CHAPTER III PROFILE OF TAMIL NADU ELECTRICITY BOARD AND POWER SECTOR REFORMS IN THE STATE

Transcription

1 CHAPTER III PROFILE OF TAMIL NADU ELECTRICITY BOARD AND POWER SECTOR REFORMS IN THE STATE 3.1 INTRODUCTION The Indian Electricity (Supply) Act was passed in the Parliament in the year Under the Electricity Act of 1948, Sub Section (79) the electricity department of each state was renamed as Electricity Boards. In Tamil Nadu the Tamil Nadu Electricity Board, hereafter called the TNEB, was commissioned and it started functioning from S.K. Chettur was the first Director of the TNEB. He was vested with all responsibilities towards the TNEB. At the same time the establishment of the new department in Tamil Nadu affected the existing workers and their welfare. Hence, the present chapter is devoted to discussing the profile of the TNEB and the reforms that took place in the power sector TAMIL NADU ELECRICITY BOARD The supply of electricity in Tamil Nadu is currently the responsibility of the Tamil Nadu Electricity Board. The TNEB is a statutory corporate body that was formed in 1957 (then known as the Madras Electricity Board) in pursuance of the Electricity (Supply) Act, The Electricity Supply Act (ESA) 1 TNEB Golden Jubilee Souvenir, Golden Jubilee ( ), Government of Tamil Nadu, 2007.

2 71 disallowed any new private participation in generating or distributing electricity and vested the power with the State Electricity Boards (SEBs) with the sole responsibility of ensuring coordinated and efficient supply of electricity in their respective states. While the SEBs were autonomous entities, the respective state governments were vested with the authority to oversee their policy decisions. The various State Electricity Boards in India are 1) Andra Pradesh, 2) Assam, 3) Bihar, 4) Chhattisgarh, 5) Delhi, 6) Gujarat, 7) Haryana, 8) Himachal Pradesh, 9) Jammu & Kashmir, 10) Jharkhand, 11) Karnataka, 12) Kerala, 13) Madhya Pradesh, 14) Maharastra, 15) Megalaya, 16) Orissa, 17) Punjab, 18) Rajasthan, 19) Tamil Nadu, 20) Uttaranchal, 21) Uttar Pradesh and 22) West Bengal. 2 The TNEB ranks top among the top three SEBs in the country, along with Maharashtra and Gujarat, in terms of the size of its operation gauged by the generating capacity at its command, the amount of energy sold and the number of consumers serviced. Tamil Nadu ranks sixth in terms of per capita electricity consumption among the states. The technical performance efficiency of the TNEB, measured by the plant load factor and the transmission and distribution losses, has normally been above the all India average and is among the top five to six SEBs. The TNEB has been in the forefront of rural electrification. Extending electricity to rural areas and promoting electrification of agricultural pumps have been accorded top priority on the TNEB s agenda. As early as 1991 the TNEB 2 Ibid.

3 72 had provided electricity to all the inhabited villages in Tamil Nadu and the number of electrified agricultural pumps in the state has registered a phenomenal growth. The TNEB s financial record is, however, a cause for much concern. Ever since the early seventies the average revenue realised per unit of electricity sold has been lower than the average cost of supplying a unit, if we do not take into consideration the subsidy provided by the State Government. This gap has been widening over the years. The Tamil Nadu Government s directive to give free electricity to a sizeable section of the domestic consumers has been largely responsible for this. The state government is committed to providing the necessary subsidies to bridge the gap. But then, as is to be expected, this was hindering capacity expansion in the sector and is also significantly eroding the health of the state finances. The TNEB is of course not alone in being situated in such a predicament. Almost all the SEBs in India are going though financial crises and many of them are in worse shape compared to the TNEB. In order to tackle the situation there are ongoing reforms in the power sector. At this juncture it might therefore be useful to analyse its strength and weakness, identify some major issues to be addressed and explore desirable and feasible options available for improvement. 3 3 Ibid.

4 73 Electricity generation in Tamil Nadu began in 1900 when a tea-estate set up a tiny hydroelectric power station to generate electricity for its own consumption. Commercial supply of electricity did not begin till the Binny Group of companies set up a thermal power station in Chennai and sold power to the Government Press, the General Hospital, the tramways and some residential areas. Till 1927, only private companies undertook the commercial supply of electricity and were regulated by the technical requirements and administrative procedures laid out in the Indian Electricity Act In 1927 the Electricity Department was created, as a wing of the state government. In order to actively boost power development in the state, generation and transmission of electricity came under the monopoly control of the Department. Retail distribution of electricity was largely taken up by licensees, some private and some local municipalities. Between 1927 and 1947 the Department created 104 MW of hydro generating capacity and between 1947 and 1951 about 52 MW of thermal capacity was added. During the First Plan another 110 MW of generating capacity was created, 64 per cent of which was hydro. The Department was able to generate surpluses after meeting all costs and provisions. The Electricity (Supply) Act was passed in 1948 for the rationalization of the production and supply of electricity and generally for taking measures conducive to electricity development. As per the Act, each state government was

5 74 required to constitute a state electricity board and responsibility for power supply in the State was to be under its monopolistic control. Existing private or municipal licenses for power distribution were allowed to continue but no new private distributing companies or generating companies could be set up. Apart from the SEBs, the Central or state government could set up generating companies. The Madras Electricity Board was duly formed in 1957 and later it came to be known as the Tamil Nadu Electricity Board Number of Substations in Tamil Nadu Electricity Board The number of substations in the TNEB and the Trend Values for the Study Period to are presented in Table 3.1. TABLE 3.1 Trend Values and Number of Sub-Stations in TNEB Year Number Trend value Source: Tamil Nadu Electricity Board Statistics at a Glance, 2007.

6 75 It is evident from Table 3.1 that the number sub-stations in the TNEB has registered an increasing trend during the study period. The trend value during was which has increased to during registering per cent growth. Table 3.2 presents the co-efficient of variations and the compound growth rate of the number of sub-stations in the TNEB. TABLE 3.2 Co-Efficient of Variations and CGR of Number of Sub-Stations in Tamil Nadu Electricity Board a Trend Coefficients b R 2 Adjusted R 2 Compound Growth Rate (in %) CV The number of sub-stations in the TNEB has registered a compound growth rate of per cent per annum. The number has also recorded a co-efficient variation of per cent. The growth of sub-stations in the TNEB is also depicted in Figure 3.1

7 In Numbers 76 Figure 3.1 Actual and Trend Values for Sub-Stations in Tamil Nadu Year Actual Trend

8 Capital outlay The successive Five Year Plans of the Government of India have allocated sizeable proportions in the State Plan outlay for the power sector. The share of power sector outlay in total went up from about 38 per cent during the first Five Year Plan to 42 per cent during the Second and gradually came down to 24 per cent during the Ninth Plan. On an average over the last 55 years around 25 per cent of the Tamil Nadu Plan outlays were allocated to the power sector. At the All-India level this share has been about 16.5 per cent. Table 3.3 presents details of the total power sector outlay and the shares of generation, transmission and rural electrification categories in this total.

9 78 TABLE 3.3 Plan-Wise Outlays For Different Categories Plan Period First Plan ( ) Second Plan ( ) Third Plan ( ) Annual Plans ( ) Fourth Plan ( ) Fifth Plan ( ) Annual Plan ( ) Sixth Plan ( ) Seventh Plan ( ) Annual Plan ( ) Annual Plan ( ) Eighth Plan ( ) Ninth Plan (Upto 2001) Total outlay on power (Rs. Crore) Generation Percentage Share of Total Outlay T&D Network Rural Elec., Source: Tamil Nadu Electricity Board Statistics at a Glance 2001.

10 79 Variations can be observed from the data given in the State Plan documents. The reason is that the TNEB figures include expenditures outside the Plan and accrual of interest during construction for some of the future Plans. The Rajadyasha Committee suggested, as a thumb rule for balanced capacity expansion in the power sector, an allocation of 50 per cent of the total investment to generation capacity and 25 per cent each for transmission and distribution. It may be observed from the above table that the share of generation of assets was significantly less than 50 per cent during the First and Second Plans, was close to 50 per cent between the Third and Sixth Plans and was nearly 60 per cent during the Seventh Plan. Since the early-nineties this share has been falling and stood at around 30 per cent during the Ninth Plan. The share of rural electrification has been above 25 per cent during the first Three Plans and was a record high of 43.5 per cent during the Fourth Plan after which it has been relatively lower, averaging around 14 per cent. The above allocation pattern reiterates the high priority given to rural electrification during the first Four Plan periods, by the end of which time service had been extended to a significant section of the rural areas. Subsequently, the share of this category has been falling. The noticeable fall in the generation outlays during the nineties is largely due to the fact that the TNEB had increasingly relied on purchasing energy from the Central Sector power generating stations. It also anticipated some generating stations to come up in the

11 80 private sector, following the amendments made to the ESA in 1991 that allowed private sector participation in power generation Installed capacity The installed power generating capacity of the TNEB has grown from 156 MW in at the beginning of the First Plan to 5,213 MW at the end of , at a Compound Annual Growth (CAG) rate of 7.3 per cent (Table 3.4). An additional capacity of MW is at the command of the TNEB, assigned to it from the Central Sector generating stations of the Neyveli Lignite Corporation (NLC), the National Thermal Power Corporation (NTPC), the nuclear power stations at Kalpakkam and Kaiga and some independent power producers (IPP). The share of the TNEB s own share in the total generating capacity at its disposal had been around 75 per cent since the end of the Third Plan. Hydro generating capacity accounted for about 70 per cent of the installed capacity during the First Plan period and went up to 80 per cent by the end of the Second Plan. The major sources of hydro potential in the State had been tapped before the early-seventies and subsequently coal/lignite based generating capacity was gaining dominance. At the end of coal based thermal generating capacity accounted for 60 per cent. While hydro power accounted for 27 per cent, the balance was contributed by gas turbines, wind, nuclear and diesel based generating capacity. 4 Tamil Nadu Electricity Board Statistics at a Glance 2001, Government of Tamil Nadu.

12 81 During about 2,800 MW of captive generating capacity, set up by some industrial and commercial enterprises, also existed in Tamil Nadu. Tamil Nadu has been identified as a State with good potential for generating Wind-based electricity and the TNEB and the Ministry for Non- Conventional Sources have been taking steps to promote greater use of this nonpolluting energy source. The TNEB has a provision that any private industry wanting to set up capacity at appropriate locations, could feed the electricity into the grid and draw the energy wherever their industry might be located. During the private sector has installed about 800 MW of wind-based generating capacity. This is 29 per cent of the total captive generation capacity set up by industries. The TNEB has installed 19 MW of wind-based generating capacity.

13 82 Year TABLE 3.4 Plan-Wise Installed Power Generating Capacity Of TNEB TNEB Capacity Hydro Thermal Gas Wind At the Command of TNEB NLC NTPC NPC IPP TOTAL Co-incident Peak Demand in M.W /845 Source : Tamil Nadu Electricity Board Statistics at a Glance and Annual Administration Reports,

14 Trend Values for Installed Capacity in Tamil Nadu Electricity Board The Installed Capacity in the Tamil Nadu Electricity Board and the trend values for the study period to are presented in Table 3.5. TABLE 3. 5 Trend Values for Installed Capacity in Tamil Nadu Electricity Board Year Actual Trend Value Source: Tamil Nadu Electricity Board Statistics at a Glance, It is evident from Table 3.5 that the installed capacity in the Tamil Nadu Electricity Board has registered an increasing trend during the study period. The value during was which has increased to during registering per cent growth. Table 3.6 presents the co-efficient of variations and the compound growth rate of installed capacity in the TNEB.

15 84 TABLE 3.6 Co-Efficient of Variations and Compound Growth Rate of Installed Capacity in the TNEB Trend Coefficients a b R 2 Adjusted R 2 Compound Growth Rate (in %) CV The Installed capacity in TNEB has registered a compound growth rate of per annum. The installed capacity has also recorded a co-efficient of variation of per cent. The growth of installed capacity in TNEB is also depicted in Figure 3.2

16 In Units (M.W.) 85 Figure 3.2 Actual and Trend Values for Installed Capacity (M.W.) Year Actual Trend

17 Transmission and Distribution TABLE 3.7 Plan-wise Progress in Distribution Capacity Year Pumpsets Connected Huts Electrified Source: Tamil Nadu Electricity Board Statistics at a Glance, 2007.

18 87 The TNEB has expanded its transmission and distribution capacity to keep up with the requirements of servicing its increasing number of consumers. Table 3.7 presents the details regarding the growth in the number of substations, high tension (HT) lines, low tension (LT) lines and the number of distribution transformers as at the end of each plan period. As mentioned earlier, extending the distribution grid so as to give the residents in rural areas access to electricity and promoting growth in electrical pumps for irrigation purposes have been a priority in Tamil Nadu and for the TNEB. The TNEB also supplies free electricity to hut-dwellers under its one-hutone-light scheme. As on 31st March 2007, 15.6 lakh huts and 18.2 lakh agricultural pumps were connected with electric power Actual and Trend Values for Transmission Lines (in CKT Kms.) The transmission lines in the Tamil Nadu Electricity Board and the trend values for during the study period to are presented in Table 3.8.

19 88 TABLE 3.8 Actual and Trend Value of Transmission Lines (in CKT Kms.) Year Actual Trend Source: Tamil Nadu Electricity Board Statistics at a Glance, It is evident from Table 3.8 that in the transmission lines the TNEB has registered a decreasing trend during the study period. The trend value during was which has decreased to during registering per cent. Table 3.9 presents the co-efficient of variations and the compound growth rate of transmission lines in the TNEB.

20 89 Trend Coefficients a b TABLE 3.9 Co-Efficient of Variations and Compound Growth Rate of Transmission Lines in the TNEB R 2 Adjusted R 2 Compound Growth Rate (in %) CV The transmission lines in the TNEB have registered a compound growth rate of per annum. The transmission lines have also recorded a co-efficient of variation of per cent. The decrease of transmission lines in the TNEB is depicted in Figure 3.3.

21 Length (in CKT Kms.) 90 Figure 3.3 Actual and Trend Values for Length of Transmission Lines (in CKT Kms.) Year Actual Trend

22 Actual and Trend Values for HT Transmission Lines (in C.K.T. Kms) The HT transmission lines in the TNEB and the trend values for during the study period to are presented in Table TABLE 3.10 Actual and Trend Values for HT Transmission Lines (in C.K.T. Kms) Year Actual Trend Source: Tamil Nadu Electricity Board Statistics at a Glance, It is evident from Table 3.10 that the HT transmission lines in the TNEB have registered an increasing trend during the study period. The trend value during was which has increased to during registering per cent. Table 3.11 presents the co-efficient of variations and the compound growth rate of HT transmission lines in the TNEB.

23 92 Table 3.11 Co-efficient of Variations and Compound Growth Rate of HT Transmission Lines in the TNEB Trend Coefficients a b R 2 Adjusted R 2 Compound Growth Rate (in %) CV In the HT Transmission lines the TNEB has registered a compound growth rate of per annum. The HT transmission lines have also recorded a coefficient of variation of 6.70 per cent. The growth of HT transmission lines in the TNEB is depicted in Figure 3.4.

24 Length (in CKT Kms.) 93 Figure 3.4 Actual and Trend Values for HT Transmission Lines (in CKT Kms.) Year Actual Trend

25 Actual and Trend Values for LT Transmission Lines (in C.K.T. Kms) The LT transmission lines in the TNEB and the trend values for the study period to are presented in Table TABLE 3.12 Actual and Trend Values for LT Transmission Lines (in C.K.T. Kms) Year Actual Trend Value Source: Tamil Nadu Electricity Board Statistics at a Glance, It is evident from Table 3.12 that the LT transmission lines in the TNEB have registered an increasing trend during the study period. The trend value during was which has increased to during registering per cent. Table 3.13 presents the Co-efficient of variations and the compound growth rate of LT Transmission lines in the TNEB.

26 95 Table 3.13 Co-Efficient of Variations and Compound Growth Rate of LT Transmission Lines in the TNEB Trend Coefficients a b R 2 Adjusted R 2 Compound Growth Rate (in %) CV The LT transmission lines in TNEB has registered a compound growth rate of per annum. The LT transmission lines has also recorded a co-efficient variations of 7.93 per cent. The growth of LT transmission lines in TNEB is also depicted in Figure 3.5

27 Length (in CKT Kms.) 96 Figure 3.5 Actual and Trend Values for LT Transmission Lines (in CKT Kms.) Year Actual Trend

28 97 Year Energy Availability The total energy available with TNEB for disposal to final consumers grew 612 million units (mu) at the beginning of the first Plan ( ) to 41,764 mu at the end of , registering a CAG rate of 8.8 per cent. Table 3.14 provides details for the final year of each plan period. Hydro TABLE 3.14 Generation, Purchase and Import of Energy (In Mw) Gross Generation Therm al Gas Wind Total Central sector Purchase Privat e sector Total Total import Gross Total (59.07) (14.91) (26.02) (100.00) (80.15) (18.55) (1.29) (100.00) (48.94) (11.43) (34.19) (5.42) (100.00) (58.07) (5.65) (33.70) (2.59) (100.00) (53.30) (16.85) (25.91) (3.94) (100.00) (53.13) (19.60) (16.98) (0.11) (10.19) (100.00) (32.39) (35.94) (30.05) (0.03) (1.59) (100.00) (18.20) (46.60) (0.02) (35.07) (0.10) (100.00) (19.15) (44.28) (0.14) (36.32) (0.11) (100.00) (20.12) (42.87) (0.11) (36.86) (0.03) (100.00) (13.00) (56.87) 0.26 (0.06) (27.46) (2.35) (100.00) (13.05) (46.60) 0.51 (0.04) (28.52) (11.27) (100.00) (8.64) (31.89) (0.34) (0.32) (19.44) (7.62) (100.00) Source: TNEB Annual Reports, 2007.

29 98 During the First two plan periods the TNEB was meeting its total sales entirely from its own generation. Starting from the Third Plan, when the TNEB started purchasing electricity from the NLC, the share of purchased energy available has been around 35 per cent. Till the beginning of the Ninth Plan purchases were largely from Central sector generating stations. While there was also a small percentage of energy imported from other states between and , during the nineties there have been no import. A negligible percentage was also purchased from a few private industries, the industries that were allowed to set up their own captive generation capacity could sell any excess energy to the TNEB. During the Ninth Plan, however, a couple of independent power producers had set up diesel based generating capacity and sold electricity to the TNEB. Hence it can be seen that the share of electricity purchased from the private sector comprised about 28 per cent of the total purchase of the TNEB and purchased power accounted for 40 per cent of the total energy available during The share of hydro generation to the TNEB s own generation witnessed a rise from 76 per cent during to 91 per cent during after which it has been exhibiting a falling trend. During the share of hydro generation was about 22 per cent. There have been considerable yearly and seasonal variations in this share depending on the success of the monsoons and the water availability in the reservoirs.

30 Generation of Electricity by Thermal Power Stations The generation of electricity by Thermal Power Stations in the TNEB and the trend values for the period to are presented in Table 3.15 TABLE 3.15 Generation of Electricity by Thermal Power Stations Year Actual Trend Value Source: Tamil Nadu Electricity Board Statistics at a Glance, It is evident from table 3.15 that the generation of electricity by Thermal Power Stations in the TNEB registered an increasing trend during the study period. The trend value during was which has increased to during registering 120 per cent Table 3.16 presents the co-efficient of variations and the compound growth rate of the generation of electricity by the Thermal Power Stations in the TNEB

31 100 TABLE 3.16 Co-Efficient of Variations and Compound Growth Rate of the Generation of Electricity by the Thermal Power Stations in the TNEB Trend Coefficients R 2 Adjusted a b R 2 Compound Growth Rate (in %) CV The Generation of Electricity by Thermal Power Stations in the TNEB has registered a compound growth rate of per annum. The generation of electricity by Thermal Power Stations has also recorded a co-efficient variations of 8.36 per cent. The growth of the generation of electricity by Thermal Power Stations in the TNEB is depicted in Figure 3.6

32 in M.U. 101 Figure 3.6 Actual and Trend Values for Generation of Electricity by Thermal Power Stations (in M.U.) Year Actual Trend

33 Actual and Trend Values for Outlay on Power (Rs. In Crores) The outlay on power in the TNEB and the trend values for the study period to are presented in Table TABLE 3.17 Actual and Trend Values for Outlay on Power (Rs. in Crores) Year Actual Trend Value Source: Tamil Nadu Electricity Board Statistics at a Glance, It is evident from table 3.17 that the outlay on power in TNEB as registered an increasing trend during the study period. The trend value during was which has increased to during registering 153 per cent Table 3.18 presents the co-efficient of variations and the compound growth rate of the outlay of power in the TNEB

34 Rs. in Crores 103 TABLE 3.18 Co-Efficient of Variations and Compound Growth Rate of the Outlay of Power in the TNEB Trend Coefficients R 2 Adjusted a b R 2 Compound Growth Rate (in %) CV The outlay on power in the TNEB has registered a compound grown rate of per annum. The outlay on power in the TNEB has also recorded a co-efficient of variations of per sent. The growth of outlay on power in the TNEB is also depicted in Figure 3.7. Figure 3.7 Actual and Trend Values for Outlay on Power (Rs. In Crores) Year Actual Trend

35 Consumer Services The total number of consumers serviced by the TNEB has grown from 7.7 lakhs at the end of the Second Plan( ) to about 150 lakh as of March 2002, at a CAG rate of 7.7 per cent and the connected load also grew at the same rate from 1,294 MW to 26,239 MW, Comparing the consumer and connected load profiles the share between and it may be observed that the share of industry in the number of consumers and connected load has remained nearly the same. The number of consumers in the service category, which includes commercial as well as government and non commercial services, has increased its share in the total from 6 per cent to 13 per cent whereas in terms of the connected load it accounted for nearly 12 per cent at both the points of reference. Agriculture has fallen both in terms of its share in the number of consumers and connected load. The proportion of agricultural consumers fell from around 15 per cent in to about 11 per cent in whereas in terms of connected load the share came down from nearly 32 per cent to 24 per cent during the same period. The domestic category on the other hand had witnessed a phenomenal rise in its share of consumers and connected load. This category accounted for 50 per cent of the consumers and 16 per cent of the connected load in but by the end of these rose to 73 per cent and 33 per cent respectively.

36 105 TABLE 3.19 NUMBER OF CONSUMERS AND CONNECTED LOAD FOR DIFFERENT CATEGORY Sl. No HT Category Consumers (Nos.) Conne Conne Conne Conne Consumermerermers Consu- Consum- Consu- cted cted cted c-ted Load Load Load Load (Nos.) (Nos.) (Nos.) (Nos.) (MW) (MW) (MW) (MW) Conne cted Load (MW) 1 Industry Services Licen. & Miscellaneous Total LT 1 Domestic Agricul- ture Industry Services Licen. & Miscellaneous Total Grand Total (HT+LT) Source: TNEB Annual Reports, 2007.

37 106 TABLE 3.20 GROWTH IN NUMBER OF SUBSTATIONS, HIGH TENSION, TOW TENSION AND DISTRIBUTION OF TRANSFORMES Sl. No Category LT Consu mers (Nos.) Connected Load (MW) Consumers (Nos.) Conne c ted Load (MW) Consumers (Nos.) Conne c ted Load (MW) Consum ers (Nos.) Conne c-ted Load (MW) Consumers (Nos.) Conne c-ted Load (MW) 1 Domestic Industry Services Licen.& Agriculture Miscellaneous Total Grand total (HT+LT) Source: TNEB Annual Reports, Table 3.20 presents information on the electricity sold by the TNEB to different categories of consumers during the final year of each Plan period. It may be observed that the share of electricity consumption by the domestic and agricultural categories has steadily risen while that of the industrial category, after showing an increasing trend up to has been falling since then. The share of the consumption by the services category, which includes both government and commercial institutions, has remained more or less stable at around 11 per cent

38 107 since the Second Plan. The share of industrial consumption rose from 27 per cent at the end of the First Plan to 50 per cent by the end of the Fourth Plan Actual and Trend Values for Per Capita Consumption (in K.W.H) The per capita consumption in the TNEB and the trend values for the study period ( to ) are presented Table 3.21 TABLE 3.21 Actual and Trend Values for Per Capita Consumption (in K.W.H) Year Actual Trend Value Source: Tamil Nadu Electricity Board Statistics at a Glance, It is evident from Table 3.21 that the per capita consumption in the TNEB as registered an increasing trend during the study period. The trend value during

39 was which has increased to during registering a 239 per cent rise. Table 3.22 presents the co-efficient of variations and the compound growth rate of per capita consumption in the TNEB TABLE 3.22 Co-Efficient of Variations and Compound Growth Rate of Per Capita Consumption in the TNEB Trend Coefficients R 2 Adjusted a b R 2 Compound Growth Rate (in %) CV The per capita consumption in the TNEB has registered a compound grown rate of 1.48 per annum. The per capita consumption has also recorded a co-efficient of variations of per sent. The growth of per capita consumption depicted in Figure 3.8

40 In K.W.H. 109 Figure 3.8 Actual and Trend Values for Per Capita Consumption (in K.W.H.) Year Actual Trend

41 Technical Performance Efficiencies The technical performance efficiencies of the TNEB can be judged in terms of the transmission and distribution (T&D) losses, the system load factor, the plant load factor (PLF), the plant availability factor, the auxiliary consumption, the fuel consumption, the employee-consumer ratio as well as the quality of electricity supplied and its being available on demand. The sale of energy and line loss details of the TNEB during the various plan periods are depicted in Table 3.23 Year Cross total TABLE 3.23 Sale of Energy and line loss Auxiliary Consumption Kadampari pumpin Sales within state Sales other State Total sales Line Loss Line Loss Source : Statistics at a Glance and Annual Administration Reports, 2007 Tamil Nadu Electricity Board. The T&D losses incurred by the TNEB were 12.4 per cent of the total energy available at the end of the First Plan period. This loss increased to 21 per

42 111 cent by the end of the Fourth Plan after which it has gradually declined and stood at 16.5 per cent during This is the lowest rate of loss reported by any SEB at the All-India level during the same year. It must be noted here that the T&D losses reported are an estimate. This is because electricity consumption by agricultural pumps and by hut dwellers is not metered since power is supplied free of charge to these categories. As a result the unaccounted amount of energy in the system actually comprises of technical T&D losses, consumption by agriculture, by hut dwellers and any illegal drawing of power from the system. However, discussions with both the TNEB and some experts outside the TNEB indicate that the technical T&D losses are a fairly realistic estimate. Though the TNEB s losses in comparison with other SEBs are low, 16 per cent is still high for a system of its size and load. It should be feasible to bring this down to around 10 per cent if appropriate measures are taken. The system load factor, which basically measures the efficiency of capacity utilization between peak and off-peak times, has been quite high for the TNEB. During the sixties and seventies, the system load factor was above 60 per cent, during the eighties it was a little above 70 per cent and during the nineties it has been as high as 75 per cent. The way this is achieved, however, is by restricting the hours of supply for some consumer groups.the load from agricultural pumps in relation to the TNEB s system capacity is quite high. While the installed

43 112 generating capacity of the TNEB is about 7500 MW, the connected load for agriculture were 6169 MW as on Hence the TNEB restricted supply to this category only during off-peak hours and that too by dividing the consumers into two groups and allowing supply to each on a rotational basis. Given that the TNEB neither charges for nor even meters the consumption by this group, this is the only option available to manage the system load. The unfortunate fallout of this arrangement is that industrial and other consumers who are connected to some of the rural feeders would also be able to avail power only during these restricted hours. The plant load factor (PLF) and the plant availability, which measure efficiency in utilizing generating plants, have been, on an average, fairly high for the thermal plants operated by the TNEB. The PLF for the TNEB thermal plants has generally been higher than the All-India average and during the year it ranked among the top five. Some of the TNEB thermal plants were recipients of the Central Meritorious Productivity Reward for many years. Auxiliary consumption (electricity consumed in generating stations) and fuel consumption rates have been within reasonable ranges though there is some scope for improvement. As for the number consumers served and the number of electricity units generated per employee the TNEB performance has been close to the All- India average.

44 113 In terms of the availability of power, starting from the late-seventies till 1992, the TNEB had to impose periodic power cuts ranging from 15 per cent to 60 per cent of the maximum demand and/or energy consumption. The large industrial consumers drawing power at the HT level were generally the worst hit during times of shortages. Often the shortages occurred when the hydro reservoirs had depleted storages. Starting from 1992 there have been no announced power cuts because additional thermal generating facilities created during the nineties have been able to provide the back up. However, there have been frequent unannounced interruptions in supply and the imbalances between demand and supply resulted in lower frequency cycles and significant voltage fluctuations. In the deficit in peak power availability was between per cent and the energy deficit was about two percent, as estimated by the TNEB. The magnitude of shortfall in supply can be gauged by the amount of captive generating capacity installed by consumers and their utilization intensity as well as pending applications for new connections. In the agricultural category, while about 16.5 lakh pumps have been electrified, applications for another 5 lakh pumps are still pending Financial Performance Details relating to the financial performance of the TNEB for the last year of each Plan period starting from the Third Plan are analyzed here since the earlyseventies, and the net surplus for the TNEB had been negative, if the subsidy

45 114 claimed from the Government is not taken into account. The gap between the average cost and the average revenue per unit fell short of the average cost by about three paise. During the seventies the gap increased; during the eighties it was as high as paise during After registering an improvement during the early nineties it declined to about 5.66 paise during It worsened again and during the average revenue fell short of the average cost by about 39 paise. The average cost here is taken to be the total revenue expenses incurred by the TNEB per unit of electricity sold, rather than the cost per unit at the LT end as is considered in some reports. During the sixties the return on the net fixed assets (NFA) was positive, though it was very low, at 0.62 per cent during and 1.29 per cent during During the Seventies the average return on the NFA was about (-) 4 per cent and it considerably declined during the Eighties. In , the return on the NFA was as low as (-) per cent. There was a significant improvement during the Eighth Plan when the return was between (-) 3 to (-) 4 per cent. By the year , the situation has worsened again and the return on the NFA was (-) 16.8 per cent. If the subsidy claimed from the state government is taken into account, the return on the NFA would be positive. It was below two per cent till the late-eighties and subsequent to the 1988 Amendment of the ESA, requiring a three per cent return on the NFA, the subsidies claimed have ensured a return of three per cent or more.

46 115

47 116 The many ills of the TNEB can probably be traced to two basic sources: one is the nature of the institutional arrangement in terms of how decision making authority, risks and responsibilities are distributed and the other is the manner in which the state government has sought to subsidize the consumption of certain groups. The institutional arrangement for power supply that is basically outlined by the ESA has the following problems. (i) The funding that is made available to the SEBs is not in any way tied to its performance efficiencies. Funds are made available through government budgetary allocations either as grants or as loans at subsidized interest rates. Loans from financial institutions were also available at subsidized rates during the earlier years. (ii) The management of the SEB neither has autonomy in making policy decisions nor is it held accountable for performance standards. (iii) The policy-making authority, typically the State government, does not directly bear any risk related to its policy decisions. On the other hand, the party in power has the potential to indulge in different forms of financial and political rent seeking. The negative impacts of bad policies are felt over much longer horizons and with considerable lag whereas the decision-makers can realize significant short-term rents These factors have basically been responsible for not stemming the increasing slack in the system that is reflected in overstaffing, delays in project execution, unjustifiable cost increases, leakages and in poor quality and insufficient quantity of electricity supply.

48 117 Tamil Nadu s Subsidy Scheme for agricultural consumers initially started with charging a lower rate per unit for small farmers. The idea was to help lowincome farmers who depended entirely on farming for a livelihood and who were realizing very meager profit margins, that too with considerable uncertainties. Over the yeas, this subsidy has been extended to all farmers rich and poor, large and small. The State government required the TNEB to periodically announce subsidies on an ad hoc basis without any considerations whatsoever for the costs involved and the benefits realized. The State Government also specified annual targets in terms of the number of agricultural pumps to be energized, number of huts to be given free supply, etc., again not looking at the efficiency implications of such decisions. The Governments however were committed to making good the corresponding losses to the TNEB by transferring funds from the state s finances. The subsidy amount to be claimed from the government each year was earlier determined by the TNEB as follows: Electricity sold to agricultural consumers was estimated This is because agricultural consumption is not metered, since TNEB saw no merit in spending resources on installing and maintaining meters and measuring the actual consumption when no revenue was fourthcoming from this category. Based on the estimated agricultural consumption and the cost per unit incurred in serving this category the TNEB would work out the subsidy to be claimed from the government. Subsequent to the 1988 Amendment to the ESA, which required all SEBs to earn at least 3 percent return

49 118 on the net fixed assets, the subsidy amount to be claimed was estimated so as to ensue a minimum return of 3 percent on net fixed assets. Thus on the one hand, policies on subsidies have been announced without any analysis of the costs and benefits involved. These polices have created a lot of negative externalities. Agricultural consumers have no idea of the costs they impose on the system by their consumption. The fact that they have not needed to pay even a proportion of this cost has encouraged indiscriminate use of the ground water potential. This has resulted in falling groundwater tables in many areas, seawater intrusion in coastal zones and increased soil salinity in some areas. Falling ground water tables have also made it costlier for small farmers to access the water. As a result markets for water have sprung up where the small farmers end up buying water from the large formers. Free access to electricity has also, as to be expected, encouraged a phenomenal growth in the demand from this category. The proportion of consumption by the non-subsidized categories is falling and that of the subsidized category is rising. Given its negative internal resources and given the limits to the budgetary funds available, the TNEB is unable to expand and maintain its capacity to keep up with the growth in demand. This has resulted in the deteriorating quality of service and in shortage. The manner in which the subsidies are estimated as a residual amount and transferred from the state finances to the TNEB also provides a convenient cover-

50 119 up for a lot of inefficiencies on the part of utility. There is no incentive or compulsion for the utility to minimize costs. A lot of inefficiencies can be swept under the carpet of agricultural subsidies. Since a sizeable proportion of consumption is not metered it provides incentives for illegal consumption of power. The unaccounted energy in the system comprises the following: consumption by agricultural consumers, consumption by hut-dwellers, technical transmission and distribution losses and illegal consumption of power. Given that it is very difficult for the TNEB to arrive at accurate estimates for all these categories and also to check illegal consumption of electricity, the figures given for agricultural consumption are probably overestimates as the following analysis indicates. The subsidy policy has a strong adverse impact on the financial health of the TNEB and the State Government. The shortfalls in the revenue account of the TNEB are eating into the capital outlays for capacity expansion. Increasing proportions of the State government s borrowing are being used up to cover revenue gaps (arising due to electricity and other subsidies) rather than the capacity to create investments. There is also considerable capacity in the manner in which the subsidy amount is presented in the financial statements. The subsidy item that is shown in the revenue receipts of the TNEB is not necessarily the actual subsidy amount that is transferred from the State Government. It is in fact subsidy claimed from the Government. This is subsidy

51 120 that is due from the TNEB owes the State Government. The unadjusted amounts of subsidy are accumulated and shown on the balance sheet as an asset Actual and Trend Values for Gross Revenue in Five Year Plans (Rs. in crores) The gross revenue in the TNEB and the trend values for the study period ( to ) are presented table 3.25 TABLE 3.25 Actual and Trend Values for Gross Revenue in Five Year Plans (Rs. in crores) Five Year Plans Actual Trend Value I II III IV V VI VII VIII IX X Source: Tamil Nadu Electricity Board Statistics at a Glance, It is evident from Table 3.25 that the gross revenue in the TNEB has registered an increasing trend during the study period. The trend value during was which has increased to during registering per cent growth