Supreme Court Rules Indian Railways Must Pay Power Surcharges Under Electricity Act

Indian Railways is expected to face higher electricity procurement costs after the Supreme Court of India ruled that the national transporter qualifies as a 'consumer' under the Electricity Act, 2003, making it liable to pay cross-subsidy surcharge (CSS) and additional surcharge on power purchased through open access.

The verdict is likely to increase the railways’ operating expenses and impact its operating ratio, as electricity is a major component of traction costs.

A two-judge bench comprising Justice Dipankar Datta and Justice Satish Chandra Sharma held that Indian Railways purchases electricity through open access exclusively for self-consumption and therefore falls within the definition of a consumer under the Electricity Act.

The court observed that railways cannot claim the status of a deemed distribution licensee (DDL) to avoid payment of CSS and additional surcharge. “The appellant does not pass muster as a deemed distribution licensee under the Act, and it can in no circumstances escape the liability,” the bench said.

The Supreme Court also directed state electricity distribution companies to calculate and issue detailed statements of outstanding surcharge dues payable by railways, specifying the applicable supply areas and periods of open-access usage. Railways will be allowed time to respond to the calculations.

The dispute dates back to railways’ proposal to procure 100 MW of electricity through inter-state open access for traction substations in Maharashtra. After the Maharashtra State Electricity Transmission Company Ltd. denied connectivity, railways approached the Central Electricity Regulatory Commission seeking recognition as a deemed distribution licensee exempt from surcharges.

While the CERC ruled in favour of railways in 2015, the decision was challenged by multiple state regulators and power distribution companies. In February 2024, the Appellate Tribunal for Electricity overturned the CERC order, ruling that railways is a consumer and not a deemed distribution licensee. The Supreme Court has now upheld that interpretation.