TANGEDCO appoints London-based EY for help in finances, working

TANGEDCO has appointed London-based multinational professional services network Ernst and Young (EY) to suggest ways and means to improve its finances as well as working.

This followed the announcement made by the DMK government to appoint a consultant after taking charge, to improve working of the state Discom, which is facing historic losses and delay in clearing dues to power generators. The consultant will submit its first report on the working of the Discom by the end of this month.

TANGEDCO management needs support to make the Discom come back on its own feet once again.

“We chose EY through a tender, as we need recommendations from an expert to bring back the Discom,” said a senior TANGEDCO official.

The official said that TANGEDCO has asked EY to submit a preliminary report by the end of this month, and a final report later.

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“We have asked the EY to study the thermal units belonging to the TANGEDCO, and suggest ways and means to improve its working, thereby bringing down the cost of generation,” said the official.

TANGEDCO wants to lower its cost of maintaining the thermal units as well as the generating cost. “The second issue for which we need suggestions is the losses. As of now, we have accumulated a loss of ₹1,11,084, and outstanding debt of ₹1,34,119 crore. We need to bring down both, and the EY will be giving their recommendations,” said the official.

The generation cost of thermal units owned by TANGEDCO has been on the rise over the years.

“The generation cost of TANGEDCO’s thermal units was ₹3.64 per unit, but the same has increased to ₹4.87, while that of private companies, which also generate power using coal, was ₹3.76 in 2011-12 has increased to ₹4.42. We will have to bring down the generation cost,” said the official.

TANGEDCO is also getting loans for setting up thermal units across the state, as well as towards paying salary and pension.

“We have both low cost and high-cost loans and the interest payments are on the rise. We want to cut the interest payments, and EY will be suggesting to close a few high-cost loans as well as the number of years within which the loans have been returned,” said the official.

TANGEDCO has also not revised its tariff for the past seven years. The last time the tariff was revised was in December 2014, since when the cost of coals or rent for rail rakes, salaries and other such expenses have increased, but the revenue has remained more or less the same.

“Against the average cost of supply of ₹9.06 per unit, the recovery from 18 percent of the electricity supplied to the agriculture sector is nil, while the subsidy pay-out is ₹3.32 per unit. Hence, TANGEDCO does not get fully subsidized for the full cost of supply to agriculture, which is ₹8,225 crore,” said the official.

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Likewise, in the case of domestic consumers, on an average, TANGEDCO recovers ₹2.23 per unit. Domestic tariff subsidy is ₹1.09 per unit on an average, as against the total cost of supply of ₹9.06 per unit, leaving 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 was ₹18,735 crore in 2020-21. Clearly those who consume more electricity are receiving greater subsidies.