The TrustBridge Newsletter | Issue 7
Seminar: Insights into TNERC from Review at APTEL | Carnegie 'Political Economy Dialogue' | Electricity Chokepoint in Tamil Nadu Finance | Govt Intervention in Startups | Free Electricity to States
This is TrustBridge’s monthly newsletter. TrustBridge seeks to improve India’s business environment by improving the rule of law. In this monthly newsletter, we bring you the work done by the TrustBridge Team in the public space and offer insights into future work.
Events
Seminar (online): 28 March, 3-4PM IST
Insights into the Tamil Nadu Electricity Regulatory Commission from Review at the Appellate Tribunal for Electricity
by Bhavin Patel and Renuka Sane
The paper analyses all appeal orders at the Appellate Tribunal for Electricity (APTEL) from 2013 onwards where the Tamil Nadu Electricity Regulatory Commission (TNERC) was either an appellant or respondent. The TNERC is not able to hold its ground in 65% of appeals. In addition, 25% of the appeals are “remanded” back to the TNERC, suggesting that it did not even do a good job of ensuring that all the evidence necessary to decide a matter was brought on record, despite being conferred the powers of a Civil Court for such purposes under Section 94 of the Electricity Act, 2003. Further, the TNERC lost 89% of matters that involved issues related to how it uses its regulatory powers. Analysis of these orders helps identify areas of concern, and can guide the management and board of the regulator towards remedial action, providing a pathway to enhancing regulatory state capacity.
Please let us know if you'd like to attend so that we can send you the meeting link: write to: info@trustbridge.in
Conferences
TrustBridge Rule of Law Foundation and XKDR Forum organised a conference on Electricity Reforms in the Economic Strategy of Tamil Nadu on February 29, 2024 in Chennai.
TrustBridge participated at Carnegie India’s ‘Political Economy Dialogue’ held at the India International Centre in New Delhi on March 11 and 12, 2024:
Renuka Sane moderated the session `The Challenges and Opportunities in India’s Climate Transition’. Akshay Jaitly was a panellist for the session.
Renuka was a panellist for the session 'The Past and the Future of Public Sector Enterprises’.
Anjali Sharma moderated the session 'Breaking the Logjam on Key Factor Market Reforms’.
Papers and Articles
Charmi Mehta, Radhika Pandey, Renuka Sane, and Ajay Shah released a new working paper on `The electricity chokepoint in Tamil Nadu public finance’.
Indian electricity utilities face significant financial stress on account of unfunded subsidies. This paper places the problem of electricity subsidies in the context of a debt sustainability analysis (DSA) for Tamil Nadu. We find the state fails on five out of six indicators for debt sustainability. We integrate the electricity sector into the conventional DSA, giving a “corrected DSA”. These modifications are material in changing our sense of the fiscal situation in the state. There are concerns about the extent to which the current fiscal path is sustainable. Fiscal stress harms investibility in electricity. Resolving the problems of electricity policy is a critical component of the development of the medium-term fiscal strategy for the state government.
Publications in the Media
Renuka Sane wrote two articles in The Print:
“Byju’s, Paytm Payments Bank crises are a wake-up call. But govt intervention isn’t the answer”. 28 February 2024.
Imposing public market restrictions on private markets comes at a cost and should not be done blindly. If this is done, we may lose the upside potential that comes with a startup ecosystem without any gains to minority shareholders, as there are none in this context. VCs should be able to take founders to court for fudging of books or other such misdemeanours.
“What’s the true cost of free electricity to states? Just look at Tamil Nadu”. 13 March 2024.
Taking Tamil Nadu as an example, one could argue that the debt of the two power sector utilities—Tamil Nadu Transmission Corporation (TANTRANSCO) and Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO)—will likely become the state government’s responsibility. If these two entities are unable to repay their debt, then the state government will have to step in, even though both are distinct from the government.
According to the revised estimates for FY 2023, Tamil Nadu’s debt-to-GDP ratio was 31.56. However, when the outstanding long-term borrowings of the two utilities—approximately Rs 2 lakh crore—are added to the state’s debt, the debt-to-GDP ratio shoots up to 39.7. This is an increase of almost 8 percentage points, and has a material impact on the fiscal sustainability of the state. So, how high can a debt-to-GDP ratio be? The Tamil Nadu Fiscal Responsibility Act 2003 set a target of 25 per cent for 2015, after which the debt-to-GDP was intended to decline. But even without the addition of the power sector debt, Tamil Nadu has crossed this threshold. Other states are likely to be in similar positions.
