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The State government has made a specific policy direction in this regard to the KSERC, which had set the ceiling, in response to the revised guidelines issued by the Union Finance Ministry for States availing themselves of additional borrowing of 0.5% of their Gross State Domestic Product (GSDP).
The November 21 policy direction by the government sought compliance with the terms for ‘fuel and power purchase cost adjustment (FPPCA)’ mentioned in the Union Power Ministry’s Electricity (Amendment) Rules, 2022, “by avoiding ceiling limit of 10 paise per unit per month” fixed by the commission. Section 108 requires the KSERC to be guided by written policy directions from the State government in matters of public interest.
The additional borrowing to the extent of 0.5% of the GSDP is linked to power sector performance. Of the mandatory and performance evaluation conditions in the guidelines, one deals with the FPPCA compliance and the second, with the threshold limits for tariff-based competitive bidding of intrastate transmission projects.
Power purchase costs
As the distribution licencee, the Kerala State Electricity Board (KSEB) collects fuel surcharge on electricity bills for recovering additional money spent on power purchases. Electricity (Amendment) Rules, 2022, specify the conditions for the “timely recovery” of power purchase costs by a distribution licencee. It says that fuel and power purchase adjustment surcharges should be calculated and billed to consumers automatically, without going through the regulatory approval process on a monthly basis as per the formula prescribed by the State commission.
In May 2023, the commission had fixed 10 paise a unit as the maximum surcharge that can be automatically collected from consumers in a month after the Centre amended the Electricity Rules to make surcharge recovery by distribution companies (Discom) an automatic process. Then, the commission had noted that the balance surcharge, if any, could be carried forward to the next month subject to the condition that the recovery would not exceed 10 paise a unit.
Transmission projects
In response to the Centre’s guidelines, the government has also sought the commission’s nod for setting ₹250 crore as the threshold limit for considering tariff-based competitive bidding for intrastate transmission projects.
Following the Finance Ministry’s revision of the guidelines in September this year, the KSEB had written to the State government to take up these matters with the KSERC. In response to the government’s request the same month that the ceiling be removed, the commission had sought a formal policy direction from the government, notes the November 21 government order issued by Additional Chief Secretary (Power) Puneet Kumar.
Published – November 24, 2025 04:36 pm IST
