Summary
Indian Railways is not a deemed distribution licensee under the third proviso to Section 14 of the Electricity Act, 2003, because it does not supply electricity to consumers in an area of supply; it buys power for its own use and is therefore a consumer liable to pay Cross-Subsidy Surcharge and Additional Surcharge when it takes open access. APTEL's judgment was upheld.
Issues
- Whether the powers under Section 11(g) and (h) of the Railways Act to erect and operate power supply and distribution installations amount to distribution of electricity, so as to make Indian Railways a deemed distribution licensee.
- Whether Indian Railways, as an entity of the Central Government, is an 'Appropriate Government' for the third proviso to Section 14 of the Electricity Act, 2003.
- Whether Indian Railways, even if a deemed distribution licensee, is exempt from Cross-Subsidy Surcharge and Additional Surcharge when it avails open access under Section 42.
- Whether a proposed amending Bill can be used as an aid to interpret the existing statute.
Provisions considered
- Sections 2(17), 2(19) and 2(3), Electricity Act, 2003Read together, the definitions of distribution licensee, distribution system and area of supply require an entity both to operate a distribution system and to supply electricity to consumers within an authorised area of supply; a network ending at the entity's own installations is not a distribution system, and the Railways' pan-India area of operation is not an area of supply. (¶¶ 16, 17, 20, 21, 22, 23, 24)
- Section 14, third proviso, Electricity Act, 2003Deemed licensee status under the proviso cannot be claimed merely by being a Central Government entity; the entity must actually perform the function of distribution and supply to consumers, as the Military Engineering Services do and the Railways do not. (¶¶ 19, 46, 47, 48, 50, 71)
- Section 2(5)(a), Electricity Act, 2003The subject of the definition is the Central Government; 'railways' in clause (ii) names a subject matter, not an entity that is itself the Appropriate Government. Applying a functional test, the Railways were treated as within the definition for the limited purpose of the analysis, but this did not help their claim. (¶¶ 38, 40, 41, 42, 43, 44, 45, 50)
- Section 11(g) and (h), Railways ActThese clauses authorise the Railways to erect and operate electric traction equipment and power supply and distribution installations for working the railway; they do not authorise commercial distribution or supply of electricity, and the non-obstante clause does not displace the licensing scheme of Sections 12 and 14 of the Electricity Act since there is no irreconcilable conflict. (¶¶ 19, 26, 27, 28, 29)
- Section 173, Electricity Act, 2003Relied on by the Railways for the overriding effect of the Railways Act; the Court found no inconsistency between the two statutes that would bring the overriding effect into play, as both could be read harmoniously. (¶ 26)
- Section 42(2) and (4); Section 2(47), Electricity Act, 2003A consumer who avails open access pays Cross-Subsidy Surcharge to meet current cross-subsidy and Additional Surcharge to meet the licensee's fixed costs arising from its obligation to supply; the Railways, being a consumer, are liable to both. (¶¶ 51, 52, 54, 57, 58, 59)
- Section 2(15), Electricity Act, 2003The Railways purchase electricity solely for their own use and supply it to no one but their own constituents, and are therefore consumers within this definition. (¶ 57)
Held
- A person seeking a distribution licence, or claiming deemed licensee status, must both operate and maintain a distribution system and supply electricity to consumers in its area of supply. The obligation to supply is mandatory, so the argument that supply is no longer a licensed activity under the 2003 Act is merely semantic. (¶¶ 16, 17, 18)
- An internal network that only conveys electricity from overhead equipment to locomotives, signals and station facilities for the Railways' own consumption, without sale or supply to a consumer for consideration, is not a 'distribution system'; and the Railways' area of operation cannot be equated with an 'area of supply'. (¶¶ 21, 23, 24, 25)
- Section 11 of the Railways Act cannot be read so widely as to dispense with the licensing framework of the Electricity Act. A non-obstante clause operates only where two provisions are irreconcilably inconsistent; here the Railways can exercise their operational powers while complying with the Electricity Act. Earlier decisions on the Railways' power to build transmission lines and on exemption from environmental and local permissions do not support any wider immunity. (¶¶ 26, 27, 28, 29)
- The Railways' own statement that it does not claim any right to supply electricity to third parties outside its operations showed that it does not seek the role or obligations of a distribution licensee, and relied on that status only to avoid paying the surcharges. (¶¶ 36, 37)
- Being 'State' under Article 12 does not by itself make an entity the 'Appropriate Government'. Even if the Railways fall within Section 2(5)(a) because of the Central Government's administrative and fiscal control, deemed licensee status cannot follow without actual distribution and supply to consumers. (¶¶ 42, 43, 44, 45, 46, 47, 48, 50)
- Ministry of Power letters declaring the Railways a deemed licensee are executive communications with no binding legal force; they cannot amend or override the statute. (¶ 49)
- Because the Railways buy electricity only for their own use, they are consumers and must pay Cross-Subsidy Surcharge and Additional Surcharge for open access like any other consumer. Following Sesa Sterlite, even an entity with deemed licensee status that consumes all the electricity itself is treated as a consumer for this purpose. (¶¶ 57, 58, 59)
- A legislative proposal has no binding force, but it may be looked at to identify gaps in the existing law. The failure of the 2014 proposal to make the Railways a deemed licensee, and the 2025 draft proposal to phase out cross-subsidy for the Railways, showed that no exemption exists under the present statute. A casus omissus cannot be supplied by judicial interpretation. (¶¶ 60, 61, 65, 67, 69, 70)
Result
Appeals dismissed and APTEL's judgment upheld. The distribution licensees were directed to compute the outstanding Cross-Subsidy Surcharge and Additional Surcharge by area of supply and period, give the Railways an opportunity to respond, and allow time for payment, subject to scrutiny by the Appropriate Commission. No order as to costs.