Apathetic Politicians Bring an Indian Utility to the Verge of Bankruptcy and Ruin

The Indian power sector seems in a perennial crisis because of the totally apathetic politicians who for their selfish interests are willing to apparently kill their state-owned power utility for some votes. Tamil Nadu which has one of the largest renewable power capacities in India has a power utility called TANGEDCO which always has massive losses. The current debt of this utility now matches that of the entire state at around $15 billion. The utility has not increased the prices of power even as costs have increased dramatically due to higher fuel costs, capital upgrades, etc. On top of that, every state-owned utility in India generally has a massive bloated workforce that generates a huge wage bill. They get increments irrespective of the state of the company as they are governed by state employment rules. This not only means job security till retirement but also fat salary increases. This further inflates the cost structure of the utility.

Also, read the List of Top Power/Electricity Companies/Utilities in India

For reasons unknown, the state utility TANGEDCO has not increased the tariffs which are supposed to be governed by an independent state regulator. However, regulators instead of being impartial and independent are generally stooges of the state ruling party who appoint the head of the regulatory body (most some crony which they like). This ensures that the regulator does not do its job and allows the utility to become a vote-buying entity. Tamil Nadu is currently run by politicians who have almost no hope of ever returning to power again. They have very little interest in prudently and wisely running the government. They don’t have a long-term vision or any interest in promoting long term viability and growth of institutions.

Due to this selfish and apathetic attitude the state distribution power utility is being run into the ground. Private power generators are also facing the music as payments from the utility are getting delayed by almost one year. The utility does not have money to pay to its suppliers given that it does not get the massive subsidies it is supposed to get from the state government. While the central government is trying to bring some discipline by asking distribution utilities to give Letters of Credit (LC) to generators before buying power and other measures, the fundamental problem of the short term selfish nature of the ruling party politicians remains unsolved.