Tamil Nadu’s electricity shortage has come with a steep price tag. To keep the lights on during peak hours, the state’s power utility has agreed to procure electricity at rates ranging from Rs 35 to Rs 37 per unit, raising questions about planning, tender transparency and the financial health of Tamil Nadu Power Distribution Corporation Limited (TNPDCL), formerly TANGEDCO.
On October 6, TNPDCL floated an e-tender seeking 4,500 MW of emergency power from the open market, to be utilised from October 12 to 31. The tender covered 1,500 MW between midnight and 2 am and 3,000 MW between 6 pm and midnight. According to figures on the State Load Despatch Centre website, evening peak demand reached 20,527 megawatts (MW) on October 12, against an off-peak demand of 17,037 MW. The Southern Regional Load Despatch Centre recorded a peak of 19,845 MW, compared to the 14,351 MW reported for the corresponding period last year. “The demand had gone up to 21,700 MW. We have a shortfall of about 1,850 MW in expected supply from central generating stations, including Neyveli Lignite Corporation. Wind generation has also fallen to approximately 500 MW against a contracted 3,500 MW, because of the El Niño effect,” said Electricity Minister C.T.R. Nirmal Kumar,
The tenders were called for due to an unexpected surge in electricity demand and shortfall. But the bids accepted for evening supply covered only 2,001 MW, at rates ranging from Rs. 33.37 to Rs. 37 per unit. Early-morning procurement was priced between Rs. 31.99 and Rs. 34.49 per unit.
The utility subsequently finalised agreements for 2,062 MW at rates ranging from Rs 31.99 to Rs 34.49 per unit for the early-morning period and 2,001 MW at Rs 33.37 to Rs 37 per unit for evening demand. Of the latter, 181 MW will be purchased at the highest rate of Rs 37 per unit. The agreements run until October 31. The figures, however, raise an immediate question as to why Tamil Nadu chose to pay so much for electricity, and could better planning have reduced the bill.
The timing of the tender has emerged as a key issue. Andhra Pradesh finalised its October power purchases on September 9, securing 150 MW at Rs 16 to 20 per unit. The utility had initially expected demand to decline after October 10, but continued high demand and uncertainty over the onset of the northeast monsoon forced it to seek additional supplies at short notice. However, here the distinction between the tendered capacity and electricity actually purchased is crucial. The maximum quantity invited through a tender is not necessarily the quantity drawn, and the highest quoted price does not apply to every unit. Nevertheless, the accepted rates demand public scrutiny.
The utility has cited a shortfall of nearly 4,000 MW from central generating stations undergoing scheduled annual maintenance, alongside declining wind generation. Peak demand has remained close to 20,000 MW, compared with around 17,000 MW in October last year, while daily consumption has increased by nearly 70 million units, the report said.
The financial implications are significant. A white paper released by Electricity Minister C.T.R. Nirmal Kumar in June put the power sector’s outstanding debt at Rs 2,47,130 crore. It also showed that expenditure between 2021 and 2026 stood at Rs 5.32 lakh crore against revenue of Rs 4.97 lakh crore, leaving a deficit of Rs 34,447 crore. Former electricity minister V. Senthil Balaji has criticised the government for failing to anticipate demand and plan generation, warning that the debt could exceed Rs 5 lakh crore by the end of the TVK government’s tenure.
TNPDCL officials and the C. Joseph Vijay-led TVK government defended the procurement, saying the gas-based plants offer flexibility. “If demand falls, the utility can avoid buying the electricity and pay only a nominal fixed charge of around Re 1 per unit, subject to the terms of the agreements,” a senior official at TNPDCL told THE WEEK. But he also expressed concern over the financial consequences. “Expensive purchases increase the cost of supply, potentially widening the gap between TNPDCL’s expenditure and the revenue it collects. That gap must eventually be addressed through government subsidies, borrowing, tariff revisions or savings elsewhere,” the officer notes.
Consumers may not face an immediate increase in their bills, but they will be forced to bear the burden indirectly through public finances or future tariff decisions. Vijay’s fans and his online supporters argue that avoiding power cuts justifies the premium, which of course is a legitimate concern. “Actually, this was because of the poor planning by the new government. The new government is not able to get the right officer to manage and run the power utility,” said a senior official at TNPDCL. In fact, the power utility in Tamil Nadu has seen two transfers in the past four months since Vijay took over as the chief minister. Earlier J. Radhakrishnan, a senior IAS officer who was running the show under the previous regime, was allowed to continue. But because the government was not able to handle the unprecedented power outages, Radhakrishnan was replaced by Arun Roy IAS, as the chairman and managing director of TNEB and TNPDCL. And now again, the TVK government has transferred Roy only to bring back Rajesh Lakhoni, again a senior officer, who was the CMD of TNEB in 2021, under the previous DMK regime.
Of course, these are administrative decisions purely to resolve the power cut problem. But uninterrupted supply and prudent procurement must go together. Tamil Nadu’s electricity consumers deserve a transparent account of the actual quantity purchased, the final cost, the alternatives considered and the reasons cheaper sources were insufficient. The government must explain why advance procurement was not undertaken earlier, whether cheaper sources were available and how it plans to reduce dependence on emergency purchases. Keeping the lights on is essential. Ensuring that the state does not pay an avoidable premium to do so is equally important.
