Indian Railways is poised to face increased electricity costs following a Supreme Court ruling that classifies the national transporter as a “consumer” under the Electricity Act. Consequently, it will be liable to pay a cross-subsidy surcharge (CSS) and an additional surcharge for purchasing electricity through open access for its own consumption, which may affect its operating ratio.
The Supreme Court rejected the argument presented by Indian Railways, which contended that it should not be considered a traditional consumer because it distributes electricity throughout its extensive operational network. The court clarified that since the Railways buys electricity through open access “exclusively for self-consumption,” it fits the definition of a consumer under the Electricity Act of 2003.
The two-judge bench, consisting of Justices Dipankar Datta and Satish Chandra Sharma, stated, “It is clear, for the reasons elaborated hereinabove, that the appellant (Indian Railways) does not pass muster as a deemed distribution licensee under the Act, and it can in no circumstances escape the liability from payment of cross-subsidy surcharge and additional surcharge as a consumer of electricity through open access.”
According to the order, state electricity distribution companies are mandated to calculate and issue a detailed statement of the outstanding CSS and additional surcharge owed by Indian Railways. The court stipulated that these calculations should clearly indicate the amount based on the service area and the duration of open access usage. Furthermore, Indian Railways must be afforded a reasonable opportunity to respond to these calculations and will be granted time to do so.
The controversy began when Indian Railways sought to procure 100 MW of power via inter-state open access for its traction substations in Maharashtra. The Maharashtra State Electricity Transmission Company denied connectivity, leading Indian Railways to request a declaration from the Central Electricity Regulatory Commission (CERC), asserting its status as a Deemed Distribution Licensee (DDL) exempt from surcharges.
CERC initially ruled in favor of Indian Railways in 2015, but this was contested by several State Electricity Regulatory Commissions (SERCs) and distribution companies. The Appellate Tribunal for Electricity (APTEL) ultimately overturned the CERC ruling on February 12, 2024, determining that Indian Railways is a consumer and not a DDL. Indian Railways subsequently appealed this decision to the Supreme Court.
