The Supreme Court has issued notices on a writ petition filed by the Tamil Nadu Power Distribution Corporation (TNPDCL) challenging Rule 23 of the Electricity (Amendment) Rules, 2024, which provides for cost-reflective electricity tariffs.

Hearing TNPDCL’s plea, a bench comprising Chief Justice Surya Kant, and Justices Joymalya Bagchi and Vipul Pancholi criticized the promise of providing free electricity to consumers in Tamil Nadu and the state government’s policy of absorbing the losses of electricity distribution companies (DISCOMs).

Issuing notices in the matter, the bench told the counsel for the petitioner and the government of India that it would like to understand the policies of other states relating to power distribution.

Coming down heavily on the ‘freebie culture,’ the court said the nation’s economic growth could be hampered by the unchecked distribution of largesse by states to consumers, irrespective of their financial status, without regard for fiscal realities.

Questioning how the scheme to provide free power was announced at the last minute, the bench observed that had these subsidies been announced in advance, the DISCOMs could have factored them into their budgets.

The Tamil Nadu government, represented by TNPDCL, argued that Rule 23 of the Electricity Amendment Rules was arbitrary and unworkable under the Constitution and violated Article 14. Rule 23 governs the gap between the approved annual revenue requirement and the estimated annual revenue from approved tariffs.

The petition raised concerns that the rule could constrain state governments’ ability to implement subsidized or free electricity programs and interfere with the powers of state electricity regulatory commissions.

The Supreme Court has made similar observations on the issue earlier, too. Last year, in a case relating to a dispute between Delhi’s DISCOMs and the Delhi Electricity Regulatory Commission, it had called for a balance between the right of consumers to affordable power and the right of DISCOMs to recover legitimate costs efficiently.

The Supreme Court emphasized that Sections 61 and 62 of the Electricity Act impose a clear obligation on the regulators to determine tariffs that are cost-reflective, provide a reasonable return to distribution licensees, and ensure consumer interests.

A few months later, the Ministry of Power proposed an amendment to the Electricity Act, 2003, mandating the electricity regulators to issue cost-reflective power tariffs. The Draft Electricity (Amendment) Bill, 2025, stated that DISCOMs were facing cumulative losses exceeding ₹6.9 trillion (~$77.68 billion), despite the introduction of several reforms.

The next hearing in the case will be held on April 13, 2026.