Explainer: Why buying power at Rs 37 per unit has sparked a political storm in Tamil Nadu

The Tamil Nadu government’s decision to purchase power for up to Rs 37 per unit  has triggered a big political row, prompting criticism over whether it was a result of poor planning or corruption. This is the highest cost of power paid in Tamil Nadu’s history, and is highly unusual for almost any state discom in the country. 

The Tamilaga Vettri Kazhagam (TVK) government has cited an unexpected high demand amid a prolonged summer due to the El Niño phenomenon as the reason for the high cost. According to the Energy Resources Minister CTR Nirmal Kumar, the state’s peak power demand shot up by almost 30% from around 16,800 MW in October 2025 to nearly 21,700 MW this October –  an additional requirement of nearly 5,000 MW.

But the El Niño crisis has been felt across India, including the neighbouring south Indian states. Critics have compared the situation with that of Andhra Pradesh to question the lack of prior planning. 

Andhra Pradesh, too, is facing a surge in demand and had to resort to short-term power procurement deals. However, the state took measures as early as the first week of September. 

As many critics have pointed out, the Andhra Pradesh Power Coordination Committee (APCC) has also purchased power on a short-term basis for a similar period as Tamil Nadu’s expensive agreement – around 150 MW for a price of Rs 16 to Rs 20 per unit from October 1 to October 31. But this agreement was finalised by September 9. 

The West Bengal state discom also managed to purchase power on the short term market from October 11 to 19 at Rs 14.5 per unit, the DEEP (Discovery of Efficient Electricity Price) e-bidding web portal of the Union Ministry of Power shows. This agreement too was finalised over a month in advance, by September 1. 

The Tamil Nadu Power Distribution Corporation Limited (TNPDCL), however, invited bids to procure additional power of 4,500 MW on a short-term basis for October 12 to 31, only on October 6, a week ahead. The bids accepted are for 2062 MW of power at prices ranging from Rs 32 to Rs 34.5, and another 2001 MW for Rs 33.37 to Rs 37. The highest price of Rs 37 applies to 181 MW. 

Minister CTR Nirmal Kumar has said that only power from gas plants was available at the time of bidding. TNPDCL officials have said that the fixed charge per unit (regardless of actual power used) in the case of gas plants is only Re 1 per unit, which is much lower than that of coal plants, and would lower the cost in case of any unutilised power. 

Addressing the media on October 14, the Minister denied the Opposition’s allegations of corruption by favouring particular bidders. He said that most of the gas plant power will be procured though the government agency, NTPC Vidyut Vyapar Nigam Ltd. He also said that the expensive short-term agreement would result in an added cost of Rs 5 crore to Rs 7 crore a day over the 20-day period, suggesting that it was not an exorbitant amount. 

The Minister has also cited a shortfall in power supply of nearly 1850 MW from the Union government-run Neyveli Lignite Corporation India Limited, and a deficit in wind energy generation of nearly 3000 MW due to the weather conditions, for the delay in anticipating a power shortage of nearly 5000 MW. He has also blamed previous governments for failing to sign any long-term power purchase agreements since 2013. 

Meanwhile, opposition parties have heaped criticism over the expensive power deal. 

Dravida Munnetra Kazhagam (DMK) leader and former Finance Minister Palanivel Thiaga Rajan called it “either staggering incompetence in administration/planning,” or “massive corruption”, or both.

DMK MP Kanimozhi blamed the TVK government for increasing the state’s debt burden with such a deal. 

All India Anna Dravida Munnetra Kazhagam (AIADMK) general secretary and former CM Edappadi K Palaniswami asked if the TVK government was deliberately raising the debt burden of the state discom, in order to hand the power sector over to private firms. 

The Left parties, Communist Party of India (CPI) and Communist Party of India (Marxist) [CPI(M)] have also criticised the TVK government, calling for scrapping the expensive deal. 

Minister Nirmal Kumar on the other hand has said that the government plans to enter long-term power contracts and expand the state's power generation capacity. He said that the government has approved a proposal to increase the capacity of the Udangudi Supercritical Thermal Power Station by 560 MW.