The electricity chokepoint in Tamil Nadu public finance

Indian electricity utilities face significant financial stress on account of un-funded subsidies. This paper places the problem of electricity subsidies in the context of a debt sustainability analysis (dsa) for Tamil Nadu. We find the state fails on five out of six indicators for debt sustainability. We integrate the electricity sector into the conventional dsa, giving a “corrected dsa”. These modifications are material in changing our sense of the fiscal situation in the state. There are concerns about the extent to which the current fiscal path is sustainable. Fiscal stress harms investibility in electricity. Resolving the problems of electricity policy are a critical component of the development of the medium-term fiscal strategy for the state government.