Tamil Nadu’s Minister for Energy Resources, R. Nirmalkumar, has firmly stated that the electricity distribution sector in the state will not be privatised. This statement is not just a policy declaration; it aligns with findings from a recent study commissioned by the 16th Finance Commission, which evaluated the financial performance of electricity distribution companies (DISCOMs).
The study, conducted by Prayas, a non-profit organization based in Pune, emphasizes that while privatisation may enhance operational efficiency and is applicable to DISCOMs suffering from excessively high Aggregate Technical and Commercial (AT&C) losses, it might not yield significant advantages for Tamil Nadu. The study highlights that the state’s AT&C losses are relatively low and the quality of supply and service is commendable.
According to the 14th edition of the Power Finance Corporation (PFC)’s Integrated Rating and Ranking of Power Distribution Utilities, Tamil Nadu’s AT&C losses were recorded at 10.92% for 2022-23, 11.39% for 2023-24, and 10.96% for 2024-25. In contrast, the all-India averages stood at 15.22%, 15.97%, and 15.04% for the same years.
The Consumer Service Ratings of DISCOMs, formulated by the formerly Rural Electrification Corporation (REC), revealed that the Tamil Nadu Power Distribution Corporation achieved a distribution transformer (DT) failure rate of 2.65% for 2024-25, significantly better than the national average of 5.02%. With approximately 4.48 lakh DTs in operation within the state, these figures underscore the quality of service provided.
Moreover, the debate on privatisation raises substantial questions about whether private entities would be willing to manage the extensive demands of around 24 lakh agricultural connections, especially in regions like the Cauvery delta and the challenging terrain of the Jawadhu Hills. It is likely that private firms would prefer serving more lucrative segments, leaving the government to ponder the rationale behind privatisation, which could financially undermine the DISCOM.
Tamil Nadu’s history showcases a reluctance towards private involvement in electricity distribution. Although the REC advocated for franchisees to handle rural power supply over 15 years ago, the state has remained resistant. In the late 1990s, a few cooperative societies existed in areas such as Thirumayam and Kumbakonam; however, they were eventually integrated into the now-defunct Tamil Nadu Electricity Board (TNEB).
A persistent challenge for the Tamil Nadu Power Distribution Company Limited (TNPDCL) and its predecessors has been the disparity between the Average Cost of Supply and the Average Revenue Realised. Recently, this gap has narrowed significantly, achieving a provisional positive figure of ₹+0.04/unit during 2025-26. However, the government’s White Paper indicates that this improvement stems not from increased operational efficiency or full cost recovery from consumers, but rather from substantial funding support from the state government as mandated by the Union government.
The report suggests that a “comprehensive resolution framework” encompassing tariff adjustments, subsidy rationalisation, debt restructuring, and operational reforms is essential. Recognising the study’s insights, it is crucial to tackle systemic issues like cost-reflective pricing, regulatory certainty, and accountability rather than hastily opting for privatisation in Tamil Nadu, where AT&C losses and service quality are already commendable. Failure to rectify these intrinsic challenges may simply lead to a redistribution of financial pressure within the system.
