# Ramayana Ispat Pvt. Ltd. and Anr v. State of Rajasthan & Ors

- **Citation:** 2025 INSC 424
- **Court:** Supreme Court of India
- **Decided:** 2025-04-01
- **Case number:** Civil Appeal No. 7964 of 2019
- **Bench:** Vikram Nath, Prasanna B. Varale
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ramayana-ispat-pvt-ltd-and-anr-v-state-of-rajasthan-ors-38907
- **Pages:** 52

## Headnote

i) Whether the Rajasthan Electricity Regulatory Commission
(RERC) has the jurisdiction to regulate inter-state open access
under the Electricity Act, 2003; ii) Whether the imposition of
penalties for variations in drawal from contracted demand amounts
to an unreasonable restriction on the right to open access under
Section 42 of the Act of 2003; iii) Whether Regulation 26(7)
of Rajasthan Electricity Regulatory Commission (Terms and
Conditions for Open Access) Regulations, 2016 is ultra vires
for requiring an advance notice of 24 hours a day prior, thereby
preventing urgent procurement and creating an artificial barrier
to open access as protected by the Act of 2003; iv) Whether
Regulation 21 is arbitrary and discriminatory, thereby discouraging
captive power generation by creating unreasonable distinction
between captive power plants (CPPs) and state distribution
companies; v) Whether the appellants' right to open access is
foreclosed by the Regulations of 2016.
Headnotes†
Electricity Act, 2003 - Rajasthan Electricity Regulatory
Commission (Terms and Conditions for Open Access)
Regulations, 2016 - Whether the Rajasthan Electricity
Regulatory Commission (RERC) has the jurisdiction to regulate
inter-state open access under the Electricity Act, 2003:
Held: 1. s.79(1)(c) of the Act of 2003, defines the regulatory
authority of the CERC over inter-state transmission of electricity -
However, this provision does not strip State Commissions, including
RERC, of their jurisdiction over intra-state aspects of open
access - s.42(2) of the Act of 2003 expressly empowers State
Commissions to regulate open access within their respective states,
* Author
[2025] 4 S.C.R.
437
Ramayana Ispat Pvt. Ltd. and Anr. v. State of Rajasthan & Ors.
ensuring fair and non-discriminatory access to transmission and
distribution networks within the state - Further, s.42(3) of the Act
of 2003 provides that whenever a consumer, with premises within
the area of supply of a distribution licensee, requires supply of
electricity from a generating company other than such distribution
licensee, such transmission and supply shall be in accordance
with the regulations made by the State Commission. [Para 45]
2. The key determinant is not the source of power but its delivery,
end-user, and consumption within Rajasthan's intra-state grid - The
Act of 2003 provides a framework for demarcating responsibilities
between CERC and State Commissions, ensuring that intra-state
aspects of electricity regulation remain within the purview of State
Commissions - The claim that only CERC has the authority to
regulate inter-state open access cannot be accepted in light of
the legislative intent behind the Act of 2003 - Therefore, RERC
retains jurisdiction over intra-state transactions even if the power
originates from another state. [Para 47]
3. Further, s.2(47) of the Act of 2003 defines open access as nondiscriminatory access to transmission and distribution systems,
encompassing both interstate and intra-state transactions - The
respondents argue that the statute does not differentiate between
them for regulatory purposes, meaning that State Commissions
naturally retain authority over open access within their jurisdictions -
This interpretation aligns with s.42, which explicitly grants State
Commissions the power to regulate open access for consumers
in their states. [Para 48]
4. s.181 of the Act of 2003 empowers State Commissions to frame
regulations necessary for implementing the provisions of the Act of
2003 - By granting State Commissions the authority to introduce
and regulate open access, the legislature has clearly vested
regulatory oversight with RERC in Rajasthan - The omission of
any reference to CERC's jurisdiction over open access consumers
in s.42 of the Act is indicative of the legislature's intent to keep
such matters under State Commissions' oversight, ensuring that
electricity consumers and distribution networks within a state remain
subject to state-level regulatio

## Text

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[2025] 4 S.C.R. 436 : 2025 INSC 424
Ramayana Ispat Pvt. Ltd. and Anr.
v.
State of Rajasthan & Ors.
(Civil Appeal No. 7964 of 2019)
01 April 2025
[Vikram Nath* and Prasanna B. Varale, JJ.]
Issue for Consideration
i) Whether the Rajasthan Electricity Regulatory Commission
(RERC) has the jurisdiction to regulate inter-state open access
under the Electricity Act, 2003; ii) Whether the imposition of
penalties for variations in drawal from contracted demand amounts
to an unreasonable restriction on the right to open access under
Section 42 of the Act of 2003; iii) Whether Regulation 26(7)
of Rajasthan Electricity Regulatory Commission (Terms and
Conditions for Open Access) Regulations, 2016 is ultra vires
for requiring an advance notice of 24 hours a day prior, thereby
preventing urgent procurement and creating an artificial barrier
to open access as protected by the Act of 2003; iv) Whether
Regulation 21 is arbitrary and discriminatory, thereby discouraging
captive power generation by creating unreasonable distinction
between captive power plants (CPPs) and state distribution
companies; v) Whether the appellants' right to open access is
foreclosed by the Regulations of 2016.
Headnotes†
Electricity Act, 2003 - Rajasthan Electricity Regulatory
Commission (Terms and Conditions for Open Access)
Regulations, 2016 - Whether the Rajasthan Electricity
Regulatory Commission (RERC) has the jurisdiction to regulate
inter-state open access under the Electricity Act, 2003:
Held: 1. s.79(1)(c) of the Act of 2003, defines the regulatory
authority of the CERC over inter-state transmission of electricity -
However, this provision does not strip State Commissions, including
RERC, of their jurisdiction over intra-state aspects of open
access - s.42(2) of the Act of 2003 expressly empowers State
Commissions to regulate open access within their respective states,
* Author
[2025] 4 S.C.R.
437
Ramayana Ispat Pvt. Ltd. and Anr. v. State of Rajasthan & Ors.
ensuring fair and non-discriminatory access to transmission and
distribution networks within the state - Further, s.42(3) of the Act
of 2003 provides that whenever a consumer, with premises within
the area of supply of a distribution licensee, requires supply of
electricity from a generating company other than such distribution
licensee, such transmission and supply shall be in accordance
with the regulations made by the State Commission. [Para 45]
2. The key determinant is not the source of power but its delivery,
end-user, and consumption within Rajasthan's intra-state grid - The
Act of 2003 provides a framework for demarcating responsibilities
between CERC and State Commissions, ensuring that intra-state
aspects of electricity regulation remain within the purview of State
Commissions - The claim that only CERC has the authority to
regulate inter-state open access cannot be accepted in light of
the legislative intent behind the Act of 2003 - Therefore, RERC
retains jurisdiction over intra-state transactions even if the power
originates from another state. [Para 47]
3. Further, s.2(47) of the Act of 2003 defines open access as nondiscriminatory access to transmission and distribution systems,
encompassing both interstate and intra-state transactions - The
respondents argue that the statute does not differentiate between
them for regulatory purposes, meaning that State Commissions
naturally retain authority over open access within their jurisdictions -
This interpretation aligns with s.42, which explicitly grants State
Commissions the power to regulate open access for consumers
in their states. [Para 48]
4. s.181 of the Act of 2003 empowers State Commissions to frame
regulations necessary for implementing the provisions of the Act of
2003 - By granting State Commissions the authority to introduce
and regulate open access, the legislature has clearly vested
regulatory oversight with RERC in Rajasthan - The omission of
any reference to CERC's jurisdiction over open access consumers
in s.42 of the Act is indicative of the legislature's intent to keep
such matters under State Commissions' oversight, ensuring that
electricity consumers and distribution networks within a state remain
subject to state-level regulation. [Para 49]
5. Thus, the respondents' argument is well-founded in statutory
provisions, legislative intent, and the structural framework of the
Act of 2003 - RERC's authority to regulate intra-state aspects of
open access transactions, even when electricity is sourced from
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[2025] 4 S.C.R.
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another state, aligns with the Act's objectives and ensures effective
regulatory oversight. [Para 50]
Electricity Act, 2003 - Rajasthan Electricity Regulatory
Commission (Terms and Conditions for Open Access)
Regulations, 2016 - Whether the imposition of penalties for
variations in drawal from contracted demand amounts to an
unreasonable restriction on the right to open access u/s.42
of the Act of 2003:
Held: The electricity grid operates on principles of frequency
stability and demand-supply balance - Any deviation from scheduled
drawal or injection can lead to grid instability, potentially affecting all
consumers - The impugned regulations, therefore, serve a critical
function in preventing such disruptions by enforcing discipline
among generators and consumers alike - The penalties imposed
are a deterrent mechanism to prevent strategic gaming of the
system and to ensure that all stakeholders adhere to scheduling
norms - The State Commission's role is to balance the rights of
individual market participants with the broader objective of ensuring
an efficient, reliable, and stable power supply to all consumers in
the State. [Para 54]
Electricity Act, 2003 - Rajasthan Electricity Regulatory
Commission (Terms and Conditions for Open Access)
Regulations, 2016 - Whether Regulation 26(7) of Rajasthan
Electricity Regulatory Commission (Terms and Conditions for
Open Access) Regulations, 2016 is ultra vires for requiring an
advance notice of 24 hours a day prior, thereby preventing
urgent procurement and creating an artificial barrier to open
access as protected by the Act of 2003:
Held: 1. The requirement of prior notice is a reasonable procedural
safeguard that aligns with the objectives of the Act of 2003,
particularly those laid out in Section 42, which envisages a
structured approach to open access - The 24-hour notice period
ensures that both transmission and distribution licensees, as well
as load despatch centres, have adequate time to adjust their
schedules and prevent system disturbances - Moreover, it prevents
misuse by entities that may attempt to take advantage of realtime
price fluctuations, thereby engaging in speculative trading rather
than genuine demand based procurement - Further, the option
of purchasing power from the real-time market and day-ahead
[2025] 4 S.C.R.
439
Ramayana Ispat Pvt. Ltd. and Anr. v. State of Rajasthan & Ors.
market in need of urgent procurement is always available, and is
not prevented by the impugned regulations. [Para 57]
2. Furthermore, the regulation does not create an insurmountable
barrier to open access but rather seeks to bring order and
predictability to its implementation - The requirement is uniformly
applicable to all consumers, ensuring that no undue advantage
is given to any particular category - Considering the technical
and regulatory imperatives involved, the 24-hour advance notice
condition under Regulation 26(7) cannot be considered ultra vires,
as it falls within the regulatory domain of the State Commission
to establish fair, transparent, and non-disruptive mechanisms for
open access. [Para 58]
Electricity Act, 2003 - Rajasthan Electricity Regulatory
Commission (Terms and Conditions for Open Access)
Regulations, 2016 - Whether Regulation 21 is arbitrary and
discriminatory, thereby discouraging captive power generation
by creating unreasonable distinction between captive power
plants (CPPs) and state distribution companies:
Held: 1. The distinction between captive power generators and state
DISCOMs is not arbitrary but arises from the structural differences
in their roles and obligations - While captive generators primarily
generate electricity for self-consumption, distribution companies
serve a wider consumer base, requiring them to adhere to broader
regulatory commitments, including universal supply obligations - As
such, differential treatment based on the nature of their functions
is legally justified and does not amount to unfair discrimination -
Moreover, Regulation 21 does not impose undue restrictions on
captive generators but ensures that their operations align with
grid discipline, preventing any adverse impact on the larger power
ecosystem. [Para 61]
2. Additionally, the principle of non-discrimination under the Act
of 2003 does not mandate identical treatment for all entities but
rather requires a rational basis for any differentiation - In this
case, the regulatory conditions imposed on captive generators
are aimed at ensuring a level playing field and preventing misuse
of open access provisions - The regulatory framework ensures
that captive generators contribute fairly to system stability without
imposing additional burdens on distribution licensees and other
grid participants - Thus, Regulation 21 is neither arbitrary nor
440
[2025] 4 S.C.R.
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discriminatory but rather a necessary and proportionate measure
to balance the interests of various stakeholders in the electricity
sector. [Para 62]
Electricity Act, 2003 - Rajasthan Electricity Regulatory
Commission (Terms and Conditions for Open Access)
Regulations, 2016 - Whether the appellants' right to open
access is foreclosed by the Regulations of 2016:
Held: 1. A careful analysis of the Regulations of 2016 indicates that
they primarily aim at maintaining the reliability of the electricity grid,
ensuring fair pricing, and preventing speculative misuse of open
access provisions - The requirement of advance notice for short-term
open access, penalties for deviations from contracted demand, and
specific conditions for captive power generators are all designed
to create a structured and predictable electricity market - These
provisions do not prevent eligible consumers from availing open
access but instead ensure that they do so within a framework that
safeguards the interests of all stakeholders, including distribution
licensees and other consumers - Moreover, Section 181 of the
Act of 2003 empowers State Commissions to frame regulations
necessary for implementing statutory provisions, thereby validating
the regulatory measures introduced by RERC. [Para 64]
2. Furthermore, the Act of 2003, envisages a balance between the
rights of open access consumers and the operational concerns of
the power sector - The Regulations of 2016, while imposing certain
conditions, do not outright deny open access but ensure that its
implementation is equitable and does not jeopardize grid discipline -
Open access remains available to consumers who comply with
regulatory prerequisites, including scheduling obligations and
financial commitments - Thus, the appellants' assertion that their
right to open access is foreclosed is misplaced - The Regulations
of 2016 are consistent with the legislative intent of the Act of 2003,
ensuring that open access is exercised in a manner that does
not compromise system stability, fairness, or economic viability -
Therefore, the regulatory framework does not foreclose open
access but rather operationalizes it within reasonable constraints
essential for sustaining the electricity sector. [Para 65]
Case Law Cited
Energy Watchdog v. Central Electricity Regulatory Commission
[2017] 3 SCR 153 : (2017) 14 SCC 80; Reliance Infrastructure v.
[2025] 4 S.C.R.
441
Ramayana Ispat Pvt. Ltd. and Anr. v. State of Rajasthan & Ors.
State of Maharashtra [2019] 1 SCR 886 : (2019) 3 SCC 352;
Hindustan Zinc v. RERC [2015] 7 SCR 1104 : (2015) 12 SCC
611 - referred to.
List of Acts
Electricity Act, 2003; Rajasthan Electricity Regulatory Commission
(Terms and Conditions for Open Access) Regulations, 2016.
List of Keywords
Rajasthan Electricity Regulatory Commission (RERC); Inter-state
open access; Imposition of penalties; Variations in drawal from
contracted demand amounts; Section 42 of Electricity Act, 2003;
Regulation 26(7) of Rajasthan Electricity Regulatory Commission
(Terms and Conditions for Open Access) Regulations, 2016;
Advance notice of 24 hours; Regulation 21 of Rajasthan
Electricity Regulatory Commission (Terms and Conditions for
Open Access) Regulations, 2016; Jurisdiction to regulate interstate open access; Intra-state aspects of electricity regulation;
Right to open access; Consumer; Distribution licensee; InterState transmission system; Captive generation; State Load
Despatch Centre; Duties of distribution licensee and open
access; Functions of Central Commission; Functions of State
Commission; Powers of Central Commission to make regulations;
Powers of State Commissions to make regulations; Unscheduled
Interchange Pricing.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7964 of 2019
From the Judgment and Order dated 06.09.2016 of the High Court
of Rajasthan at Jaipur in DBCWP No. 4402 of 2016
With
C.A Nos. 7966 and 7965 of 2019
Appearances for Parties
Advs. for the Appellants:
Manu Seshadri, Sahil Manganani, Ms. Aakriti Gupta, Siddhant
Singh, Nikunj Dayal, Kumar Mihir, Athul Joseph, Gunjan Sharma.
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Advs. for the Respondents:
Shiv Mangal Sharma, A.A.G., Milind Kumar, Zoheb Hossain,
Dr. Rupesh Singh, Guru Prasad Singh, Anshul Suri, Satya Veer
Singh, Ms. Pratibha Jain, Ms. Christi Jain, Pallav Mongia, Anubhav
Mishra, Amritesh Krishna.
Judgment / Order of the Supreme Court
Judgment
Vikram Nath, J.
1.
The present appeals challenge two separate orders passed by
the High Court of Rajasthan-one by the Jodhpur Bench dated
29.08.2016 and the other by the Jaipur Bench dated 06.09.2016.
The appeals arise from challenges to the validity of the Rajasthan
Electricity Regulatory Commission (Terms and Conditions for Open
Access) Regulations, 20161 framed by the Rajasthan Electricity
Regulatory Commission2 in the exercise of its powers under Section
42 read with Section 181 of the Electricity Act, 2003.3 The primary
grievance of the writ petitioners, appellants herein, before the High
Court, and now the appellants before this Court, relates to the
restrictions and conditions imposed by the Regulations of 2016 on
the exercise of open access for captive power plants4 and other
large consumers of electricity.
2.
The brief background of the facts giving rise to the challenge before
us are that the writ petitioners before the High Court are engaged
in industrial production and have substantial power consumption
requirements. The facts, as taken by the High Court from one of
the writ petitions filed by Hindustan Zinc Limited, respondent No.6 in
Civil Appeal No. 7966 of 2019, for convenience, are that Hindustan
Zinc Limited is a public limited company incorporated under the
Companies Act, 1956, and is engaged in the business of mining,
smelting, and production of non-ferrous metals, including lead and
zinc. The company operates multiple units at Chanderia, Dariba,
1
Regulations of 2016.
2
RERC.
3
Act of 2003.
4
CPPs.
[2025] 4 S.C.R.
443
Ramayana Ispat Pvt. Ltd. and Anr. v. State of Rajasthan & Ors.
and Zawar, which are supported by CPPs. In addition to captive
power generation, the company also has agreements with Ajmer
Vidhyut Vitran Nigam Limited (respondent No.3 in Civil Appeal No.
7964 of 2019, respondent No.2 in Civil Appeal No. 7965 of 2019,
and respondent No.3 in Civil Appeal no. 7966 of 2019) for the supply
of power to meet its contractual demand. Under these agreements,
Hindustan Zinc Limited is entitled to draw electricity up to 70 MW
from the distribution licensee at its Dariba Zinc Smelter Unit at any
time, as per its operational requirements.
3.
Prior to the introduction of the Regulations of 2016, the appellants
were availing open access under the Rajasthan Electricity Regulatory
Commission (Terms and Conditions for Open Access) Regulations,
2004,5 which permitted them to draw power from both, their captive
generation and open access sources, without any reduction in the
contracted demand from the distribution licensee. The open access
facility under the Regulations of 2004 allowed the appellants to
schedule their power requirements on a day-ahead basis for each
15-minute block, with the flexibility to meet shortfalls through their
contracted demand from the distribution licensee.
4.
RERC issued a draft of the proposed Regulations of 2016 through
a public notice dated 06.07.2015 and invited comments and
suggestions. Hindustan Zinc Limited, along with other stakeholders,
submitted detailed objections, highlighting that certain provisions of
the draft regulations were inconsistent with the objectives of the Act
of 2003 and the principle of promoting open access. The Commission
notified the Regulations of 2016 on 27.01.2016.
5.
The key change introduced by the Regulations of 2016 was the
imposition of limitations on the simultaneous drawal of power
through open access and contracted demand from the distribution
licensee. Under the new regime, if a consumer opted to procure
power through open access, the contracted demand from the
distribution licensee would be reduced by the quantum of power
scheduled through open access. Additionally, the Regulations of
2016 imposed penalties for over-drawal and under-drawal from the
contracted demand.
5
Regulations of 2004.
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6.
The appellants before the Jodhpur Bench of the High Court challenged
several specific provisions of the Regulations of 2016 on the ground
that they were arbitrary, unreasonable, and contrary to the statutory
scheme of the Act of 2003. The primary contention was that the
Regulations of 2016 sought to undermine the statutory right of open
access guaranteed under Section 42 of the Act of 2003 by imposing
unreasonable restrictions on the simultaneous use of open access
and contracted demand. The appellants further contended that the
imposition of penalties for variations in drawal, even when caused
by unforeseen breakdowns or operational exigencies, was unjust
and discriminatory. The appellants argued that the Regulations of
2016, by reducing the contracted demand by the quantum of power
scheduled through open access, effectively penalized consumers for
exercising their statutory right to open access. It was submitted that
the statutory framework under the Act of 2003 envisaged open access
as a means to promote competition and efficiency in the electricity
market, and the Regulations of 2016 were contrary to this objective.
7.
The appellants before the Jaipur Bench of the High Court were interstate consumers, unlike the appellants before the Jodhpur Bench, who
were intra-state consumers drawing power from their captive plants
within the State of Rajasthan. The challenge before the Jaipur Bench
specifically related to Regulations 26(6) and 26(7) of the Regulations
of 2016, which the appellants contended imposed restrictions on
inter-state open access, thereby exceeding the Commission's
jurisdiction under the Act of 2003. The appellants argued that the
Regulations of 2016 amounted to an extra-territorial application
of the RERC's regulatory power, which was beyond the statutory
mandate conferred under the Act of 2003. It was contended that the
Act of 2003 empowered the State Commissions to regulate intrastate open access but not inter-state open access, which falls within
the jurisdiction of the Central Electricity Regulatory Commission.6
Therefore, the appellants contended that the impugned regulations
were ultra vires the Act of 2003 and liable to be struck down.
8.
The Jodhpur Bench in the judgment dated 29.08.2016 upheld the
validity of the Regulations of 2016, holding that the Commission
was empowered to regulate open access to ensure grid stability and
6
CERC
[2025] 4 S.C.R.
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Ramayana Ispat Pvt. Ltd. and Anr. v. State of Rajasthan & Ors.
efficient load distribution. The High Court observed that the impugned
regulations have been notified with the objective to ensure that the
consumers do not indulge in any gaming activities on the grid, and
thus the rationale behind the Regulations of 2016 is to further the
objectives of the Act of 2003 while ensuring that the interests of
consumers as well as distribution licensees are balanced. Further,
rejecting the appellants' claim that the regulations are violative of
their rights protected under Part III of the Constitution of India,
the High Court observed that they had failed to establish that the
Regulations of 2016 violate their Fundamental Rights, or the RERC
lacked competence to frame these regulations or that they are
manifestly arbitrary or unreasonable; and thus merely because the
Regulations of 2016 are claimed to cause certain inconvenience or
hardship to the appellants, they cannot be held to be illegal or ultra
vires the Act of 2003.
9.
The Jaipur Bench also upheld the validity of the Regulations of
2016 and dismissed the writ petition of the appellants herein in C.A.
7964 of 2019 herein, holding that their challenge and the issues in
their petition before the High Court were squarely covered by the
judgment of the Jodhpur Bench.
10. The appellants in all the three appeals before us are challenging the
findings of the High Court on the grounds that the Jodhpur Bench failed
to appreciate that the Regulations of 2016 are discriminatory against
the CPPs as they impose unreasonable and excessive restrictions
upon them for availing open access, contrary to the objectives of
the Act of 2003. Further, the appellants challenging the order of the
Jaipur Bench further contend that the Bench failed to consider that
RERC lacked jurisdiction to regulate inter-state open access, which
falls within the exclusive domain of the CERC under the Act of 2003.
11. The issues for consideration before this Court are as follows:
i.
Whether the RERC has the jurisdiction to regulate inter-state
open access under the Act of 2003?
ii.
Whether the imposition of penalties for variations in drawal from
contracted demand amounts to an unreasonable restriction on
the right to open access under Section 42 of the Act of 2003?
iii.
Whether Regulation 26(7) is ultra vires for requiring an advance
notice of 24 hours a day prior, thereby preventing urgent
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procurement and creating an artificial barrier to open access
as protected by the Act of 2003?
iv.
Whether Regulation 21 is arbitrary and discriminatory, thereby
discouraging captive power generation by creating unreasonable
distinction between CPPs and state distribution companies?
v.
Whether the appellants' right to open access is foreclosed by
the Regulations of 2016?
12. We have heard the learned counsels for the parties at great length.
ARGUMENTS OF THE APPELLANTS
13. The appellants have raised a comprehensive challenge to the validity
of the Regulations of 2016. The challenge is primarily directed against
regulations concerning the levy of additional surcharge, scheduling
requirement, and penalties for deviations. In Civil Appeal No. 7964 of
2019, appellants have also contested the jurisdiction of the RERC to
regulate inter-state open access, arguing that such jurisdiction falls
exclusively within the domain of the CERC under the Act of 2003.
14. The appellants in Civil Appeal No. 7964 of 2019 have contended
that the RERC lacked jurisdiction to regulate inter-state open access
through Regulations of 2016. The appellants submitted that under the
scheme of the Act of 2003, the authority to regulate inter-state open
access lies exclusively with the CERC. It is the case of the appellants
challenging the jurisdiction of the RERC with respect to regulating
inter-state open access that the Regulation 26(7) essentially forecloses
the appellants from purchasing powers as it imposes conditions on
inter-state open access. The appellant argued that these conditions,
such as requiring a 24-hour scheduling period, advance intimation of
power usage, and a minimum consumption threshold of 75% of the
scheduled quantum, exceed the jurisdiction of the State Commission
and infringe upon the powers vested in the CERC.
15. The appellants referred to Section 2(36) of the Act of 2003, which
defines "inter-state transmission" as:
"(36) " inter-State transmission system" includes -
(i)
any system for the conveyance of electricity by means
of main transmission line from the territory of one
State to another State;
[2025] 4 S.C.R.
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Ramayana Ispat Pvt. Ltd. and Anr. v. State of Rajasthan & Ors.
(ii)
the conveyance of electricity across the territory of
an intervening State as well as conveyance within
the State which is incidental to such inter-State
transmission of electricity;
(iii) the transmission of electricity within the territory of a
State on a system built, owned, operated, maintained
or controlled by a Central Transmission Utility."
In light of the above definition, the appellants argued that merely
because the transmission lines in the state of Rajasthan are used to
convey electricity it does not cease to be an inter-state transaction
as the usage of the said lines is only incidental to the conveyance
of electricity using inter-state open access.
16. Appellants contended that inter-state open access is a matter falling
within the exclusive domain of the CERC under Section 79(1)(c) of
the Act of 2003. The Act of 2003 clearly demarcates the jurisdiction
between CERC and State Commissions. It was argued that the power
of the State Commission, RERC in this case, under Section 86(1)(c)
is confined to regulating intra-state open access, and therefore, any
attempt to regulate inter-state open access by the RERC is ultra vires
the Act of 2003. The appellants highlighted that the petitioners in
Civil Appeal No. 7965 of 2019 and Civil Appeal No. 7966 of 2019 are
intra-state consumers of captive power from their captive generating
plants located within Rajasthan. However, the appellants in Civil
Appeal No. 7964 of 2019 are inter-state consumers, purchasing power
from sources located outside Rajasthan. Therefore, the challenge to
Regulation 26(7) by the appellants in Civil Appeal No. 7964 of 2019
is on a different footing, as it concerns the extra-territorial application
of the Regulations of 2016 to inter-state transactions, which is beyond
the legislative competence of the RERC.
17. The appellants while referring to Section 79(1)(c) of the Act of 2003,
submitted that it explicitly provides that the CERC shall regulate
the transmission of electricity and determine tariffs for inter-state
transmission of electricity. Section 2(36) of the Act of 2003 defines
"inter-state transmission" to mean the conveyance of electricity
from one state to another. Therefore, any open access transaction
involving the transmission of electricity across state boundaries would
qualify as an inter-state transaction, which falls exclusively within
the regulatory domain of the CERC. The appellants submitted that
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Section 86(1)(c) of the Act of 2003 empowers the State Commissions
to facilitate intra-state open access only. The power to regulate intrastate open access does not include the authority to regulate interstate open access transactions. The regulatory scheme under the
Act of 2003 establishes a clear division of jurisdiction between the
CERC and the State Commissions, with the CERC having exclusive
authority over inter-state transactions and the State Commissions
having authority over intra-state transactions.
18. It was the argument of the appellants that any surcharge or regulatory
requirement imposed by the RERC on such inter-state transactions
is ultra vires the Act of 2003 and amounts to an extra-territorial
application of state law. The appellants further submitted that the
findings of the Jodhpur Bench of the High Court, which upheld the
validity of Regulations of 2016 with respect to intra-state consumers,
cannot be applied to inter-state consumers. The challenge before the
Jaipur Bench of the High Court concerned inter-state consumers,
whose transactions are governed by the regulatory framework
established by the CERC, not the RERC, and thus would not be
covered by the judgment of the Jodhpur Bench.
19. Further, the appellants submitted that the jurisdiction of the RERC
is circumscribed by Section 86(1)(a) of the Act of 2003, in terms of
which the State Commission shall determine the tariff for generation,
supply, transmission and wheeling of electricity, wholesale, bulk or
retail "within the state". Thus, the RERC's powers with respect to
open access are only within the state and not beyond it. Whereas,
the CERC has been empowered under Section 79(1)(c) to regulate
inter-state transmission of electricity.
20. Appellants also made a reference to Section 42 of the Act of 2003
which provides that the RERC in exercise of its powers under this
provision may impose cross subsidy surcharge; wheeling charges;
additional surcharge on wheeling, if any, to meet fixed cost of the
distribution licensee arising out of its obligation to supply. Thus, the
RERC is within its power to factor operational costs only. Reference
was also made to the definition of "open access" provided under
Section 2(47), which reads as follows:
"(47) "open access" means the non-discriminatory
provision for the use of transmission lines or distribution
system or associated facilities with such lines or system
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Ramayana Ispat Pvt. Ltd. and Anr. v. State of Rajasthan & Ors.
by any licensee or consumer or a person engaged in
generation in accordance with the regulations specified
by the Appropriate Commission."
21. Appellants thus submitted that Section 42 of the Act of 2003 only
refers to the State Commissions whereas the definition of open access
contained in Section 2(47) refers to the Appropriate Commission which
includes the CERC. Therefore, the power of the State Commissions
does not extend to regulating inter-state open access transactions
which power has been conferred upon the Central Commission.
A conjoint reading of Sections 42 and 86(1)(a) of the Act of 2003
makes it clear that the regulations of the State Commissions only
apply within the state. In the case of inter-state transmission of
electricity, the governing regulation is the CERC (Connectivity and
General Network Access to the 'inter-state' Transmission System)
Regulations, 2022.7 All inter-state transactions (including collective
transactions) on the power exchange are necessarily inter-state
transactions and governed by the CERC GNA Regulations. In the
event of transmission of inter-state power from outside the state
into Rajasthan, it is not the RERC Regulations of 2016 which apply
within the state but the CERC GNA Regulations.
22. The appellants relied upon the decision of this Court in Energy
Watchdog v. Central Electricity Regulatory Commission,8 wherein
it was held that the authority to regulate inter-state transmission
and inter-state open access vests exclusively with the CERC. The
appellants argued that the ratio of this judgment squarely applies
to the present case, rendering the impugned regulation beyond the
competence of the RERC. The appellants relied upon the following
findings of this Court in Energy Watchdog (Supra):
"...24. The scheme that emerges from these sections is
that whenever there is inter State generation or supply of
electricity, it is the Central involved, and whenever there
is intra-State generation or supply of electricity, the State
Government or the State Commission is involved. This is
the precise scheme of the entire Act, including Sections
79 and 86. It will be seen that Section 79(1) itself in
7
CERC GNA Regulations.
8
(2017) 14 SCC 80.
450
[2025] 4 S.C.R.
Digital Supreme Court Reports
clauses (c), (d) and (e) speaks of inter-State transmission
and inter-State operations. This is to be contrasted
with Section 86 which deals with functions of the State
Commission which uses the expression "within the State"
in clauses (a), (b) and (d), and "intra-State" in clause (c).
This being the case, it is clear that the PPA, which deals
with generation and supply of electricity, will either have
to be governed by the State Commission or the Central
Commission. The State Commission's jurisdiction is only
where generation and supply takes place within the State.
On the other hand, the moment generation and sale takes
place in more than one State, the Central Commission
becomes the appropriate Commission under the Act. What
is important to remember is that if we were to accept the
argument on behalf of the appellant, and we were to hold
in the Adani case that there is no composite scheme for
generation and sale, as argued by the appellant, it would
be clear that neither Commission would have jurisdiction,
something which would lead to absurdity. Since generation
and sale of electricity is in more than one State obviously
Section 86 does not get attracted. This being the case, we
are constrained to observe that the expression "composite
scheme" does not mean anything more than a scheme for
generation and sale of electricity in more than one State."
23. Thus, the appellants submitted that by curtailing the purchase power
on the exchange by imposing conditions on inter-state open access
transactions taking place outside the state of Rajasthan, Regulation
26(7) is ex-facie contrary to the objectives of Act of 2003 and the
National Tariff Policy, and thus RERC has encroached upon the
jurisdiction of the CERC in framing these arbitrary regulations. By
imposing these conditions in excess of its territorial jurisdiction, the
RERC has essentially banned the purchase of power under real
time contracts, intraday contracts, and contingency contracts and
thereby ensured that industrial consumers such as the appellants
have no option but to purchase power from the Distribution Licensee
(Jaipur Vidyut Vitran Nigam), contrary to the objectives of promoting
competition such that consumers can avail quality and cheaper
power from different sources on the power exchange via the interstate open access mechanism. It was submitted that the impugned
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Ramayana Ispat Pvt. Ltd. and Anr. v. State of Rajasthan & Ors.
regulation, by interfering with inter-state scheduling, exceeds the
regulatory authority of the RERC and violates the statutory framework
established under the Act of 2003.
24. In Civil Appeal Nos. 7965 and 7966 of 2019, the challenge is to the
vires of the regulation by the captive generators supplying power
within the state of Rajasthan. Appellants have challenged the
Regulations of 2016 on the grounds that the Regulations of 2016
are discriminatory against the CPPs as they put illegal fetters upon
them for availing open access which is a statutory right of the such
power generators under Section 9 of the Act of 2003.
25. The appellant submitted that Regulation 21 of the Regulations
of 2016 is arbitrary and discriminatory against CPPs. Section
9 of the Act of 2003 recognizes the right of industries to set up
captive generation plants and ensures non-discriminatory access
to transmission and distribution networks. However, Regulation 21
creates an unreasonable distinction between captive generators and
state distribution companies,9 discouraging captive power generation.
The appellants contend that the pricing mechanism imposed under
Regulation 21 unfairly penalizes captive generators while providing
undue advantages to state DISCOMs. Under the regulation, any
under-injection by an open access consumer is settled at higher
rates, whereas over-injection is compensated at lower rates. Further,
Regulation 21 also provides that any energy injected by the power plant
but not utilised by its captive units is not paid for at all to the captive
unit/drawer/buyer. Such a pricing mechanism creates a disincentive
for captive generators to sell their surplus power through open access
and effectively forces them to rely on state utilities. The appellants
further argued that the discriminatory treatment of captive generators
under Regulation 21 is inconsistent with the intent of the Act of 2003,
which promotes competition and self-sufficiency in power generation.
By creating an uneven playing field, the regulation hampers industrial
consumers' ability to optimize their power procurement strategies and
forces them into an unfair dependence on state utilities.
26. The appellants have challenged Regulation 21 on the ground that
by imposition of heavy penalty in case of under-injection by CPPs
as provided in Regulation 21 and at the same time exemption of the
9
DISCOMs.
452
[2025] 4 S.C.R.
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State Generators and other generators supplying power to DISCOMS
on long term basis (by virtue of Regulation 5 and Regulation 6), the
Regulations of 2016 have created a discriminatory regime detrimental
to the interest of CPPs which is totally against the spirit of the proviso
to Section 9(1) of the Act of 2003.
27. It is the argument of the appellants that these regulations discourage
open access by providing extremely stringent provisions for normal
and practically uncontrollable deviations from schedule and are
thereby creating artificial barriers on CPPs and consumers availing
open access by making the supply from open access non feasible
and economically unviable by forcing the captive generators and
consumers to incur very steep payments as well as enriching the
DISCOMs at the expense of the open access consumers.
28. Appellants further highlighted that the National Electricity Policy 200510
realises the enormous potential of CPPs and envisages encouraging
generation from such plants for the overall development of the
power market in the country. A conjoint reading of the provisions of
the Act of 2003 and NEP of 2005 establishes that it is the explicit
intention of the legislature that the CPPs should be encouraged and
developed as a source of decentralised power generators. Therefore,
any regulation putting CPPs at a position disadvantageous vis-a-vis
other generator in the matter of providing open access or regulating
supply of power from them is in violation of and ultra vires to the
provisions of Act of 2003 and the NEP of 2005.
ARGUMENTS OF THE RESPONDENTS
29. The respondents, including the RERC and the distribution licensees
have strongly defended the validity of the Regulations of 2016,
contending that the same have been framed well within the jurisdiction
of the RERC as conferred under the Act of 2003 and are essential for
maintaining grid discipline, ensuring fair competition, and safeguarding
the financial viability of the electricity DISCOMs. Further, it has also
been vehemently submitted that open access cannot be absolutely
free, untrammelled, un-controlled or unrestricted. The submissions
of all the respondents defending the validity of the Regulations of
2016 have been reproduced below.
10
NEP of 2005.
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Ramayana Ispat Pvt. Ltd. and Anr. v. State of Rajasthan & Ors.
30. At the outset, it is submitted that the regulation of electricity is
an intricate and highly specialized domain requiring expertise in
technical, economic, and legal considerations. The Act of 2003,
entrusts regulatory commissions with the responsibility of ensuring
an efficient, reliable, and economically viable electricity sector while
balancing the interests of generators, consumers, and DISCOMs.
Electricity, being a form of energy that cannot be stored in its raw
form, necessitates continuous real-time management to maintain
grid stability.