Indian Railways Is Not a Deemed Distribution Licensee and Must Pay Open Access Surcharges When It Procures Electricity for Its Own Use

Held: The Supreme Court held that Indian Railways does not qualify as a deemed distribution licensee under the third proviso to Section 14 of the Electricity Act, 2003 merely because it maintains electric traction, power supply and distribution installations for railway operations under Section 11 of the Railways Act, 1989. The Court held that a distribution licensee must operate a distribution system for supplying electricity to consumers in an area of supply, whereas Indian Railways procures electricity for its own traction, signalling, stations and operational requirements and does not supply electricity to independent consumers. The Court further held that even if Indian Railways were hypothetically treated as a deemed distribution licensee, it would remain liable to pay Cross-Subsidy Surcharge and Additional Surcharge when procuring electricity through open access for self-consumption like any other consumer.

Summary: The dispute arose after Indian Railways sought open access to procure power for its traction substations and claimed that, being a Central Government entity and authorised under the Railways Act to maintain power supply and distribution installations, it should be treated as a deemed distribution licensee exempt from Cross-Subsidy Surcharge and Additional Surcharge. CERC had accepted Indian Railways’ position, while several State Electricity Regulatory Commissions took differing views. APTEL ultimately rejected Indian Railways’ claim, holding that its internal electricity network was meant for self-consumption and did not amount to distribution to consumers. The Supreme Court affirmed APTEL’s reasoning. It held that “distribution installation” under the Railways Act cannot be equated with a “distribution system” under the Electricity Act, which requires last-mile supply to consumers. The Court also held that the non-obstante clause in Section 11 of the Railways Act does not override the licensing and surcharge framework of the Electricity Act, because both statutes can operate harmoniously. Executive letters issued by the Ministry of Power describing Railways as a deemed licensee were held not to override the statute.

Decision: The Supreme Court dismissed all appeals filed by Indian Railways and upheld APTEL’s common judgment dated 12 February 2024 in Appeal Nos. 276/2015, 320/2018, 114/2020, 73/2021, 213/2021, 170/2019, 343/2019 and 133/2020. The Court directed the respondent distribution licensees to compute and issue detailed calculations of Cross-Subsidy Surcharge and Additional Surcharge outstanding against Indian Railways, disaggregated by area of supply and period of open access. Indian Railways was directed to be given a reasonable opportunity to respond to those calculations, with time for payment or response to be granted at the discretion of the respective distribution licensees, subject to scrutiny by the appropriate commission. All pending applications were disposed of and no order as to costs was passed.