TANGEDCO’s Purchase Agreement Negligence Cost Rs 813 Crore Loss, says Report

The negligence by Tamil Nadu Generation and Distribution Corporation (TANGEDCO) in the purchase agreement has resulted in crore of loss. This has been stated in a CAG report for the year ending March 2021.

The report underlined TANGEDCO failure to terminate its power purchase agreement with a private power generating company PPN, thus resulting in an unnecessary loss of Rs 453.04 crore with additional liabilities of Rs 360.20 crore.

According to the report, TANGEDCO and PPN were bound with a 30 years power purchase agreement since January 1997 with an acceptance for the supply of 330.5 MW power from the date of commercial operation.

It added that there is an agreement which stipulated a fuel mixture of gas and naphtha in the ratio of 70 is to 30. But with the delay in the availability of gas, TANGEDCO gave a nod to the 100 per cent naphtha supply, a higher costlier fuel until the natural gas availability.

Following the directives of the Central Electricity Authority and consequent request from TNEB, PPN further submitted an undertaking to limit the fuel supply agreement for 15 years. Accordingly, TANGEDCO approved a 15-year deal in August 1998, the report said.

Subsequently, the project was executed by PPN achieving a commercial operation in 2001 and TANGEDCO continued its power purchase up to June 2016 and made the payments as per terms. On PPN’s request, the public sector further extended the agreement with naphtha as an alternative fuel, a temporary measure for a period of 5 years.

Meanwhile, in February 2018, TANGEDCO decided not to propel with naphtha as an alternative fuel and filed a petition before Tamil Nadu Electricity Regulatory Commission (TNERC) seeking to direct PPN not to declare availability without a valid agreement. 

This fell on deaf ear's for PPN and the private company continued its power supply with fixed charged invoices beyond June 2016, which total outstanding as on April 2021 was Rs 813.24 crore. The same was brought to light by the Audit and despite the board’s decision of no extension, TANGEDCO failed to terminate the power purchase agreement nor filed a petition before TNERC. 

The whole blunder resulted in the payment of Rs 2,453.04 crore to the private player PPN over the period between March 2020 and November 2021 on an ad hoc basis against bills raised by PPN from April 2016 to April 2021. 

In a nutshell, the report highlighted TANGEDCO’s failure in taking any legal action or sending default notices in accordance with the power purchase agreement, leading to additional liabilities of Rs 813.24 crore.