Tamil Nadu has emphasized the urgent necessity for financial reforms within the power sector, seeking collaborative support from both the State and Central governments to bolster the financial health of distribution companies (discoms). The State has proposed a comprehensive debt restructuring strategy, advocating for a shared financial responsibility to facilitate effective implementation. This plan should be linked to reforms that promote accountability and prevent the escalation of debt.
During the second Group of Ministers meeting for State Electricity Ministers in Mumbai, Tamil Nadu’s Electricity Minister V. Senthil Balaji announced that the State government has earmarked ₹53,000 crore in subsidies and ₹52,000 crore in loss funding to the Tamil Nadu Power Distribution Corporation Ltd (TNPDCL) over the past four years to ensure a reliable and affordable electricity supply.
He called for a reduction in loan interest rates from the Rural Electrification Corporation (REC) and Power Finance Corporation (PFC) by at least 1.5 percent, updates to net metering policies for rooftop solar installations, and lower trading margins for the Solar Energy Corporation of India (SECI). Furthermore, he requested a restructuring of the Interstate Transmission System (ISTS) charge pooling for renewable energy, storage, and green hydrogen, which would promote equitable cost distribution among States. Balaji also sought the expedited approval of Tamil Nadu’s ₹3,200 crore system modernization initiative under the Revamped Distribution Sector Scheme (RDSS) and national acknowledgment for the Raigarh–Pugalur–Thrissur high-voltage direct current (HVDC) transmission project.
Last year, the State government undertook a reorganization of TANGEDCO, creating distinct entities for generation, green energy, and distribution.
The rising costs associated with power purchases and interest continue to put pressure on TNPDCL’s finances. To tackle this, the State has successfully integrated artificial intelligence technology for demand forecasting and day-ahead power procurement, enhancing cost efficiency. These initiatives have contributed to a reduction in Aggregate Technical and Commercial (AT&C) losses from 19.47 percent in 2017-18 to 11.39 percent in 2023-24, translating into significant financial savings. Negotiations have also led to a 0.5 percent reduction in loan interest rates from PFC and REC, relieving some financial strain.
Improvements in payment discipline have decreased the average payable days from 146 to 48, significantly lowering late payment surcharges. These efforts have helped narrow the gap between Average Cost of Supply (ACS) and Average Revenue Realized (ARR) to just 8 paise per unit, thereby enhancing the financial stability of TNPDCL.
Balaji also highlighted Tamil Nadu’s ambitious goal of developing 20,000 MW of energy storage capacity through pumped storage hydroelectric projects and battery energy storage systems. This initiative aims to maximize the use of surplus solar energy while reducing electricity costs during peak demand times.
To sustain growth in the power sector and facilitate grid decarbonization, substantial investments will be necessary. Estimates suggest that over ₹2,00,000 crore will be required for generation, transmission, storage, and distribution over the next five to seven years. Addressing this challenge will require collaboration between government entities and private sector stakeholders, Balaji concluded.
