THIRUVANANTHAPURAM: Kerala’s electricity charges have yet again been increased, and this time by 16 paise per unit, effective from December 5, 2024.
This marks the fifth tariff hike under the LDF Government led by Pinarayi Vijayan since 2016. The Minister of Electricity, Kerala K Krishnankutty, defended the tariff hike. He said, “We dont have any alternatives at this juncture before us, other than increasing the bill for consumers,” he said.
The Kerala State Electricity Board Ltd (KSEBL) had initially proposed a 4.45 per cent hike (37 paise per unit), but the proposal was shot down by the Electricity Regulatory Commission, which in turn instructed the company to introduce a much lighter hike.
The Regulatory Commission approved a phased increase of 16 paise per unit for FY 2024-25 and 12 paise for FY 2025-26, with no hike planned for FY 2026-27.
Will this save KSEBL?
Financial experts are questioning whether the latest tariff hike will finally break KSEBL’s persistent cycle of losses, a trend that has been plaguing the utility company even after its transformation into a company.
All these times, the efforts by KSEBL have been to strengthen the revenue base unilaterally, but no effective steps have been made by the company towards reining in the run-away costs incurred by the company, according to experts.
Consumers using up to 40 units are exempt from the hike. A 5 paise per unit increase has been imposed on agricultural electricity use, impacting approximately 5 lakh consumers.
Revenue Implications
KSEBL expects this tariff hike to generate significant additional revenue. A detailed estimation of the annual revenue increase is pending but can range from hundreds of crores, depending on overall consumption patterns and exemptions.
Tariff hikes since 2016
In 2017, KSEBL had implemented a minor hike focused on fixed charges. After four years, in 2021, a substantial increase, including fixed charges and per-unit rates, have been introduced by the company citing high operational costs.
Again in 2022, a further 6.6 per cent tariff hike was introduced, which was followed by an upward revision of fixed charges in 2023 without any changes in the regular tariffs.
Financial performance
A review of the financial performance in the past couple of years reveals that KSEBL has always faced financial difficulties, though. KSEBL has been able to post a net profit of Rs736.27 crore in the financial year 2021-22 (FY22).
The company had reported a substantial net loss of Rs1,822.crore in 2020-21 with most other years too witnessing losses. Talking to businessbenchmark.news, a senior official from the Kerala Government’s Finance Department said the high salary and pension costs play a crucial role in KSEBL’s poor finances.
“The latest tariff hike provides temporary relief to KSEBL’s strained finances but underscores the need for structural reforms. Long-term financial stability will require addressing inefficiencies, re-evaluating pension obligations, and optimising operational expenses,” he further said.
