Inside Tamil Nadu’s emergency electricity purchase and political row
Tamil Nadu has agreed to pay Rs 37 for a unit of electricity, several times the rates at which it bought power earlier this year, in an emergency effort to keep the lights on during an unusually hot October.
The purchase has opened a political battle over whether the state is facing an unavoidable shortage or paying the price for decisions that could have been made months ago.
The C Vijay Joseph-led Tamilaga Vettri Kazhagam (TVK) government argues that the expensive electricity, largely generated from gas, is necessary to prevent widespread power cuts.
Opposition parties, including the DMK and AIADMK, say the purchase reflects poor planning and have questioned whether private suppliers are being favoured.
What is the problem?
At the centre of the dispute is a basic problem. The electricity demand has risen sharply just as some of the state’s expected sources of supply have weakened. According to State Load Despatch Centre figures, evening peak demand reached 20,527 megawatts (MW) on Monday, against an off-peak demand of 17,037 MW.
The Southern Regional Load Despatch Centre recorded a peak of 19,845 MW, compared to the 14,351 MW reported for the corresponding period last year.
Energy Minister CTR Nirmal Kumar said on Tuesday that demand had climbed to 21,700 MW, while Tamil Nadu had suffered a shortfall of about 1,850 MW in expected supply from central generating stations, including Neyveli Lignite Corporation.
Wind generation, he said, had fallen to approximately 500 MW against a contracted 3,500 MW.
The result is a shortage that the government is attempting to bridge through the short-term electricity market, where the available supply is considerably more expensive.
Nirmal Kumar said the government intended to draw around 1,500 MW of higher-cost power between October 15 and 31, primarily during the six-hour evening peak. He estimated that the purchase would impose an additional burden of about Rs 5 crore daily, but argued that the alternative was power cuts lasting two to three hours.
The minister said cheaper electricity was being purchased wherever available and that gas-generated power would be used only to meet the remaining shortfall. The distinction matters because the highest quoted price does not necessarily represent the cost of every unit purchased. Nor does the capacity covered by a tender necessarily equal the electricity ultimately drawn.
TNPDCL’s October 6 tender sought 4,500 MW of emergency power for October 12-31, comprising 1,500 MW for the midnight-to-2 am period and 3,000 MW for the evening peak between 6 pm and midnight. According to bidding details, the evening segment accounted for accepted offers totalling 2,001 MW, including 1,380 MW at Rs 35.92 per unit, 340 MW at Rs 35.93, 181 MW at Rs 37 and 100 MW at Rs 33.37.
The government has said the quantity ultimately purchased and the total expenditure will depend on demand during the procurement period.
Opposition questions move
The Opposition has questioned why Tamil Nadu must pay such prices when neighbouring Andhra Pradesh has reportedly secured electricity at Rs 14 to Rs 20 per unit.
AIADMK general secretary Edappadi K Palaniswami demanded that the agreement be withdrawn. DMK leader Udhayanidhi Stalin questioned whether the shortage had been artificially created, while former Finance Minister PTR Palanivel Thiaga Rajan raised allegations of administrative incompetence or corruption.
Nirmal Kumar denied allegations that the TVK government had cancelled cheaper power purchase agreements after assuming office, saying existing contracts could not be terminated arbitrarily under national guidelines. The allegation that lower-cost agreements were cancelled in June has not been independently substantiated with details of the suppliers, contracted rates or duration.
What official records show
Official records, however, show that Tamil Nadu had entered into medium-term procurement arrangements before the change of government. In a written reply to the Lok Sabha in March, the Union Power Ministry said TNPDCL had concluded agreements for about 2,700 MW for five years, besides short-term arrangements for about 3,500 MW during March, April and May to meet summer demand. These were distinct from the long-term agreements whose absence the minister blamed on the previous administration.
The minister alleged that the previous DMK government had failed to enter into long-term power purchase agreements during its five-year tenure, leaving Tamil Nadu exposed to short-term market prices.
He said the government would issue tenders this month for at least 3,500 MW of long-term procurement, while preparing a separate five-year contract for 1,500 MW to 2,000 MW. It aimed to secure another 6,000 MW to 8,000 MW by 2028-29.
The administration was also attempting to increase generation from existing thermal plants. According to Nirmal Kumar, actual generation had risen to approximately 4,200-4,300 MW against an installed capacity of 5,300 MW, compared with around 2,200 MW generated from 4,300 MW of installed capacity during the corresponding period last year.
The government was examining whether to revive the stalled Uppur thermal project, where substantial construction and equipment procurement had already been completed. It was also preparing a revised renewable energy policy incorporating battery storage. New solar applications had been held up for four months during the review, the minister said, citing alleged irregularities in earlier arrangements.
Earlier warnings
The present controversy follows an earlier warning. In May 2024, the Tamil Nadu Electricity Regulatory Commission cautioned that excessive reliance on expensive short-term electricity purchases could widen the utility’s revenue gap and eventually burden consumers. It called for better planning, faster completion of generation projects and investment in storage. More than two years later, the question has returned with considerably higher prices.
On Monday, even the Secretariat experienced an electrical interruption. Nirmal Kumar said the problem was confined to an overheated electrical board on one floor, repaired within about 15 minutes, rather than a power cut affecting the entire building.
The government says it is paying a premium to prevent prolonged interruptions across Tamil Nadu. What remains unresolved is how much that insurance will cost and whether the state could have secured it more cheaply.
