CAG questions Tangedco’s wisdom in buying expensive power, ignoring lower tariff options

The Comptroller and Auditor General (CAG) has criticised Tamil Nadu Generation and Distribution Corporation Limited (Tangedco) management for ignoring power available at a lower tariff and purchasing the same at a higher tariff between 2017 and 2020.

The CAG presented the report in the assembly on Tuesday. In 2012, Tangedco signed a power purchase agreement with Adani Enterprises Ltd at Rs 4.99 per unit for providing 200MW between September 2012 and 2017. The company lowered its tariff at Rs 3.50 per unit and wanted Tangedco to sign a PPA for two more years. But, instead of signing a new PPA with Adani, it went on to purchase power from other sources at a tariff which ranged between Rs 4.10 and Rs 5.48 per unit. “Tangedco, instead of accepting the offered rate of Rs 3.50 per unit, asked Adani to lower the tariff further. However, to meet the power requirement, Tangedco procured power at a higher cost from the power exchange. Thus non-renewal of contract with lesser rate lacked justification,” said the CAG report. As a result, the state power utility spent Rs 149.02 crore more.

The CAG report further said that Tangedco placed orders on four power suppliers for procurement of electricity ranging from 615MW to 815MW under short-term agreement between February 2019 and May 2019 at a cost of Rs 5.20 per unit. The discom procured a total of 2000.85 million units at a total cost of Rs 1040.44 crore.

The state power generation and distribution company went for the short-term agreement at a higher cost when it had a power purchase agreement (PPA) with long term agreement (LTOA) and power was not purchased from these companies which offered lower tariff. “Audit analysis indicated that there was an unutilised quantum of power contracted from LTOA and such unutilised quantum was 24.28%. The variable cost for the LTOA was Rs 2.57 and Rs 2.71 per unit against more than Rs 5 per unit from short-term agreements,” said the report.

Against the above two, Tangedco has spent an additional amount of Rs 693.85 crore by going for short-term agreement instead of purchasing from LTOA.

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The CAG also stated that the power generation and distribution company must complete segregation of agriculture load on feeder. As per the UDAy scheme, it must have segregated agriculture load separately so that quality power can be supplied to domestic consumers in rural areas. But Tangedco did not take action for separation of agriculture load in the remaining 1,891 feeders. “Audit is of the view that considering the benefits, Tangedco should explore the possibility of feeder segregation,” said the report.