Tamil Nadu CM Expresses Concern With the Proposed Amendments in Electricity Act

Opposes privatization of distribution networks, direct benefit transfer, RPO targets


In a letter to the Union Power Minister, R.K. Singh, the Chief Minister of Tamil Nadu, Edapaddi K Palaniswamy, has underlined several concerns relating to the proposed amendment to the Electricity Act, seeking center’s intervention.

In April this year, the Ministry of Power (MoP) issued a draft proposal for the amendment of the Electricity Act 2003 to address contract enforcement, renewable purchase obligations (RPO), among other vital issues. The Ministry had invited comments, suggestions, and objections from stakeholders. Read about the crucial amendments that have been proposed here.

In the letter, Palaniswamy noted that the proposed privatization of distribution networks will adversely affect distribution companies (DISCOMs) and will lead to massive losses for the DISCOMs.

“Allowing private franchisees or sublicensee would only lead to cherry picking of remunerative areas by the franchisee or the sub-distribution licensee affecting the DISCOMs directly. The state DISCOMs will be left with serving social sector obligations and rural areas, which will result in massive losses to the DISCOMs,” the Chief Minister said.

Further, he underlined the state government’s mandate that farmers should receive free power, and it needs to be continued.  Raising his point against the direct benefit transfer (DBT) program, he said, “The DBT principle should not be applied to the agricultural sector. Further, the Government of Tamil Nadu has been providing 100 units free for all domestic consumers, for which the government provides subsidies to the Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO). This program may also be kept outside the scope of the DBT system.”

DBT is an attempt to change the mechanism of transferring subsidies. Under this, subsidies are directly paid to the people through their bank accounts to reduce leakages and delays.

The subsidy is given by the state government to the agricultural sector and domestic consumers are released to TANGEDCO directly, the letter added. The subsidies given by state DISCOMs are correctly assessed with the approval of the state commission. Also, the subsidy is being provided to the utility in advance in Tamil Nadu, according to the Chief Minister. So, the mode of payment of subsidy may be left to the consideration of the state government, he proposed.

The letter also suggested that the RPO targets should be determined for total renewable energy rather than independently for solar, non-solar, and hydro, among others. He rallied for this proposal, adding that setting of hydropower purchase obligation separately to a state like Tamil Nadu cannot be accepted as hydro generation is seasonal and monsoon-dependent, therefore, not in the control of DISCOMs.

Also, on the PM-KUSUM program, the Chief Minister noted that instead of separating agricultural feeders and solarizing it, which would be too costly, it would be better to solarize individual grid-connected pump sets. “Separation of agricultural feeder will be a costly proposal and will also cause unrest among farmers,” he added.

In his letter, Palaniswamy acknowledged the center’s initiative for DISCOMs by providing them a liquidity infusion package of ₹900 billion (~$11.9 billion) to clear the dues of generators and transmission companies. He added that TANGEDCO has already applied for the financial assistance of ₹206.2 billion (~$2.75 billion) from the Power Finance Corporation (PFC) and REC Limited.

The Chief Minister requested the center to release the recovered amount under the restructured accelerated power development and reforms program (RAPDRP). He said that the center should provide the amount of ₹2.68 billion (~$35.7 million), which is pending to TANGEDCO and also convert 50% of the loan amount, which amounts to ₹13.3 billion (~$177.08 million), as a grant.

Highlighting the importance of the Raigarh-Pugalur-Thrissur HDVC transmission corridor, the Chief Minister said, “The Raigarh- Pugalur HVDC corridor would be used for the export of 3 GW of renewable energy to the western region. Since this corridor is going to be used for the export of renewable power from the southern region to the rest of the country, it is requested that Raigarh-Pugalur-Thrissur HVDC transmission corridor may be declared as strategic and of national importance.”

The letter also noted that central financial assistance amounting to ₹500.8 million (~$4.4 million) that has been pending from the MNRE should be released to Tamil Nadu Energy Development Agency (TEDA).

In February this year, the Tamil Nadu Electricity Regulatory Commission (TNERC) had issued a consultative paper for procuring solar power by distribution licensees.  In the consultative paper issued by the Commission, it proposed the procurement of solar power by distribution licensees through the competitive bidding process following the bidding guidelines issued by the central government (which is already happening). The power can also be procured from the projects contracted through a competitive bidding process by SECI to comply with their renewable purchase obligations targets.

According to Mercom India’s Solar Project Tracker, Tamil Nadu has an installed solar capacity of approximately 3.6 GW as of Q1 2020. Nearly 488 MW of solar capacity is under development.

Tamil Nadu has a terrible reputation when it comes to late payment to solar and wind developers and curtailing renewable power.