Tamil Nadu Earmarks Rs 18,091 Crore for Energy Sector in Interim Budget

Tamil Nadu expects power demand to double in the coming years from current levels, according to its 2026–27 budget. Based on this assessment, the state allocated Rs. 18,091 crore for the Energy Department in its interim budget estimates.

The state is also formulating new plans to generate 100 billion units of renewable green energy. As part of the first phase, Tamil Nadu has completed a preliminary study to develop a 1,000 MW pumped storage hydroelectric project in the Vellimalai area of Kanyakumari district, with an estimated investment of Rs. 5,320 crore through the public–private partnership (PPP) route.

In the energy storage segment, the state has finalised tenders for installing 1,000 MWh of battery energy storage systems (BESS) to provide assured round-the-clock green power. Tamil Nadu also said it would soon release a new Integrated Renewable Energy Policy aimed at accelerating renewable energy capacity addition.

The budget noted a Union government mandate for Tamil Nadu to provide Rs. 16,290 crore as loss funding to TNPDCL, or face an equivalent reduction in its borrowing ceiling. This requirement has placed significant fiscal pressure on the state, as TNPDCL’s actual loss stood at Rs. 413 crore. However, this loss reduction has been enabled by the trifurcation of the erstwhile TANGEDCO into Tamil Nadu Power Distribution Corporation Limited (TNPDCL), Tamil Nadu Power Generation Corporation Limited (TNPGCL), and Tamil Nadu Green Energy Corporation Limited (TNGECL).  

Consequently, Tamil Nadu has incurred an additional expenditure of Rs. 15,877 crore in the current financial year, underscoring the impact of reform-linked central mandates on state finances.

Tamil Nadu awards first BESS tender

In the last fiscal year, Tamil Nadu awarded its first battery energy storage system (BESS) tender through the energy arm of Tamil Nadu Generation and Distribution Corporation (TNGECL) for a 375 MW/1,500 MWh project in January 2026. The project, issued in November 2025, carries a 1.5-cycle daily requirement over 15 years and discovered a lowest tariff of Rs. 3.15 lakh per MW per month, with results announced two months after the tender was floated.

The tender was awarded to Eagle Construction Co at the benchmark tariff of Rs. 3.15 lakh per MW per month. OPG Power Generation Private Limited followed with a bid of Rs. 3.16 lakh, while Onward Solar Power Private Limited secured capacity at Rs. 3.25 lakh.

Other successful bidders included FORCEOne SD Private Limited at Rs. 3.27 lakh, Brics Renewable Energy Private Limited at Rs. 3.28 lakh, and Sri Srinivasa Constructions Private Limited at Rs. 3.32 lakh per MW per month.