Tamil Nadu has stressed the urgent need for financial reforms in the power sector, calling for collaborative support from both State and Central governments to improve the financial health of discoms. The State has sought a comprehensive debt restructuring plan, advocating for a shared financial burden to ensure effective implementation. This plan should be tied to financial reforms that enforce accountability and curb further debt accumulation.
Speaking at the 2nd Group of Ministers meeting of State Electricity Ministers in Mumbai, Tamil Nadu Electricity Minister V Senthil Balaji stated that the State government has allocated ₹53,000 crore in subsidies and ₹52,000 crore in loss funding to Tamil Nadu Power Distribution Corporation Ltd (TNPDCL) over the past four years to maintain a reliable and affordable electricity supply.
He called for reducing REC and PFC loan interest rates by at least 1.5 per cent, revising net metering policies for rooftop solar, and lowering SECI’s trade margins. He also pushed for restructuring ISTS charge pooling for renewable energy, storage, and green hydrogen, ensuring fair cost distribution among States. Additionally, he sought early approval of Tamil Nadu’s ₹3,200 crore system modernisation proposal under RDSS and national recognition for the Raigarh–Pugalur–Thrissur HVDC transmission system.
Last year, the State government restructured TANGEDCO, establishing separate entities for generation, green energy, and distribution.
Rising power purchase and interest costs continue to strain TNPDCL’s finances. “To address this, we have successfully integrated AI technology for demand forecasting and day-ahead power procurement, optimising costs and efficiency, he said. “These measures have helped Tamil Nadu reduce Aggregate Technical and Commercial (AT&C) losses from 19.47 per cent in 2017-18 to 11.39 per cent in 2023-24, leading to significant financial savings. Loan interest rates from PFC and REC were also negotiated down by 0.5 per cent, easing financial pressure.
Payment discipline
Better payment discipline has reduced payable days from 146 to 48, significantly cutting late payment surcharges. These efforts have helped narrow the ACS-ARR gap to just 8 paise per unit, improving TNPDCL’s financial stability, he stated.
Balaji also highlighted that the State has an ambitious plan to develop 20,000 MW of energy storage capacity through pumped storage hydro-electric projects and battery energy storage systems. The initiative aims to efficiently utilise surplus solar power and reduce peak-hour electricity costs.
The power sector requires massive investments to sustain growth and drive grid decarbonisation. Estimates indicate that over ₹2,00,000 crore will be needed across generation, transmission, storage, and distribution in the next five-seven years. Meeting this challenge demands collaboration between the government and the private sector, he pointed out.