Supreme Court rules Railways liable to pay open access surcharges
The Supreme Court of India has dismissed Indian Railways’ appeal and upheld the judgment of the Appellate Tribunal for Electricity (APTEL), ruling that the national transporter does not qualify as a deemed distribution licensee under the Electricity Act, 2003. The decision confirms that Indian Railways is liable to pay Cross-Subsidy Surcharge (CSS) and Additional Surcharge while procuring electricity through open access.
A bench comprising Justice Satish Chandra Sharma and Justice Dipankar Datta delivered the judgment on May 8, 2026, in a batch of statutory appeals led by Civil Appeal No. 4652 of 2024. The Court upheld APTEL’s common judgment dated February 12, 2024, which had overturned a 2015 order of the Central Electricity Regulatory Commission (CERC) recognising Indian Railways as a deemed distribution licensee.
The Court examined four key issues in the matter. On the question of distribution licensee status, it held that Indian Railways’ activities under Section 11(g) and (h) of the Railways Act do not amount to distribution of electricity under the Electricity Act. The Court observed that the railway network is used for internal consumption and does not involve supply of electricity to consumers against consideration.
The judgment noted that a distribution system is required to connect ultimately to the installation of a consumer, whereas railway assets such as locomotives, signalling systems, and station facilities do not qualify as consumers under Section 2(15) of the Electricity Act.
On the issue of “Appropriate Government” status, the Court accepted that Indian Railways falls within the scope of Section 2(5)(a) of the Electricity Act because of the Central Government’s administrative and financial control. However, it held that such status alone does not satisfy the substantive conditions required for recognition as a distribution licensee. The Court distinguished Indian Railways from the Military Engineering Services, which supplies electricity to third-party consumers and is recognised as a deemed distribution licensee.
Addressing the applicability of CSS and Additional Surcharge, the Court held that even if Indian Railways were treated as a deemed distribution licensee, it procures electricity solely for self-consumption and therefore remains a consumer for that purpose. Referring to the functionality test laid down in the Sesa Sterlite Limited v. Orissa Electricity Regulatory Commission case, the Court ruled that Indian Railways cannot avoid payment of CSS and Additional Surcharge.
The Court also referred to the Draft Electricity (Amendment) Bill, 2025, which proposes gradual removal of cross-subsidy for railways, metro railways, and manufacturing entities within five years. According to the judgment, the existence of such a proposal indicates that no exemption currently exists under the prevailing legal framework.
The respondent distribution companies have been directed to calculate and issue detailed statements of outstanding CSS and Additional Surcharge amounts, segregated by area of supply and period of open access availed. The Court also directed that Indian Railways be given reasonable opportunity to respond to the calculations.
The ruling is expected to have major financial implications for electricity distribution companies across multiple states supplying power to railway traction substations. The dispute had travelled through CERC, several State Electricity Regulatory Commissions, and APTEL before reaching the Supreme Court, with distribution companies from West Bengal, Odisha, Kerala, Madhya Pradesh, Rajasthan, Maharashtra, Haryana, and Punjab opposing Indian Railways’ claim.
