Tamil Nadu Electricity Sector: The Subsidy Narrative (1989 – 2016)

By K Vishnu Mohan Rao
Regulatory Assistance Project
3 August 2017

Since the 1990s, Tamil Nadu’s electricity sector has been synonymous with subsidies. These subsidies have often been perceived as steps taken by political parties to increase their voter base. This is especially so when certain sizeable categories of electricity consumers—agricultural, domestic, etc.—are targeted. Despite the seemingly political motivations behind electricity subsidies, little is known about the interaction of consumers and other stakeholders in getting these subsidies for themselves. This paper takes the view that not all subsidies are politically motivated, but are grounded in the socioeconomic and developmental contexts of the particular time period. The paper will trace the history of electricity subsidies in Tamil Nadu from 1990 and highlight how various electricity consumer categories have actively lobbied for getting electricity subsidies in various forums—political, judicial, administrative, or regulatory. Further, it will explore the reasons as to what necessitated the subsidies and look at the particular strategies used by consumers to obtain them. It should be noted that is the category of subsidies is not limited to free power, but also includes shifting of consumers from higher tariffs to lower tariffs and creation of new consumer categories. Further, this paper also highlights that subsidies are often used as a means to enable growth and development of certain consumer sectors in Tamil Nadu. To understand the history of electricity subsidy in Tamil Nadu, this paper attempts a narrative by taking into account events that occurred from 1989, starting from the farmers’ agitation, and leading up to the 2016 elections. The tenures of the elected governments are taken as the basis for the temporal analysis. Further, the effect of the subsidy mechanism on the financial position of the state’s utility, the restructured Tamil Nadu Electricity Board (TNEB Ltd.) will also be analysed. Within the time period of the elected governments, the paper will seek to understand the underlying motivations of the consumer categories to become part of the subsidy mechanism while at the same time analysing the political, judicial, administrative and regulatory reasoning. The conclusions will seek to bring out recommendations to debate the direction in which electricity subsidies is moving and to understand the implications for the governance of the electricity sector in Tamil Nadu.