Sun Feb 08 04:10:09 UTC 2026: ### Tamil Nadu’s State Enterprises Grapple with Significant Financial Losses Despite Government Support

The Story:
A recent report by the 16th Finance Commission has identified Tamil Nadu as one of the top three states in India suffering from substantial losses incurred by State Public Sector Enterprises (SPSEs). For the year 2022-23, Tamil Nadu recorded losses of ₹16,048 crore, trailing behind Uttar Pradesh (₹32,430 crore) and Rajasthan (₹18,814 crore). Although the Tamil Nadu Power Distribution Corporation Limited (TNPDCL), successor to the defunct Tamil Nadu Generation and Distribution Corporation (Tangedco), reported a profit after tax (PAT) of ₹2,073 crore in 2024-25, this was primarily due to substantial government subsidies and the takeover of losses.

Despite improvements attributed to the unbundling of Tangedco, the accumulated deficit of TNPDCL remains high at ₹1,19,153 crore in 2024-25, down from ₹1,66,944 crore in 2023-24. The Finance Commission highlighted the burden these losses place on state budgets, requiring significant budgetary expenditure in the form of subsidies, grants, equity investments, and loans. Tamil Nadu’s budgetary outlay to SPSEs for 2022-23 was ₹26,867 crore, with outstanding guarantees standing at ₹89,768 crore.

Key Points:

  • Tamil Nadu is among the top three states with the highest losses in State Public Sector Enterprises (SPSEs) in 2022-23, with losses amounting to ₹16,048 crore.
  • The power sector, particularly the now-defunct Tamil Nadu Generation and Distribution Corporation (Tangedco), contributed significantly to these losses.
  • The Tamil Nadu Power Distribution Corporation Limited (TNPDCL) reported a profit after tax (PAT) of ₹2,073 crore in 2024-25, but this was largely due to government subsidies and the takeover of losses amounting to ₹15,772 crore and ₹16,107 crore respectively.
  • The accumulated deficit of TNPDCL remains substantial at ₹1,19,153 crore in 2024-25.
  • The Finance Commission has highlighted the financial burden of SPSEs on state budgets, with Tamil Nadu’s budgetary outlay to SPSEs in 2022-23 being ₹26,867 crore, and outstanding guarantees at ₹89,768 crore.

Key Takeaways:

  • Tamil Nadu’s SPSEs, particularly in the power sector, are a significant drain on the state’s finances.
  • Government subsidies are masking the true financial health of the TNPDCL.
  • The high accumulated deficit of TNPDCL necessitates long-term structural reforms.
  • The State government’s exposure to risk through outstanding guarantees for SPSE loans is substantial.
  • While Tamil Nadu is not in the worst category for proportion of loss-making enterprises, ongoing financial support is unsustainable in the long run.

Impact Analysis:
The continued losses incurred by Tamil Nadu’s SPSEs have significant implications for the state’s economic stability and development. The reliance on government subsidies diverts funds from other critical sectors such as education, healthcare, and infrastructure. The high accumulated debt could limit the state’s ability to invest in future growth initiatives. Furthermore, the contingent liabilities from outstanding guarantees pose a risk to the state’s fiscal position if these enterprises default on their loans. To ensure long-term sustainability, Tamil Nadu needs to implement comprehensive reforms to improve the operational efficiency and financial viability of its SPSEs.

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