Jammu and Kashmir's 6.83% Tariff Hike: Who Absorbs the Risk When Utilities Claim 'Compulsion'

The Joint Electricity Regulatory Commission of Jammu and Kashmir has approved a 6.83 percent electricity tariff increase ^[3] effective September 1, 2026, and Chief Minister Omar Abdullah has mounted a public defense of the decision ^[2], framing it as a fiscal necessity rather than policy choice. This framing obscures the regulatory mechanism at work and who bears its consequences.

When a utility or regulator calls a tariff rise a "compulsion," what they are really saying is: we have not reformed the structure that makes such increases inevitable. In Jammu and Kashmir, as in most regulated jurisdictions worldwide, the utility (through its DISCOMs, or distribution companies) operates under rate-of-return regulation, the oldest and least-reformed monopoly pricing model. Under this framework, the utility's profit is a fixed percentage return on its capital base. The rational response is to grow that base through capital expenditure, not to control costs or reduce losses. The more capital deployed, the larger the absolute profit; this is not an accident of management, it is the incentive baked into the regulatory contract. When transmission and distribution (T&D) losses remain high, as Abdullah acknowledged ^[3], the shortfall flows directly to ratepayers via tariff hikes. The utility has earned its allowed return regardless.

The Federation of Chambers of Industries Kashmir has filed its own objection, noting that while DISCOMs requested around 5 percent, the approved increase was substantially higher and came without adequate stakeholder consultation ^[9]. This pattern is standard under rate-of-return regulation: the utility files a request, intervenors (if they have capacity and standing) contest it, but the hearing process is opaque and the burden of proof falls on those challenging the utility, not on the utility to justify each cost. Industrial consumers bear the tariff burden while having the smallest voice in the room where the decision was made.

Tariff increases are presented as inevitable because the alternative (performance-based regulation, multi-year rate plans, decoupling, earnings tests) has not been implemented. Performance-based regulation breaks the link between capital deployment and profit by fixing revenue for a multi-year period; the utility then keeps whatever savings it achieves through efficiency, loss reduction, or demand management. Under such a framework, reducing T&D losses flows to shareholder benefit, not ratepayer burden. Hawaii's 2020 regulatory order and the UK's RIIO framework offer models: fixed revenue paths adjusted annually for inflation minus a productivity factor, symmetric penalties and rewards tied to measured outcomes, and no back-door capex trackers to rebuild the growth incentive.

Until Jammu and Kashmir's regulator shifts from rate-of-return to performance-based terms, every tariff filing will be presented as compulsion. The alternative is not to freeze rates; it is to decouple the utility's profit from its capital base and make its earnings contingent on the losses and affordability outcomes it actually delivers. That requires a formal order from the JERC establishing a control period, a revenue-adjustment formula, and measurable performance targets for loss reduction and cost control. Without it, ratepayers absorb both the inflation that drove costs up and the regulatory structure that guarantees the utility will recover every penny.