Public sector undertakings (PSUs) in Tamil Nadu, in particular power and transport units, carry higher than permissible levels of debt, and reforms are the only way forward, indicated the “White Paper on Tamil Nadu’s Government Finances.”
Of the 60 PSUs in the State, 26 are loss making. They are dependent on government guarantees since their credit ratings are too low. But government guarantees have skyrocketed from ₹3,466 crore in 2006-07 to ₹90,344 crore in 2020-21. Also, outstanding government loans have ballooned from ₹1,579 crore in 2006-07 to ₹20,020 crore in 2020-21. Outstanding debt of power utilities - Tangedco and Tantransco - and STUs was ₹1.99-lakh crore as on March 31, 2021. The outstanding debt of Tangedco, the power generation company, was ₹1.24-lakh crore (excluding State government loan) and ₹1.34-lakh crore (including State government loan of ₹4,582.45 crore and UDAY Loan of ₹4,563.00 crore). Despite several measures, the Tangedco’s losses continue to increase on high costs and low recoveries. There is a shortfall of ₹2.36 on every unit. Also, there has been a sustained increase in costs over the last 10 years including employee costs, pension costs and interest. In FY21, of the total costs of ₹20,262 crore, staff costs accounted for ₹5,833 crore and pensions ₹3,204 crore, while interest cost was at ₹11,225 crore.
Also, increase in primary input cost of coal and increase in cost through external power purchase agreements also contribute to the increase in overall cost.
On the revenue side, there has been no revision of tariff in the past seven years. There is a nil recovery from the power supplied to the agriculture sector, while the subsidy payout is ₹3.32 per unit. Hence, Tangedco does not fully recover the cost of supply to agriculture which is ₹8,225 crore and the cross subsidisation is beyond the permissible 20 per cent.
In the case of domestic consumers, there is a large under recovery gap of ₹5.74 per unit. With 32,639 million units of electricity supplied to the domestic sector, the total loss on account of domestic supply is ₹18,735 crore in FY21.
Accumulated losses
The accumulated loss of the STUs in 2020-21 is ₹42,144 crore, up from ₹8,762 crore in 2011-12 . The factors contributing to a sustained increase in losses over the last 10 years have been due to high employee cost (62 per cent in FY21) followed by pension, diesel and interest costs. STUs are making a loss of ₹59.15 for every km operated. The accumulated losses of the two water sector Boards amounted to ₹5,282.57 crores as on March 31, 2021.
“The outstanding debts of PSUs & the Government are 36 per cent of GSDP which is significantly higher than the permissible limit of 25 per cent. Their poor financial condition leads to deterioration in the quality of services and poses risks to the State Government’s already over stretched fiscal resources. Hence, reform in this area cannot be postponed any further,” it said.