The Kerala State Electricity Board (KSEB) restructuring programme envisages stiff penalties on the state government in case it fails to pay power subsidy to the board within a specified period.
The high-powered committee constituted by the planning board in its report on the restructuring of the KSEB advised the state regulatory commission to recover the entire cost of power from the government if the latter delayed paying the board.
The report said if the state government wished to subsidise any class of consumers, it would have to compensate the board in cash on a monthly basis. "If the subsidy was not forthcoming in any particular month, the commission should be empowered to direct the board to charge full tariffs," the report added.
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Unlike Orissa and Haryana, Kerala is not planning to split the board into different entities and allow complete privatisation of generation and distribution.
Instead, the capital structure of KSEB will be changed through infusion of equity and reduction in the loan component. This will reduce the interest costs on the board and improve profitability.
Alongside the state will also adopt a power tariff policy that will enable the board earn a return of 16 per cent as well as generate 20 per cent of the funds required for future projects.
Though the initial increase in the average tariff is expected to be between 25 and 30 per cent, it will taper off and equal the tariff calculated on the basis of the Electricity Supply Act. The time period estimated for this is five years.
So far, no state government has a clear policy for power tariffs at the distribution end and levy tariffs on an ad hoc basis. Once adopted, Kerala will become the first state to have a policy for charging consumers as well as maintaining the financial viability of the SEB.