Power cost accounts over 40% of the cost of production and with the revised power tariff, the spinning and weaving mills in Tamil Nadu would become uncompetitive.
12th September 2022
Tamil Nadu Electricity Regulatory Commission has notified the revised tariff Orders for energy charges and different services provided by TANGEDCO on 9th September 2022. The steep hike across the services would erode competitiveness of the HT/EHT consumers especially the power intensive sectors textile industry in Tamil Nadu.
Tamil Nadu Electricity Regulatory Commission has notified the revised tariff Orders for energy charges and different services provided by TANGEDCO on 9th September 2022. The steep hike across the services would erode competitiveness of the HT/EHT consumers especially the power intensive sectors textile industry in Tamil Nadu. Tamil Nadu textile industry that accounts 1/3rd of the country’s textile business size and around 45% of the spun yarn manufacturing (spinning) capacity of the nation, fetches around Rs.1 lakh crores forex earnings, provides direct jobs to over 60 lakh people in the State, paying around Rs.4,000 crores SGST, etc., and the single largest HT consumer of TANGEDCO would have serious impact due to the steep tariff increase. Tamil Nadu does not have the raw material base (cotton and man-made fibres) and sources over 97% of its raw material mainly from States like Gujarat, Maharashtra, Telangana by spending Rs.3 to 6 per kg for transport. These States have become highly competitive and added capacities offering attractive incentives through unique textile policies and selling yarn at Rs.10 to 15 per kg cheaper and affecting the financial viability the spinning mills in Tamil Nadu.
In a press release issued here today, Mr Ravi Sam, Chairman, The Southern India Mills Association (SIMA) has appreciated the various policy initiatives taken by Hon’ble Chief Minister of Tamil Nadu on power front making the energy department more industry friendly. He has also appreciated the proposal of the Government to install 20,000 MW capacity renewable energy in the coming years.
SIMA Chairman said that the power intensive textile industry would become uncompetitive with the recent steep increase in the power tariff. He has said that the State is already uncompetitive and could not make sizable investments in modernisation, capacity expansion and green field projects when compared to the raw material rich (cotton and man-made fibres) States like Gujarat and Maharashtra. He has stated that power cost accounts over 40% of the cost of production and with the revised power tariff, the spinning and weaving mills in the State would become uncompetitive. Mr Ravi Sam has said that the approximate net power tariff increase for the textile industry works out to Rs.1 per unit and one kilo gram yarn manufacturing needs on an average 5 units and thus increases the yarn price by Rs.5 per kg that would affect the competitiveness of the downstream sectors like power loom, handloom, garment and made-ups segments that already raise voices against any increase in yarn price. He has added that for a spinning mill having 25,000 spindles, the power tariff increase per year would be to tune of Rs.1.2 crores.
Mr Ravi Sam has said that the Government could have deferred the power tariff increase decision for some time as the textile industry across the country particularly in Tamil Nadu is facing unforeseen crisis due to cotton shortage, high volatility in cotton prices and cutdown production to the tune of 50%. He has said that Tamil Nadu accounts over 85% of the SSI spinning mills in the country that has stopped around 70% production due to the cotton crisis.
While appreciating the tariff revision after a period of five years, SIMA Chairman has stated that TNERC has failed to consider the erosion of global competitiveness of the power intensive sectors like textiles. He has said that while the State Government has taken concerted efforts to attract over Rs.2.2 lakh crore investment through attractive industrial policies, the revised tariff would become detrimental for the new investments.
Mr Ravi Sam has said that the increase of demand charges from Rs.350 per KVA to Rs.550 KVA, is an abnormal hike when compared to most of the States in the country. He said the increase in peak hours from six hours to eight hours and also increase in peak hour charges from 20% to 25% is very high. He has suggested conducting a detailed study to assess HT consumers power consumption in each slot including peak hours and night hours and determine the additional charge for peak hours and concession for night hours on a scientific basis. He stated that the decision of year-on-year increase with the cap of 6% without following the procedure of filing of ARR by TANGEDCO with the TNERC would lead to automatic year-on-year increase, which is not prevailing in any other States. He has suggested conducting a detailed study to decide the methodology for determining the annual rate of power tariff increase rather than adopting the inflation rate which has no corelation with the power tariff increase.
Mr Ravi Sam has stated the steep increase of wheeling charges from Rs.0.21 per unit to Rs.0.96 and transmission charges from Rs.3,037.30 per MW/per day to Rs.5,159/- per MW per day and system operating charges from Rs.33.74 per MW/per day to Rs.69.84 per MW / per day would make non-conventional energy and open access power expensive and discourage the investments in non-conventional energy and new investments in the power intensive sectors.
SIMA Chairman has appealed to reduce the demand charges, wheeling charges, transmission charges and consider increasing the night hour rebate on par with peak hour to sustain the global competitiveness of the textile industry in Tamil Nadu and also avoid year-on-year increase with a cap of 6% and make the State as an attractive destination for new investments.