Indian Railways and the Clean Energy Imperative: Rethinking Large-Scale Power Procurement after the Supreme Court Verdict
The Supreme Court’s ruling now makes it economically imperative for Indian Railways to accelerate the transition to renewable power procurement. Especially when the open-access procurement from conventional generators, previously claimed to be surcharge-free, now carries the full burden of CSS and AS.
June 06, 2026. By News Bureau
The Dispute
The controversy traces its origins back from 2015, when Indian Railways sought recognition from the Central Electricity Regulatory Commission (“CERC”) as a DDL. If classified as a DDL, Indian Railways could procure electricity through open access without paying cross-subsidy surcharge (“CSS”) and additional surcharge (“AS”), which are charges that subsidise supply to weaker consumer categories. CERC initially ruled in favour of Indian Railways, but multiple State Electricity Regulatory Commissions (“SERCs”) and distribution companies (“DISCOMs”) challenged this determination before the Appellate Tribunal for Electricity (“APTEL”).
In February 2024, APTEL reversed the CERC’s order, holding that Indian Railways functions exclusively as a “consumer” under the Act. Thereafter, a Supreme Court division bench comprising of Justice Dipankar Datta and Justice Satish Chandra Sharma, has now upheld APTEL’s reasoning and dismissed all the civil appeals filed by Indian Railways.
The Legal Reasoning
The Supreme Court’s analysis was based on three critical statutory distinctions. First, it clarified that “distribution’ under the Act involves a twin requirement, namely, operating a distribution system and supplying electricity to consumers within a designated area of supply. Indian Railways’ internal electrical infrastructure serves only its own operations and does not constitute distribution to third-party consumers.
Second, the authority granted under Section 11 of the Railways Act, 1989 to construct and maintain electrical installations does not confer the status of a distribution licensee under the Act. The two statutes operate in distinct regulatory domains.
Third, Supreme Court rejected Indian Railways’ reliance on the Draft Electricity (Amendment) Bill, 2025, which proposed exempting Indian Railways from CSS. A bill which is yet to be passed by the Parliament cannot create privileges not already enshrined in law. Supreme Court noted that a similar provision in the 2014 Electricity Amendment Bill had been rejected by Parliament demonstrating legislative intent that Indian Railways should not be treated as a distribution licensee.
Industry estimates suggest that accumulated liabilities on account of unpaid CSS and AS, spanning over the period during which Indian Railways procured power through open access claiming DDL status could amount to approximately upwards of INR 10,000 crores. The Supreme Court has directed DISCOMs to compute and present detailed calculations of outstanding surcharges, segregated by area of supply and the period of open access usage, with Indian Railways given an opportunity to respond before the appropriate SERCs.
The Clean Energy Imperative
It is here that the judgment transcends its immediate fiscal consequences and compels a strategic rethinking of Indian Railways’ power procurement architecture. Indian Railways has committed to becoming a net-zero carbon emitter by 2030. As of late 2025, in terms of data published by Press Information Bureau, Indian Railways is procuring power from various commissioned solar and wind power plants having total capacity of 812 MW and 93 MW respectively, for traction. Further Indian Railways is also procuring an additional 1,600 MW of round-the-clock (“RTC”) hybrid renewable power from solar, wind, and battery storage components.
The Supreme Court’s ruling now makes it economically imperative for Indian Railways to accelerate this transition to renewable power procurement. Especially when the open-access procurement from conventional generators, previously claimed to be surcharge-free, now carries the full burden of CSS and AS. Further, procurement of renewable energy particularly through captive generation arrangements, group captive models on Indian Railways’ vast land holdings can potentially mitigate or altogether avoid these surcharges, depending on applicable state regulations and the structure of procurement.
For Indian Railways, the path forward is clear. Supreme Court’s verdict transforms the clean energy transition from a sustainability aspiration into an economic necessity. Scaling up renewable procurement, investing in captive solar and wind installations along the railway corridor, and embracing hybrid storage solutions are no longer optional, in fact they are the most rational response to the new legal and financial reality.
- Anand Shrivastava, Partner at Sagus Legal and Shivam Sinha, Partner at Sagus Legal
please contact: contact@energetica-india.net.
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