a situation where banks are reluctant about lending money to TNEB.
  • Tamil Nadu government is now initiating action to mobilize Rs 6,000 crore through the Tamil Nadu Power Finance Corporation (TNPFC). This loan amount from TNPFC is the only external source of capital for TNEB to carry out upgradation of power plants and improvements in the transmission and distribution network.
  • One silver lining for the electricity board, however, has been a recent mobilization of Rs 120 crore through bonds. The money raised is being used to increase the pace of strengthening the transmission and distribution network in the state.
  • TNEB has requested Japan International Cooperation Agency (JICA) to fund its various power infrastructure development works. Following this, a JICA team has already visited the State. The TNEB proposal, if accepted by the Japanese agency, will see a good cash flow in the form of long term loans.