The Supreme Court has ruled that Indian Railways cannot claim the status of a deemed distribution licensee under the Electricity Act, 2003, ending a long-running dispute over electricity procurement through open access systems.
A bench led by Justice Dipankar Datta and Justice Satish Chandra Sharma held that Railways, while operating its own internal power infrastructure, does not distribute electricity to outside consumers and therefore cannot avoid paying cross-subsidy surcharge and additional surcharge to state power distribution companies.
Background of the Dispute
The case arose after Indian Railways sought open access to procure electricity directly from generating companies for railway traction substations across different states. State transmission utilities and distribution companies objected, arguing that Railways was only a consumer and not a licensed electricity distributor.
Railways relied on Section 11 of the Railways Act and a 2014 clarification issued by the Ministry of Power to argue that it qualified as a deemed distribution licensee under Section 14 of the Electricity Act.
The Appellate Tribunal for Electricity (APTEL) had earlier rejected this claim in February 2024, prompting Railways to approach the Supreme Court.
The Supreme Court examined whether the railway network’s internal electrical system could be treated as a “distribution system” under electricity law.
The bench noted that a distribution licensee must not only maintain infrastructure but also supply electricity to consumers within a designated area. Railways, the Court said, only uses electricity for its own operations such as locomotives, signalling systems and stations.
“The conveyance of electricity within this internal network is for the own consumption of the Appellant and does not constitute distribution,” the Court observed.
The Court further clarified that merely maintaining “distribution installations” under the Railways Act does not automatically grant the legal status of a distribution licensee under the Electricity Act.
On the issue of government control, the bench accepted that Indian Railways functions under the authority of the Central Government. However, it said this alone was insufficient to claim the benefits available to deemed distribution licensees.
The judgment also stated that executive communications issued by the Ministry of Power could not override statutory provisions.
“It is rather unfortunate that the Appellant has pursued this lis for over 10 years based solely on the tenuous claim” arising from those communications, the Court remarked.
The Supreme Court upheld APTEL’s findings and ruled that Indian Railways remains liable to pay cross-subsidy surcharge and additional surcharge when procuring electricity through open access arrangements.
The Court concluded that Railways does not qualify as a deemed distribution licensee because it does not supply electricity to independent consumers and uses the electricity entirely for its own operational requirements.
Case Details:
Case Title: Indian Railways v. West Bengal State Electricity Distribution Company Ltd. & Ors.
Case Number: Civil Appeal Nos. 4652-4659 of 2024
Judge: Justice Dipankar Datta and Justice Satish Chandra Sharma
Decision Date: 8 May 2026
