Cannot increase electricity tariff to cover salary hikes, Regulatory Commission tells KSEB

THIRUVANANTHAPURAM: The State Electricity Regulatory Commission has ruled that electricity tariffs cannot be increased to cover the additional expenses incurred from salary hikes given to employees without the government's prior approval.

In its order on the application submitted for approval of the revenue and expenditure for the financial year 2023–24, the Commission stated that the matter can only be considered after obtaining the government's sanction, which must be secured within two months.

Meanwhile, the Kerala State Electricity Board (KSEB) had requested tariff revisions to compensate for a total loss of Rs 731.22 crore, including salary expenses. However, the Commission approved only Rs 236.93 crore of this loss.

There is an existing directive that salary hikes require prior government approval. Ignoring this, KSEB had twice implemented substantial salary increases under pressure from employee unions.

A request from the CITU, a recognised union in KSEB, to fill vacancies by reporting them to the Public Service Commission (PSC) and proceeding with recruitment was also rejected by the Commission.

Additional expense incurred from salary amounts to just Rs 7.93 crore, says KSEB
KSEB argued that since the number of employees is currently around 27,000 (though the sanctioned strength is 30,000), the salary revision has only added Rs 7.93 crore to the total salary expenses, and this should be considered. The Commission rejected this argument.

The Commission also criticised KSEB for taking a Rs 2,091.68 crore loan from the Kerala Infrastructure Investment Fund Board (KIIFB) at an interest rate of 9.52%. This has resulted in a loss of Rs 21.33 crore for KSEB, which the Commission said should not be passed on to consumers through tariff hikes. The Commission directed that the loan be refinanced at a maximum interest rate of 8.50%.

Should purchase 200 MW of solar energy
Although KSEB had signed an agreement to purchase 200 MW of solar power from the Solar Energy Corporation at a rate of Rs 2.82 per unit, it has been buying only 75 MW. Instead, it has been purchasing power from external sources at rates exceeding Rs 8 per unit.

The Commission pointed out that this is causing a significant financial loss, which unfairly burdens consumers. It has now ordered KSEB to procure the remaining 125 MW at the contracted rate. The agreement was signed six years ago, but since then, only 75 MW has been utilised.