The Supreme Court of India has agreed to examine a petition filed by the Tamil Nadu Power Distribution Corporation Limited (TNPDCL) challenging a central rule that requires electricity tariffs to fully reflect the actual cost of supply. The case relates to Rule 23 of the Electricity (Amendment) Rules, 2024, which directs power distribution companies to reduce and eliminate the gap between their approved costs and revenue collected from consumers.

A bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and Vipul Pancholi issued a notice on the petition. The Court has sought responses and asked how different states are handling financial losses in the power sector. Under the amended rule, the gap between the approved revenue requirement and the actual tariff income must not exceed 3 percent. Any past financial gap must be cleared within seven years, while new gaps must be eliminated within three years.

TNPDCL has argued that the strict enforcement of this rule could lead to a sharp increase in electricity tariffs in Tamil Nadu. The corporation said that consumers may face a tariff hike of up to 50 percent if the rule is implemented without flexibility. It is submitted that the rule does not differentiate between private distribution companies and state-owned utilities that operate with social welfare responsibilities. Senior Advocate Gopal Subramanium, appearing for TNPDCL, told the Court that the Tamil Nadu government currently absorbs the financial losses to protect consumers from higher prices.

During the hearing, the bench raised concerns about the financial health of power distribution companies and state finances. Justice Joymalya Bagchi observed that if a state wants to provide subsidies, it should allocate funds in advance as required under the Electricity Act. He said allowing losses to accumulate without proper budgeting can lead to financial instability and arbitrary spending.

The Chief Justice also commented on the broader issue of fiscal discipline. He noted that while welfare measures are important, states are increasingly facing budget deficits. He pointed out that public money collected from taxpayers in other sectors is often used to cover losses in electricity distribution. The Court emphasized that consumers who are financially capable should pay the actual cost of the electricity they use to maintain financial stability in the power sector.

TNPDCL has also argued that Rule 23 is unconstitutional. It claims that the rule has a retrospective effect and interferes with the powers of State Electricity Regulatory Commissions to set tariffs based on local conditions. The Supreme Court’s decision in this matter is expected to have wide implications for electricity pricing and subsidy policies across India.

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