TN’s decision to buy power at up to Rs 37 per unit triggers political row

Tamil Nadu’s power utility has locked in some of the most expensive short-term electricity purchases in its history, agreeing to rates as high as Rs 35 per unit for gas-based power through the end of October. The decision, taken by the Tamil Nadu Power Distribution Corporation Limited (TNPDCL) under the TVK-led government, has triggered a sharp political row, with opposition leaders calling it evidence of mismanagement or worse, while the electricity minister defends it as a temporary measure to avoid widespread power cuts.

TNPDCL has finalised deals for roughly 1,500 MW of round-the-clock supply at Rs 31.99-Rs 34.49 per unit and around 2,000 MW for evening peak hours (6 pm to midnight) at Rs 33.37-Rs 37 per unit, running from October 12 to October 31.

Opposition parties accused the utility of tendering for higher quantities, but Electricity and Law Minister CTR Nirmal Kumar clarified that the state will draw only about 1,500 MW of the costlier supply, mainly during peak evening hours when solar generation drops to zero. He put the additional daily cost at around Rs 5 crore. Officials note that only gas-based plants were available in the open market at short notice; coal-based power was largely unavailable. Fixed charges on the gas contracts are low (under Rs 1 per unit if power is not drawn), giving some flexibility.

Reasons for emergency purchase

The TVK government attributes the need for emergency buying to a sharp rise in demand, shortfalls from central generating stations (around 4,000 MW under annual maintenance), reduced wind generation, and delayed monsoon rains linked to El Niño conditions.

Nirmal Kumar told The Federal that peak demand had risen from 16,800 MW last year to around 21,700 MW this year, a jump of nearly 30 per cent. He further clarified that he was referring specifically to October demand levels, not the annual system peak. He shared a TNEB grid demand screenshot from 13 October 2025 showing 16,847 MW and said current October demand is expected to cross 21,000 MW because of higher temperatures.

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Other factors cited by the minister include a shortfall of around 1,850 MW from the central pool and wind generation that has fallen to roughly 500 MW against 3,500 MW that was tied up. He said the short-term purchase is meant to prevent two- to three-hour cuts and that long-term tenders for 3,500 MW or more, along with multi-year contracts, are being prepared this month. He also denied that earlier power purchase agreements were arbitrarily cancelled after the TVK government took office.

‘Mega scam’, alleges AIADMK

AIADMK general secretary Edappadi K Palaniswami accused the TVK government of orchestrating a “mega scam”, alleging that lower-rate contracts were cancelled in May over corruption suspicions, only for the state to now buy power at nearly double the price from private firms.

Also Read: Tamil Nadu's summer blackouts expose a deepening power crisis

He compared the rates unfavourably with Andhra Pradesh’s earlier deals at Rs 16–20 per unit, and warned of rising debt and the risk of eventual privatisation of the utility. Consumer bills, he says, have already jumped under revised calculations.

Opposition condemns high rates

Former DMK electricity minister V Senthil Balaji highlighted the contrast with purchases around Rs 20 per unit under the previous regime, and warned that the utility’s debt, already above Rs 2.4 lakh crore, could climb toward Rs 5 lakh crore. He also accused the present minister of irregularities in solar capacity additions.

PMK leader Anbumani Ramadoss, AMMK’s TTV Dhinakaran, Naam Tamilar’s Seeman, and others condemned the high rates, questioned the lack of advance planning, and demanded stronger own-generation capacity and greater transparency on the contracts and companies involved.

Cost of late planning?

The immediate numbers show a genuine supply crunch in October driven by weather, central station maintenance, and weak wind output. Gas-based power is expensive when it is the only option available at short notice, and the minister’s attempt to limit the draw to peak hours and cap the extra daily cost at Rs 5 crore is the government’s way of containing the political fallout.

Also Read: TN government deploys teams, vehicles to tackle Chennai's severe power cuts

At the same time, the dispute over the 30 per cent demand-increase claim has given the opposition a clear opening. While October-to-October demand has risen sharply, annual peak growth has been more modest. The fact that Andhra Pradesh secured significantly lower rates weeks earlier for a smaller quantum underlines the cost of late planning. Whether earlier contracts were cancelled for valid reasons or in a way that forced costlier emergency buying remains a point of political contention.

Coal shortage

Why is Tamil Nadu buying power at such high rates? Electricity Board officials have attributed the steep purchase price primarily to a shortage of coal. Because of this shortage, thermal (coal-based) power was simply not available in the recent short-term tender. As a result, the utility has had to turn to gas-based power plants, which are quoting significantly higher rates.

A senior electricity board official explained the difference in cost structure. Even if thermal power had been available at an average of around Rs 10 per unit, roughly half of that amount would have been fixed cost and half variable cost. Under thermal contracts, the buyer must pay the full fixed cost whether or not the power is actually drawn.

'Flexibility of gas-based power'

In contrast, gas-based plants require only a fixed charge of about Rs 1 per unit if no power is purchased. Because the current contracted rates are high, officials say the utility will draw the gas-based power only when it is strictly necessary and will otherwise limit itself to the low fixed charge.

According to the official, the decision to sign the expensive short-term contracts was driven by the absence of cheaper thermal options in the open market. The gas-based deals, while costly on a per-unit basis, give the utility greater flexibility: It can avoid large payments if demand eases, paying only the nominal fixed charge. Officials maintain that the power will be purchased only to the extent required to prevent load-shedding.

The India Meteorological Department has forecast rain from Wednesday (October 14), offering a measure of relief to the TVK government. The northeast monsoon is also expected to set in around October 15. Power department officials say that once rains begin in earnest, electricity demand is likely to fall sharply. In that sense, the government is now counting on the weather to ease the immediate supply pressure.