The Tamil Nadu Generation and Distribution Corporation (Tangedco), which has applied for the Central government’s Aatmanirbhar Bharat package of ₹90,000 crore for electricity distribution companies (discoms) across the country, may require special permission from the Centre, as the State government is finding it hard to agree to the condition on bridging the gap between the Average Cost of Supply (ACS) and the Average Revenue Realisation (ARR).
The timeline for reducing the ACS-ARR difference is three-four years. The condition can be fulfilled only through periodic hikes to power tariff, which is too much for the ruling AIADMK dispensation to swallow, given that the Assembly election is due in less than a year. Since the hike in December 2014, there has been no revision to the power tariff. For the State to benefit from the package, special permission from the Centre will be imperative.
A section of officials in the know, is, however, hopeful of getting the issue resolved, going by the experience the State government had during 2015-16, in the run-up to the implementation of the Ujwal DISCOM Assurance Yojana (UDAY), meant to facilitate the operational and financial turnaround of discoms.
The Central package, to be implemented through the Power Finance Corporation (PFC) and the Rural Electrification Corporation (REC), will help discoms clear dues, outstanding as of March 31, 2020, to Central generation and transmission companies of the Union government, independent power producers and renewable energy generators. Tangedco’s figure is ₹20,600 crore. The power utility, which gave its consent immediately after the Central government unveiled the package in May, submitted an application to the agencies about a week ago.
The financial assistance will be rendered in the form of loans, which will have a tenure of up to 10 years, including a moratorium period not exceeding three years. The State government’s guarantee, which is a pre-requisite to getting the assistance, will cover the loan amount, along with interest and any other charges.
The State government has to endorse a plan for the reduction of the ACS-ARR gap, which will have to be prepared in consultation with the Union Power Ministry, prior to the power utility securing the second tranche of the proposed assistance. The plan will also have a component on reducing Aggregate Technical and Commercial (AT&C) losses.
There are other “pre-disbursement conditions” for the first tranche, such as digital payment of power bills by consumers and installation of smart meters or prepaid meters in government departments and attached offices. They are not likely to pose any trouble to the State, where 40% of billed consumers, accounting for around 2.2 crore, are making payments through internet banking. A project to install smart meters in T. Nagar, a prominent locality in Chennai, would also have been rolled out if not for the pandemic.
There is one more aspect of the package which won’t be of comfort to the State government. As the dues will be settled directly to the power suppliers, there is also little scope for States to negotiate and lower the interest component. Yet, in the interest of its power utility, the State government is likely to go along with the arrangement.
