Why do we make the rating of surge arrester (KV) always less than system voltage? What calculation is involved?

It's not less than system voltage. Surge arresters are used to protect transmission lines, transformer or other equipment's from transient voltage.

Suppose you have to protect 132kV transmission line.

Here, how you calculate arrester voltage.

X=132kV /sqrt(3) per phase

= 76.21kV

Y= sqrt(2)*X ……. (Peak value)

=1.414*76.21

=107.76kV

Z=Y* 110% ……. (10% margin)

=107.76* 1.1

=118.53kV

Arresters used in each line is 120kV, 10kA.

No, the rating of surge arrestor is never less than the system voltage. Surge arrestors are connected between Phase and Ground, while the system voltage is Rated in Phase to Phase voltage.

For eg. for a 33 kV system the phase-to-phase voltage is 33 kV and phase to ground voltage is (33/sqrt(3)) 19.05 kV. The surge arrestor for 33 kV system is of 30 kV rating, which is well above the phase to ground voltage (across which the surge arrestor is connected).

Any voltage surge in power line needs to be grounded effectively. Surge arresters are not connected in between two phases, but are always connected in between line phase to ground and hence phase to ground voltage is taken consideration while deciding voltage rating of arrester, which is √3 times less than system voltage.