The Karnataka Electricity Regulatory Commission (KERC) has allowed a review petition filed by the state’s electricity distribution companies (DISCOMs) and revised tariffs for agricultural, commercial, and industrial consumer categories for the financial year 2025-26.

The revisions apply lower tariffs to the agricultural pump set category under LT-4(a) and higher tariffs to select commercial and industrial categories, including LT-3(a), LT-5, HT-2(a), and HT-2(b).

For the LT-4(a) agricultural pumps category, the commission revised the energy charges across the five distribution utilities.

The revised tariff has been set at:

• ₹6.57 (~$0.0713)/kWh for Bangalore Electricity Supply Company
• ₹7.40 (~$0.0803)/kWh for Mangalore Electricity Supply Company
• ₹7.70 (~$0.0836)/kWh for Chamundeshwari Electricity Supply Corporation
• ₹7.73 (~$0.0839)/kWh for Hubli Electricity Supply Company
• ₹7.79 (~$0.0845)/kWh for Gulbarga Electricity Supply Company

These tariffs replace the uniform rate of ₹8.30 (~$0.0901)/kWh previously determined for FY 2025-26 in the original tariff order.

The commission noted that the remaining subsidy shortfall would be addressed partly by increasing tariffs for certain commercial and industrial consumers:

• LT-3(a) commercial consumers’ fixed charge has been set at ₹235 (~$2.55)/kW and the energy charge at ₹7.10 (~$0.0771)/kWh, compared to ₹215 (~$2.35)/kW and ₹7 (~$0.0770)/kWh in the original tariff order.
• • LT-5 industrial consumers’ revised tariff is ₹165 (~$1.79) per HP as the fixed charge and ₹5.20 (~$0.0564)/kWh as the energy charge, compared to ₹150 (~$1.64)/HP and ₹4.50 (~$0.0490)/kWh previously.
• HT-2(a) industrial consumers’ tariff has been fixed at ₹365 (~$3.96)/kVA as demand charge and ₹6.70 (~$0.0727)/kWh as the energy charge, compared to ₹345 (~$3.76)/kVA and ₹6.60 (~$0.0719)/kWh earlier.
• • HT-2(b) commercial consumers’ demand charge has been fixed at ₹390 (~$4.23)/kVA, and the energy charge at ₹6.90 (~$0.0749)/kWh, compared to ₹370 (~$4.03)/kVA and ₹5.95 (~$0.0649)/kWh in the original tariff order.

Background

The review petition was filed jointly by the five DISCOMs operating in Karnataka. They sought a review of the tariff order issued in March 2025, which set the annual revenue requirement and retail supply tariffs for the control period from FY 2025-26 to FY 2027-28, along with the annual performance review for FY 2023-24.

The utilities argued that the tariff set by the Commission for the LT-4(a) agricultural category created a significant financial mismatch between the state government subsidy and the subsidy requirement under the tariff order. The Karnataka government had allocated ₹160.21 billion (~$1.74 billion) in the FY 2025-26 budget to subsidize electricity supplied to irrigation pumps.

According to the petitioners, the tariff determined by the Commission would require subsidy payments of about ₹206.40 billion (~$2.24 billion), leaving a shortfall of approximately ₹46.20 billion (~$501 million).

The DISCOMs stated that Karnataka provides free electricity to agricultural pumps with a capacity of up to 10 HP. Because of this policy, the utilities cannot recover the shortfall directly from farmers. They argued that unless the tariff for the agricultural category was reduced, the mismatch between subsidy allocation and supply costs would lead to financial stress for the DISCOMs.

The petitioners also highlighted that the tariff for agricultural pumps had increased sharply in the original tariff order. They argued that the increase placed a significant burden on the government because the subsidy obligation is linked to the tariff level. The utilities requested that the tariff for the LT-4(a) category be reduced and that the resulting revenue gap be addressed through a combination of additional government support, miscellaneous revenue, and tariff adjustments for other consumer categories.

Commission’s Analysis

The Commission noted that the petitioners argued that the tariff order did not adequately account for the state government’s subsidy for agricultural pumps. However, it observed that the Electricity Act does not require the regulator to consider the state government’s ubsidy allocation when determining tariffs. Instead, the tariff determination process must primarily rely on the annual revenue requirement of the distribution licensees and the principles laid out in Sections 61 and 62 of the Electricity Act, 2003.

The regulator held that the petitioners did not demonstrate an error apparent on the face of the record. It also noted that the petitioners had not indicated the specific subsidy amount during the original tariff proceedings. As a result, the case did not fall within the first two grounds for review under the applicable legal framework.

However, the Commission considered whether the petition could be examined for the potential consequences of maintaining the earlier tariff for the LT-4(a) category.

It noted that the state government had allocated ₹160.21 billion (~$1.74 billion) to subsidize free electricity for agricultural pumps, but the estimated subsidy requirement based on the tariff order was significantly higher.

The Commission observed that if the government subsidy did not fully cover the cost of electricity supplied to agricultural consumers, distribution utilities could be forced to recover the remaining amount directly from farmers. This outcome would impose an unexpected financial burden on agricultural consumers who currently receive free electricity under state policy.

The government had subsequently announced additional budgetary support of ₹236.25 billion (~$256 million. The DISCOMs had proposed raising additional revenue from miscellaneous sources and through tariff adjustments for the commercial and industrial categories.

The Commission considered these measures reasonable and found that they could help address the subsidy shortfall while maintaining financial stability for the distribution utilities.

Taking these factors into account, the state regulator concluded that the case could be considered on grounds of sufficient reason for review. It held that revising the tariffs would help protect agricultural consumers while ensuring that the DISCOMs can recover the cost of electricity supply reasonably.

The Commission had earlier issued draft regulations seeking to formally establish a time-bound roadmap for reducing tariff cross-subsidies across consumer categories and to align retail tariffs more closely with the cost of supplying electricity, consistent with statutory requirements and national tariff policy objectives.

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