KERC issues draft roadmap to reduce cross subsidy and surcharge in Karnataka

The Karnataka Electricity Regulatory Commission (KERC) issued a draft notification on 12 December 2025 proposing the Karnataka Electricity Regulatory Commission (Roadmap for Reducing Cross-Subsidy and Cross Subsidy Surcharge) Regulations, 2025. The move follows a direction from the High Court of Karnataka in December 2024, requiring the Commission to frame regulations to progressively reduce cross subsidies and the related surcharge. The draft notes that through past tariff orders, most consumer categories are already within the ±20% band prescribed in the national Tariff Policy.

Context and current status

KERC states that it has maintained uniform tariffs across state distribution companies and has gradually reduced cross subsidies over more than two decades. As per Tariff Order 2025, which sets tariffs for FY 2025-26 to FY 2027-28, most categories are already within the ±20% threshold relative to the Average Cost of Supply.

However, two categories remain outside this band on the negative side, where tariffs are significantly subsidized. These are LT-6c Electric Vehicle charging stations and HT-3 private lift irrigation consumers. The Commission notes that its scope to design a roadmap is limited, but it has framed the plan to comply with the court direction.

Proposed reduction roadmap

For EV charging stations, the cross subsidy level projected at about –48.83% in FY 2027-28 will be progressively reduced to within –20% over six years starting FY 2028-29, with annual reduction of 5%.

For private lift irrigation consumers under HT-3, where the subsidy level is projected at around –78.98% in FY 2027-28, a reduction trajectory of 10% per year over the same six-year period is proposed, bringing it within –20%.

During this transition, the Commission will readjust cross subsidy levels of other categories that currently bear the burden of subsidizing these consumers.

Treatment of other consumer categories

For all other tariff categories, the Commission will attempt to maintain cross subsidy levels within the ±20% range. If any adjustments are required, they will not exceed 5% of the level prevailing in FY 2027-28 and will remain within the 20% band.

For the two specially identified categories, after completion of the six-year period in FY 2033-34, the Commission may make further adjustments, limited to 5% of the prevailing level at that time and still within the ±20% range.

The draft clarifies that the methodology for computing and reducing Cross Subsidy Surcharge for open access consumers will continue as prescribed under the Government of India Tariff Policy. 

The featured photograph is for representation only.