TNM Ground Report: Struggling Coimbatore MSMEs reel under steep power tariff hike

The power tariff hike, hikes in fixed charges, and peak hours has triggered economic instability in MSMEs and pushed entrepreneurs to leave the sector.
An MSME unit in Coimbatore
An MSME unit in Coimbatore (TNM Photo by Nithya Pandian)
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The Micro, Small, and Medium Enterprises (MSME) sector in Coimbatore is reeling under the effects of a hike in power tariff. The hike in peak hour and fixed charges has further worsened the condition of MSMEs which are already grappling with GST and a hike in raw material prices. TNM visited several manufacturing units in Coimbatore to know how the power tariff hike has impacted the MSME industries.

In the cluster of four CNC mill industries in Peelamedu of Coimbatore, Kalyana Sundaram, the owner of one of the 30,000-odd MSMEs told TNM that he is paying Rs 16,524 as a fixed power charge every two months after the state government introduced a new tariff last September. “It was just Rs 3,780 before the implementation. Now, I need to pay a monthly salary of one employee as a fixed charge,” he lamented. The industry he runs requires 53 kW of power which falls under a 50-112 kW slab. He needs to pay Rs 300 per kW every two months against the Rs 70 he paid before the tariff hike. He also needed to pay 15% of the consumption of power as peak hour charges which had no mention on his Electricity Board (EB) card. He pointed out that there is no separate meter to monitor peak hour usage. For 3,820 units of consumption, Sundaram paid Rs 35,394 as an electricity bill before September 2022. After the new tariff, he paid Rs 61,720 for just 2,290 units.

“I started this unit 20 years ago and I employed 20 workers including migrant workers and ran those machines for almost 20 hours. But now, I let go of half of the employees, and our production hours have been reduced to 10 to 11 hours a day,” Sundaram noted adding that he could not compensate for the power tariff hike by raising the production cost all at one go as manufacturers are already dealing with hike in raw material prices. “We have no other option but to close the units,” he said. 

Read: Tamil Nadu: 40,000 MSMEs observe strike protesting hike in power tariff 

Changes in fixed price charges
Changes in fixed price chargesSource: Tamil Nadu Electricity Regulatory Commission

No Time of Day meters 

In September 2022, the state government increased peak hour (6 am-10 am and 6 pm-10 pm) charges by up to 15% for the industries that fall under Low Tension (LT) 3B Tariff. At the time of the announcement, Tamil Nadu Generation and Distribution Corporation (TANGEDCO) did not have any Time of Day (ToD) meters to monitor the usage of power during peak hours. Even a year after the tariff hike, the consumers have yet to see the ToD meters. TNM also found that all the consumers do not have a detailed EB card on how much they need to pay for peak hours consumption, fixed charges, and taxes. 

Paramashivam, district secretary of the Tamil Nadu Association of Cottage and Micro Enterprises (TACT) said that farmers in the Delta region have received subsidies. In Erode, the powerloom industry enjoys free power up to 1,000 units. “Here, we are generating economy, creating employment regardless of education qualification one has, and we are training the youngsters to become entrepreneurs in the field. But, we got no recognition from the government. On top of it, the power tariff hike has impacted the industry badly,” he said. Paramashivam runs a small-scale business in Sowripalayam which produces textile machinery supplies and spares for garments manufacturing units. His expenditure has sharply increased from Rs one lakh to Rs 1,40,000 after the power tariff hike.

Negligence of the state and disappearance of MSMEs 

Viswanathan, vice president of TACT pointed out how one wrong move has forced them to pay huge power tariffs. According to him, the TN Electricity Regulatory Commission (TNERC) introduced a policy for the micro-sector units that consume less than 12 kW of power in 2001. The state governing body directed TNEB to provide 3A-1 power connections to such units, but they were given 3B connections. Under the 3A-1 connection, a unit of power costs Rs 4.65 paise, whereas Rs 7.65 paise is charged for the 3B connection.

“For all these years, we were exploited. To avoid further escalation of this issue, the government addressed the 3A1 connection only. But all other demands are yet to be addressed,” Viswanathan added. The policies of the last two decades have impacted the MSMEs so badly that even Viswanathan said that he wanted to quit the industry. 

Peak hour charges in Tamil Nadu
Peak hour charges in Tamil NaduSource: Tamil Nadu Electricity Regulatory Commission

According to Viswanathan, nearly 40,000 micro industries occupied every nook and corner of the district before longer power cut hours in the state in 2008. Udayamaplayam in Coimbatore, where he initially started his industry, had nearly 150 micro-industry units. Now it has been reduced to just 50 units. “In Coimbatore, between 25,000 and 30,000 MSME units sustained over the period even under the tremendous pressure. But this power tariff issues had prompted the closure of many units,” Viswanathan said.

Protest and Recommendations 

The Federation of Coimbatore Industries Association (FCIA) along with TACT staged protests on multiple occasions last month to address their five demands. MSME Associations and other units, under the banner of The Tamil Nadu Industrial Electricity Consumers’ Federation, demanded the cancellation of the multi-year tariff policy, and the suspension of yearly hikes in industrial electricity tariff. They also demanded rollback in the increase of fixed charges, repeal increase in peak hour charges for LT consumers, and migration of the micro industry consumers with a contracted load below 12kW to the cottage industries tariff category.

On September 30, in a meeting with members from the MSME sector, TNERC directed TANGEDCO to allow the migration of micro industry consumers with usage of 12kW into LT Cottage industries tariff (3A-1) from LT industrial tariff (3B). 

Talking to TNM, Electricity Minister Thangam Thennarasu said "The MSME Minister TM Anbarasan has held talks with the industry and explained to them the possible concessions which can be extended to them by TANGEDCO." Talking about the annual tariff hike decision, he pointed out that the Union government is very firm on following the UDAY (Ujwal Discom Assurance Yojana) scheme that was signed by the All India Anna Dravid Munnetra Kazhagam (AIADMK) government. States that have signed UDAY scheme have to take over 75% of the distribution-related loans and bonds would be issued against them to raise fresh capital.

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