Discoms cannot levy Cross Subsidy Surcharge on power supply having statutory protection from Ministry of Power

JSA Advocates and Solicitors (JSA) succeeded in securing a Judgment in favour of Rain Cements Ltd. (“Rain”), a cement manufacturer and an open access consumer of electricity in the state of Telangana. By Judgment dated 01.10.2026, High Court of Telangana held that since the power supply to Rain is covered under the statutory protection granted by Ministry of Power’s (“MoP”) Electricity [Removal of Difficulties] 2^nd Order, 2005, therefore, Telangana Discom’s levy of Cross Subsidy Surcharge on Rain is illegal.

Section 42(2) of the Electricity Act, 2003 provides for levy of Cross Subsidy Surcharge on open access consumers. On 08.06.2005, MoP notified the Electricity [Removal of Difficulties] 2^nd Order, 2005 which exempted power supplied by a generator holding a valid consent under Section 43A(1)(c) of Electricity (Supply) Act, 1948 from attracting the levy of Cross Subsidy Surcharge.

Rain had been availing power supply since 1999 from Rain Calcining Ltd. [i.e., a generator having a valid consent under Section 43A(1)(c) of Electricity (Supply) Act, 1948]. By Judgment dated 19.12.2023, High Court of Telangana held that the power supply from Rain Calcining Ltd. to Rain will be protected by MoP’s Electricity [Removal of Difficulties] 2^nd Order, 2005. Hence, Rain is covered by the exemption provided under MoP’s Electricity [Removal of Difficulties] 2^nd Order, 2005.

Disregarding the said legal provision, Telangana Discom issued notices upon Rain levying Cross Subsidy Surcharge for the period FY 2005-06 to FY 2014-15. Hence, Rain filed W.P. No. 25527 of 2025 before the Single Judge of High Court of Telangana challenging such notices. By Judgment dated 03.03.2026, the Single Judge of High Court of Telangana allowed Rain’s Writ Petition and quashed the Telangana Discom’s notices levying Cross Subsidy Surcharge on Rain. A Writ Appeal was preferred by the Telangana Discom against the said Judgment before the Division Bench of the High Court of Telangana. By Judgment dated 01.10.2026, the Division Bench of High Court of Telangana dismissed Telangana Discom’s Writ Appeal, and returned the following key findings in Rain’s favour:-

1. Rain is covered by the MoP Electricity [Removal of Difficulties] 2^nd Order, 2005.
2. As per the MoP Electricity [Removal of Difficulties] 2^nd Order, 2005, Telangana Discom shall NOT be entitled to levy, collect or enforce any demand of Cross Subsidy Surcharge.
3. Determination of the methodology/quantum of a statutory levy operates upon persons who are otherwise liable to bear that levy. Such determination cannot, by itself, create substantive liability on a person who is outside the charging provision or is protected by a statutory exemption.
4. Therefore, an Order of the Telangana State Electricity Regulatory Commission determining Cross Subsidy Surcharge cannot entitle Telangana Discom to levy Cross Subsidy Surcharge on Rain, which is statutorily exempted from such levy under MoP Electricity [Removal of Difficulties] 2^nd Order, 2005.

This is a landmark judgment and settles a long-standing dispute concerning applicability of MoP Electricity [Removal of Difficulties] 2^nd Order, 2005. This also assumes importance especially in light of how statutory exemptions carved out in favour of particular entities by Central Government’s decision are given due weightage vis-à-vis regulatory powers of State Electricity Regulatory Commissions.

Our Disputes team comprised, Poonam Verma Sengupta, Lead Partner; Saunak Rajguru, Principal Associate and Pradyumn Amit Sharma, Associate.