Solar power: Energy duty levied by Kerala in violation of central regulations

Kochi: Kerala reportedly violated central regulations by levying an energy duty on solar power production. The state apparently continued to do so despite the warning. In the 2024-25 state budget, the duty was raised by 15 paise per unit. This came into effect in April. All these contributed to the unprecedented rise in electricity bills of households possessing rooftop solar panels.

According to the central rule, duty shall not be levied on production of solar power, wind and hydel electricity and also in the case of nuclear energy production. But certain states, including Kerala, have been levying duty and cess for these activities, forcing the energy ministry to issue circulars and send letters to the state chief secretaries. 

As per the seventh schedule of the constitution, states are entitled to levy duty and cess only on electricity use and sales, and not on production. Similarly, duty and cess cannot be collected from across states.

Electricity comes under the concurrent list in the constitution. The centre and state governments have the liberty to form their own laws. Since 1963, Kerala has been charging 1.2 paise for every unit from consumers who produce electricity through different means.

With the rise in the number of rooftop solar panel users, the officials saw it as an opportunity to increase their incomes by levying duty on production, eventually finding itself in a conundrum. 

Only the ongrid consumers with the KSEB are supposed to pay the energy duty, it is not applicable for the offgrid producers outside the realms of the KSEB.

As per the central government, by 2030, at least 50 percent of the electricity should be produced from renewable energy sources. Solar power production is crucial to achieve the target.