16th Finance Commission identifies T.N. as one of top three States suffering heavy losses of public sector enterprises

Tamil Nadu has been identified as one of the top three States in the country, which suffer from heavy losses incurred by State Public Sector Enterprises (SPSEs).

For the year 2022-23, the top three States in this category were Uttar Pradesh (₹32,430 crore), Rajasthan (₹18,814 crore), and Tamil Nadu (₹16,048 crore), according to the volume 1 of the main report of the 16th Finance Commission. These States come under the broad group of non-north-eastern and hilly (non-NEH) States.

As in the case of other non-NEH States, a substantial portion of the losses were concentrated in the power sector. In the year in question, the now-defunct Tamil Nadu Generation and Distribution Corporation (Tangedco) had recorded a loss of about ₹9,192 crore. However, for 2024-25, the recently published Annual Integrated Rating of the Distribution Companies, compiled by the Power Finance Corporation, put the profit after tax (PAT) of the Tamil Nadu Power Distribution Corporation Limited (TNPDCL), one of the successors of the Tangedco, at ₹2,073 crore.

But this had become possible due to the State government’s largesse — the provision of tariff subsidy of ₹15,772 crore and the takeover of loss of ₹16,107 crore. More significantly, the accumulated deficit of the TNPDCL went down to ₹1,19,153 crore in 2024-25 from ₹1,66,944 crore of the Tangedco in 2023-24., thanks to the unbundling of the latter.

Describing the poor financial performance of SPSEs as “a burden on State budgets,” the Finance Commission stated that the State governments had to incur budgetary expenditure in the form of subsidies, grants, equity investments, and loans. Besides, they had to provide guarantees against the loans raised by the SPSEs. The financial support extended by State Governments to SPSEs in the form of equity, loans, and grants/subsidies through the budget during the year 2022-23 amounted to ₹2.5 lakh crore.

The Commission recorded that for 2022-23, the budgetary out go of the Tamil Nadu government to the SPSEs was ₹26,867 crore and till the end of the year in question, the outstanding guarantees stood at ₹89,768 crore.

The Commission did not include Tamil Nadu in the club of States with a high proportion of loss-making enterprises, a matter that provides solace to policy makers and people of the State.