Thiruvananthapuram: The Supreme Court’s order has created a situation for an electricity tariff hike across the country. The Supreme Court on Wednesday directed the state regulatory commissions to recover the past losses of ₹1.6 lakh crore of electricity distribution companies within two and a half years. Kerala will have to recover ₹6,600 crore. To recover this, it will have to increase the tariff by 90 paise per unit for two and a half years.

Since the verdict has to be implemented immediately, Kerala will face an unprecedented increase in the rates.

The Supreme Court’s order is in a case filed by Reliance’s power company, BSES and Tata Power against the accumulation of “regulatory assets” of electricity distribution companies in Delhi without recovering them. The verdict has been made applicable to electricity distribution companies in all states and union territories.

If the regulatory assets are declared, they must be recovered within three years. The current regulatory assets must be recovered within four years, starting from April 1, 2024. The Supreme Court has asked the Electricity Appellate Authority of the country to ensure that the verdict is implemented.

What is a regulatory asset?

The Regulatory Commission determines the amount of losses incurred by distribution companies. To avoid having to increase the rates on a large scale to make up for the losses, a part is set aside with the understanding that it can be made up later. This is the regulatory asset.

In Kerala, the loss that KSEB still has to make up for by the Regulatory Commission is ₹6,600 crore. This is from 2011 to 2017. After 2017, there was a rate increase that almost completely made up for the losses allowed by the commission.

To avoid the problem of a sudden increase in rates, the court has directed that a part of the arrears be made up immediately and the remaining amount be made up in the next phase.

The government's approach is crucial

The government can decide whether to recover the loss from the people. Instead, the board should be given subsidies. The current subsidy itself is the government’s liability. Last year, the electricity tariff was increased by 16 paise per unit and this year by 12 paise. The government and regulatory commission centres said they are evaluating the verdict.