The Kerala State Electricity Regulatory Commission has directed the Kerala State Electricity Board (KSEB) to refinance a loan totalling ₹2,091.68 crore availed from the Kerala Infrastructure Investment Fund Board (KIIFB) on the grounds that the interest rate was on the higher side.

The directive is part of the Commission’s June 30 order on the truing-up of KSEB accounts for the 2023-24 fiscal. The KSEB had availed the loan for implementing the TransGrid 2.0 project aimed at strengthening the power transmission network within Kerala. The amount includes ₹1680.81 crore as principal amount and ₹410.87 crore as interest.

The Commission headed by T.K. Jose observed that KIIFB had sanctioned the loan to the KSEB at an interest rate of 9.52%. “This is very much on the higher side,” the Commission said.

The Commission noted with concern that the average interest rate of loans availed by the KSEB from other financial institutions was 8.50%. “The higher interest rate would create an additional liability of about ₹ 2,1.33 crore annually for the State-run power utility, it said. The Commission has asked the KSEB to report the progress on the refinancing within three months to it.

According to the Commission’s order, the interest on the KIIFB loans was the highest among long-term loans availed from the financial institutions, including REC Ltd (formerly Rural Electrification Corporation) and the Power Finance Corporation (PFC).

“Hence, KSEBL should have accessed and analysed the interest rate and other terms and conditions before availing such high cost loans. As the incumbent licencee, every effort of KSEBL should aims at providing quality electricity at affordable cost to its consumers,” the Commission said.

It further observed that the KSEB had consistently taken all efforts for swapping high-cost loans with loans at cheaper rates from financial institutions, so as to pass on the benefits of the reduction in interest to electricity consumers.

Moreover, Regulation 29(6) of the Tariff Regulations 2021 also mandates the refinancing of high-cost loans so as to reduce the interest cost, it said.

APPC hiked

The State Electricity Regulatory Commission has approved ₹3.26 per unit as the average pooled power purchase cost (APPC) for settling the net surplus energy banked by prosumers as on March 31, 2024. The rate has been hiked from ₹3.15 per unit during the previous settlement period.