In a significant financial maneuver, the Kerala state government has cleared substantial pending electricity bill dues owed by its various departments and the Kerala Water Authority (KWA). The settlement was executed not through a direct cash transfer, but by adjusting the amount against the electricity duty that the Kerala State Electricity Board (KSEB) is supposed to pay to the government.
A Major Financial Adjustment
The government netted off a substantial sum of Rs 1,188.52 crore from the electricity duty that KSEB had already collected from consumers. According to an official government order, the board has been permitted to retain electricity duty amounting to Rs 1,641.02 crore, which it had collected up to September 30, 2025. This is not the first such exercise; a similar adjustment was carried out in March 2025, when pending electricity duty worth Rs 757.75 crore was settled with KSEB.
The backdrop to this transaction involves disputed claims. KSEB asserts that the state government owes it a total of Rs 1,682.81 crore. This massive amount comprises electricity bill arrears from various government departments, charges due from the agriculture sector, and outstanding payments from the KWA. However, the government has rejected a part of KSEB's claim. It dismissed the board's demand for Rs 494.29 crore related to the government's taking over of KSEB's losses in April 2025. The order clarified that this specific amount had already been adjusted from the electricity duty, bringing the net dues from the KSEB duty down to Rs 1,146.73 crore.
The Court Order and Borrowing Constraints
This latest net-off exercise was compelled by a legal development. The state government was forced to adopt this method following a court order that prohibited KSEB from paying the collected electricity duty directly into the government's account. The stay was secured by KSEB pensioners' association 'Koottayma', which challenged the government's directive for monthly remittance of the duty. Consequently, the government adjusted the dues with the condition that KSEB will repay the money, subject to the final disposal of the ongoing court case.
This practice of the state government absorbing KSEB's financial deficits has become more regular due to external fiscal pressures. The trigger was the central government's decision to lower the borrowing ceiling for states and introduce a conditional borrowing window linked to performance in the power sector. By taking over KSEB's deficits, the Kerala government aims to create room for additional borrowing to meet its financial needs.
Directives for Future Compliance
The government order also issued strict instructions to prevent future accumulation of such massive dues. It has directed all government departments to ensure timely payment of their electricity charges. Furthermore, departments have been asked to submit proposals for additional budget allocations in advance to fully cover their electricity expenditure, promoting fiscal discipline and preventing arrears from piling up again.
This complex financial settlement highlights the intertwined fiscal challenges faced by state-owned utilities and the government, especially under tightened borrowing norms and legal interventions.
