According to reports, the state’s lossmaking power utility is in a fix following a default on debt repayments. The Tamil Nadu Electricity Board (TNEB), which annually borrows nearly Rs 13,000 crore from financial institutions, has so far taken Rs 18,000 crore in long and shortterm loans over the past couple of years. In June 2011, it defaulted on repayment of Rs 2,100 crore. “We didn’t pay on time and now banks are hesitant to lend us money,” said a source.
TNEB sources said, according to Reserve Bank of India (RBI) norms, financial institutions cannot justify a loan to a company or person defaulting on payment. “Only with government assistance can we tide over the problem. The government is now initiating action to mobilize Rs 6,000 crore through the Tamil Nadu Power Finance Corporation (TNPFC),” a source said. Bank loans are the only external source of capital left for TNEB to carry out upgradation of power plants, improvements in the transmission and distribution network, and payment of salaries.
One silver lining for the electricity board, however, has been a recent mobilization of Rs 120 crore through bonds. “The total bond issue is for Rs 740 crore. It is for a period of 10 years and the rate of interest is 9.5%. Most of the companies that have subscribed are from Tamil Nadu, Mumbai and Delhi,” said the source. The money raised would be used to increase the pace of construction of power plants, and for improving and strengthening the transmission and distribution network.
While presenting the state budget, finance minister O Paneerselvam said the Tamil Nadu Generation and Distribution Company (Tangedco) was facing severe financial constraints with over Rs 40,000 crore of debt and Rs 38,000 crore in accumulated losses. The state was taking steps to augment the resources of Tangedco as a short-term measure and was working out a longterm strategy.