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Amid protests against the power tariff hike announced by the Tamil Nadu Generation and Distribution Corporation (Tangedco), industry associations have also criticised the regulator’s decision to issue orders with retrospective effect.
On Monday, the Tamil Nadu Electricity Regulatory Commission (TNERC) approved a 4.83 per cent increase in power tariffs for domestic, commercial and industrial users, effective from July 1. This has drawn backlash from several industry associations, especially those representing small and medium enterprises, who oppose both the hike and its retrospective implementation.
The new tariffs, though announced on July 15, 2024, are effective from July 1, 2024. This retrospective application is unprecedented for TNERC and has sparked practical concerns among industry members.
Disrupts financial plan
According to a circular from the Tamil Nadu Spinning Mills Association, no tariff order should be applied retrospectively. They argue that it is legally invalid and disrupts financial planning for businesses that have already factored in previous energy costs for their products sold from July 1 to 15.
A member of the association highlighted the lack of proper protocol in passing the tariff order, noting that the aggregate revenue requirement (ARR) and true-up petitions by Tantransco /Tangedco had not been approved by TNERC before issuing the tariff orders.
SK Sundararaman, Chairman of the Southern India Mills’ Association (SIMA), has appealed to Chief Minister Stalin to reconsider the tariff hike, citing the industry’s struggle with an ongoing recession over the past 2-3 years. He emphasised that linking the consumer price index (CPI) to power generation costs is inappropriate, as CPI is traditionally used to adjust wages and salaries.
Despite objections from the industry when Tangedco proposed the CPI linkage, TNERC and the government proceeded without addressing these concerns. Sundararaman urged the Chief Minister to delay the tariff hike for two years to allow the industry to recover from the impacts of the Covid pandemic, the Ukraine-Russia war and the Israel-Hamas conflict.
Govt’s argument
The State government, however, defended the hike, stating that Tamil Nadu’s power tariffs are still lower than in many other States. The government argued that the increase is necessary to address Tangedco’s mounting losses and that they are planning to implement the hike in stages to ease the burden on consumers.
According to a recent report by rating agency ICRA, TAangedco’s borrowing levels have significantly increased, reaching ₹1,69,502 crore as of March 31, 2024, up from ₹1,64,562 crore.
Tangedco’s accumulated losses are pegged at around ₹1.5-lakh crore, according to estimates.
KE Raghunathan, National Chairman of the Association of Indian Entrepreneurs, stated that Tamil Nadu’s tariffs, even after the recent increases, being the lowest in the country, speaks volumes about the poor management of affairs in the past.
“Due to the tariff hike approved in September 2022, Tangedco’s net loss for FY2024 significantly reduced to ₹2,158.5 crore from ₹9,192.3 crore in FY2023 (before accounting for prior-period changes). Future losses will depend on subsequent tariff hikes aligned with power purchase costs,” said ICRA report.
With inputs from T E Raja Simhan
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