Kerala's 1-Paise Fuel Surcharge in July 2025: A Tiny Ratchet With a Big Mechanism

The Hindu reports that the Kerala State Electricity Board (KSEB) will collect a fuel surcharge of one paise per unit in July 2025 from bi-monthly consumers, recovering the additional cost of power purchases in May 2026.^[1] The surcharge is levied under an automatic cost recovery mechanism allowed by the Kerala State Electricity Regulatory Commission's (KSERC) 2023 tariff amendment regulations.^[1] To avoid tariff shock, the commission initially set a monthly cap of 10 paise per unit, not 15 paise per unit, as the maximum recoverable amount.^[1][2][3] The cap was later removed by the commission itself through a further amendment to the regulations, not by a state government policy directive.^[1]

This is the fuel-cost pass-through clause at work: 100% of fuel-price risk is transferred to ratepayers while KSEB keeps its return on generation and transmission capex. The mechanism is a rider, a cost recovered outside a general rate case with minimal scrutiny. The one-paise figure is small, but the architecture matters: automatic monthly recovery, no commission hearing needed, and a cap that was removed after being in place only two years. In June 2025, KSEB collected 6 paise per unit; in August 2025, 8, 9 paise per unit.^[2][3] The ratchet only goes one way.

Ratepayers pay the fuel cost; shareholders keep the return on the plant. The fix is to sunset all fuel surcharge riders and fold fuel costs into base rates with a historic test year, forcing the utility to manage fuel procurement risk. Until then, every paise is a transfer from the public to the utility's bottom line.