Supreme Court Clarifies Tariff Adoption for Waste-to-Energy Projects: Municipal Corporation of Delhi vs. Gagan Narang (2025)

Date of the Judgment: January 2, 2025
Citation: 2025 INSC 2
Judges: B.R. Gavai, J. and K.V. Viswanathan, J.
Can a municipal corporation, responsible for waste management, approach the electricity regulatory commission for tariff adoption of a waste-to-energy project? The Supreme Court of India recently addressed this question. This case clarifies whether entities other than distribution licensees or generating companies can seek tariff adoption for power projects. The judgment was delivered by a two-judge bench comprising Justice B.R. Gavai and Justice K.V. Viswanathan.

Case Background

The Municipal Corporation of Delhi (MCD) planned a waste-to-energy (WTE) project at Narela Bawana, Delhi. On May 14, 2022, MCD met with distribution licensees and stakeholders. They agreed to use a tariff-based bidding model. The MCD was authorized to conduct the bidding process. This was formalized in the Minutes of Meeting on May 30, 2022.

Subsequently, on July 15, 2022, the MCD issued a Notice Inviting Tender (NIT) and a Request for Proposal (RfP). These documents sought bids for a WTE project with a minimum capacity of 28 MW. The project aimed to process 3000 (+/- 20%) tons per day of municipal solid waste. The documents were sent to the Delhi Electricity Regulatory Commission (DERC) for consideration.

The DERC directed the MCD on August 24, 2022, to file a petition for approval of the Power Purchase Agreement (PPA) and RfP. The DERC also mentioned similar petitions from other corporations. The MCD then closed the initial bidding process and issued a new NIT on October 21, 2022, with identical terms.

The Waste to Energy Research & Technology Council (WTERT) challenged the MCD’s authority to issue the tariff-based bid. During the petition’s pendency, bids were received from two companies. After evaluation, M/s JITF Urban Infrastructure Ltd. was selected as the lowest bidder with a levelized tariff of Rs. 7.380/KWh.

The MCD filed a petition before the DERC for approval of the bidding process. The DERC dismissed WTERT’s petition on March 6, 2023. It also approved the bid tariff on March 7, 2023. The DERC directed the Distribution Licensee to negotiate the PPA with the MCD.

Aggrieved by these orders, Mr. Gagan Narang filed appeals before the Appellate Tribunal for Electricity (APTEL). The APTEL set aside the DERC orders, stating that the DERC lacked jurisdiction to entertain MCD’s petition.

Timeline

Course of Proceedings

The Waste to Energy Research & Technology Council (WTERT) filed a petition before the DERC challenging the MCD’s authority to issue the tariff-based bid. The DERC dismissed this petition. The DERC also approved the bid tariff of Rs. 7.38/KWh for the project. It directed the distribution licensee to negotiate the terms of the Power Purchase Agreement (PPA) with the MCD.

Mr. Gagan Narang filed two separate appeals before the APTEL against the DERC orders. The APTEL set aside the DERC orders. It held that the DERC lacked jurisdiction to entertain a petition filed by the MCD. The APTEL reasoned that only distribution licensees or generating companies could file an application for tariff adoption under Section 63 of the Electricity Act, 2003.

Legal Framework

The case involves several key legal provisions. Section 63 of the Electricity Act, 2003, allows the Appropriate Commission to adopt a tariff determined through a transparent bidding process. Section 86(1)(b) of the same Act empowers the State Commission to regulate electricity purchase and procurement processes. It also includes the price at which electricity is procured.

Rule 15 of the Solid Waste Management Rules, 2016, mandates local authorities to facilitate the construction, operation, and maintenance of solid waste processing facilities. This includes waste-to-energy projects. Rule 6.4 of the National Tariff Policy, 2016, requires distribution licensees to procure 100% of the power produced from waste-to-energy plants.

Section 175 of the Electricity Act states that the Act’s provisions are in addition to, and not in derogation of, any other law. This means that the Electricity Act should be read in conjunction with other relevant laws, such as the Environment (Protection) Act, 1986, and its rules.

The Solid Waste Management Rules, 2016, also specify the duties of the Ministry of Power. These duties include deciding tariffs for power generated from waste-to-energy plants and ensuring compulsory purchase of this power by distribution companies.

The relevant provisions of the Solid Waste Management Rules, 2016 are:

• “15. Duties and responsibilities of local authorities and village panchayats of census towns and urban agglomerations.—The local authorities and Panchayats shall —
  (q) transport segregated bio-degradable waste to the processing facilities like compost plant, biomethanation plant or any such facility. Preference shall be given for on site processing of such waste;
  (v) facilitate construction, operation and maintenance of solid waste processing facilities and associated infrastructure on their own or with private sector participation or through any agency for optimum utilisation or various components of solid waste adopting suitable technology including the following technologies and adhering to the guidelines issued by the Ministry of Urban Development from time to time and standards prescribed by the Central Pollution Control Board. Preference shall be given to decentralised processing to minimise transportation cost and environmental impacts such as —
  (a) bio-methanation, microbial composting, vermi-composting, anaerobic digestion or any other appropriate processing for bio-stabilisation of biodegradable waste;
  (b) waste to energy processes including refused derived fuel for combustible fraction of waste or supply as feedstock to solid waste based power plants or cement kilns;”

The relevant provisions of the Tariff Policy are:

• “6.4 Renewable sources of energy generation including Co-generation from renewable energy sources:
  (1) Pursuant to provisions of section 86(1)(e) of the Act, the Appropriate Commission shall fix a minimum percentage of the total consumption of electricity in the area of a distribution licensee for purchase of energy from renewable energy sources, taking into account availability of such resources and its impact on retail tariffs. Cost of purchase of renewable energy shall be taken into account while determining tariff by SERCs. Long term growth trajectory of Renewable Purchase Obligations (RPOs) will be prescribed by the Ministry of Power in consultation with MNRE.
  Provided that cogeneration from sources other than renewable sources shall not be excluded from the applicability of RPOs.
  (i) Within the percentage so made applicable, to start with, the SERCs shall also reserve a minimum percentage for purchase of solar energy from the date of notification of this policy which shall be such that it reaches 8% of total consumption of energy, excluding Hydro Power, by March 2022 or as notified by the Central Government from time to time.
  (ii) Distribution Licensee(s) shall compulsorily procure 100% power produced from all the Waste-to-Energy plants in the State, in the ratio of their procurement of power from all sources including their own, at the tariff determined by the Appropriate Commission under Section 62 of the Act.
  (iii) It is desirable that purchase of energy from renewable sources of energy takes place more or less in the same proportion in different States. To achieve this objective in the current scenario of large availability of such resources only in certain parts of the country, an appropriate mechanism such as Renewable Energy Certificate (REC) would need to be promoted. Through such a mechanism, the renewable energy based generation companies can sell the electricity to local distribution licensee at the rates for conventional power and can recover the balance cost by selling certificates to other distribution companies and obligated entities enabling the latter to meet their renewable power purchase obligations. The REC mechanism should also have a solar specific REC.
  (iv) Appropriate Commission may also provide for a suitable regulatory framework for encouraging such other emerging renewable energy technologies by prescribing separate technology based REC multiplier (i.e. granting higher or lower number of RECs to such emerging technologies for the same level of generation). Similarly, considering the change in prices of renewable energy technologies with passage of time, the Appropriate Commission may prescribe vintage based REC multiplier (i.e. granting higher or lower number of RECs for the same level of generation based on year of commissioning of plant).
  (2) States shall endeavor to procure power from renewable energy sources through competitive bidding to keep the tariff low, except from the waste to energy plants. Procurement of power by Distribution Licensee from renewable energy sources from projects above the notified capacity, shall be done through competitive bidding process, from the date to be notified by the Central Government.”

The relevant provisions of the Solid Waste Management Rules, 2016 are:

• “9. Duties of the Ministry of Power. – The Ministry of Power through appropriate mechanisms shall, –
  (a) decide tariff or charges for the power generated from the waste to energy plants based on solid waste.
  (b) compulsory purchase power generated from such waste to energy plants by distribution company.”

The relevant provisions of the Electricity Act, 2003 are:

• “63. Determination of tariff by bidding process. – Notwithstanding anything contained in section 62, the Appropriate Commission shall adopt the tariff if such tariff has been determined through transparent process of bidding in accordance with the guidelines issued by the Central Government.”
• “86. Functions of the State Commission .-(1) The State Commission shall discharge the following functions, namely: –
  (b) regulate electricity purchase and procurement process of distribution licensees including the price at which electricity shall be procured from the generating companies or licensees or from other sources through agreements for purchase of power for distribution and supply within the State;”
• “86. Functions of the State Commission .-(1) The State Commission shall discharge the following functions, namely: –
  (e) promote cogeneration and generation of electricity from renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee;”
• “174. Act to have overriding effect. – Save as otherwise provided in section 173, the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.”
• “175. Provisions of this Act to be in addition to and not in derogation of other laws. – The provisions of this Act are in addition to and not in derogation of any other law for the time being in force.”

Arguments

Appellant (MCD) Arguments:

• The APTEL erred by limiting the applicability of Sections 63 and 86(1)(b) of the Electricity Act to only distribution licensees or generating companies.
• Section 86(1)(b) grants broad powers to the State Commission to regulate electricity purchase, including the price of procurement from various sources.
• The MCD, as a statutory body, is obligated under the Solid Waste Management Rules, 2016, to set up waste-to-energy projects.
• The National Tariff Policy, 2016, mandates distribution companies to procure 100% of the power from waste-to-energy plants.
• Section 175 of the Electricity Act states that the Act’s provisions are in addition to other laws, including environmental laws.
• Since no specific guidelines exist for bidding on waste-to-energy projects, the DERC can exercise its regulatory powers under Section 86(1)(b) to approve the bidding process and adopt the tariff.
• The waste-to-energy project is essential for processing municipal solid waste and serves a larger public interest.
• The DERC had previously approved a similar bidding process for another waste-to-energy project.

Respondent (Gagan Narang) Arguments:

• The APTEL correctly held that the MCD cannot apply for tariff adoption under Section 63 of the Electricity Act.
• Only distribution companies or generating companies can invoke Section 63.
• The Ministry of Power is exclusively responsible for providing a mechanism for tariff adoption for waste-to-energy projects, as per Rule 6.4(2) of the National Tariff Policy, 2016.
• The DERC lacks jurisdiction to entertain the MCD’s application.

Innovativeness of the argument: The MCD’s argument that it is not a stranger and is statutorily mandated to set up the WTE project is innovative. It also argued that Section 63 should be read harmoniously with Section 86(1)(b) of the Electricity Act, 2003, to give a wider interpretation to the powers of the State Commission.

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

1. Whether the application under Section 63 of the Electricity Act, 2003, could have been made by the Municipal Corporation of Delhi (MCD), a “local authority” under Section 2(41) of the Act.

Treatment of the Issue by the Court

The following table demonstrates how the Court decided the issue:

Authorities

The Supreme Court considered the following cases and legal provisions:

Cases:

• Pune Municipal Corporation v. Sus Road Baner Vikas Manch and others (2024) 9 SCC 1: This case recognized the statutory duty of municipal corporations to set up waste-to-energy projects.
• Energy Watchdog v. Central Electricity Regulatory Commission and others (2017) 14 SCC 80: This case held that when no guidelines exist, the Central Commission can exercise power under Section 79(1)(b) of the Electricity Act, 2003.
• Punjab State Power Corporation Limited and another vs. Emta Coal Limited (2022) 2 SCC 1: This case emphasized the principle of literal interpretation of statutes.
• Jaipur Vidyut Vitran Nigam Limited and others v. MB Power (Madhya Pradesh) Limited and others (2024) 8 SCC 513: This case held that the State Commission is not a mere post office and has a duty to balance the interests of consumers and generators/Discoms.
• Sanjay Ramdas Patil v. Sanjay and others (2021) 10 SCC 306: This case discussed the principles of harmonious construction of statutes.

Legal Provisions:

• Section 63, Electricity Act, 2003: Allows the Appropriate Commission to adopt a tariff determined through a transparent bidding process.
• Section 86(1)(b), Electricity Act, 2003: Empowers the State Commission to regulate electricity purchase and procurement.
• Section 86(1)(e), Electricity Act, 2003: Promotes cogeneration and generation of electricity from renewable sources.
• Section 174, Electricity Act, 2003: Gives the Act an overriding effect over other laws.
• Section 175, Electricity Act, 2003: States that the Act is in addition to, and not in derogation of, other laws.
• Rule 15, Solid Waste Management Rules, 2016: Mandates local authorities to facilitate waste processing facilities.
• Rule 6.4, National Tariff Policy, 2016: Requires distribution licensees to procure 100% power from waste-to-energy plants.

Judgment

The Supreme Court allowed the appeals filed by the Municipal Corporation of Delhi. The Court quashed the APTEL’s judgment and affirmed the DERC’s orders. The Court held that the MCD, being a statutory body, could apply for tariff adoption under Section 63 of the Electricity Act, 2003.

The Court reasoned that Section 63 does not restrict its application to only distribution licensees or generating companies. The Court emphasized that the provisions of Section 63 should be read harmoniously with Section 86(1)(b) of the Act. This section gives wide powers to the State Commission to regulate electricity purchase and procurement processes.

The Court also noted that the MCD was fulfilling its statutory obligations under the Solid Waste Management Rules, 2016, by setting up the waste-to-energy project. The Court further held that the Electricity Act is in addition to, and not in derogation of, other laws, including environmental laws.

How each authority was viewed by the Court:

• Pune Municipal Corporation v. Sus Road Baner Vikas Manch (2024) 9 SCC 1*: The Court followed this case to recognize the statutory duty of municipal corporations to set up waste-to-energy projects.
• Energy Watchdog v. Central Electricity Regulatory Commission and others (2017) 14 SCC 80*: The Court followed this case to show that regulatory powers can be exercised when no guidelines exist.
• Punjab State Power Corporation Limited and another vs. Emta Coal Limited (2022) 2 SCC 1*: The Court followed this case for the principle of literal interpretation of statutes.
• Jaipur Vidyut Vitran Nigam Limited and others v. MB Power (Madhya Pradesh) Limited and others (2024) 8 SCC 513*: The Court followed this case for the duty of State Commission to balance interests.
• Sanjay Ramdas Patil v. Sanjay and others (2021) 10 SCC 306*: The Court followed this case for the principle of harmonious construction of statutes.
• Section 63, Electricity Act, 2003: The Court interpreted this section to show it does not restrict application to Discoms or generating companies.
• Section 86(1)(b), Electricity Act, 2003: The Court interpreted this section to show the wide powers of the State Commission.
• Section 86(1)(e), Electricity Act, 2003: The Court interpreted this section to show the promotion of renewable energy.
• Section 174, Electricity Act, 2003: The Court interpreted this section to show the overriding effect of the Act.
• Section 175, Electricity Act, 2003: The Court interpreted this section to show the Act is in addition to other laws.
• Rule 15, Solid Waste Management Rules, 2016: The Court followed this rule to show the mandate for local authorities to facilitate WTE projects.
• Rule 6.4, National Tariff Policy, 2016: The Court followed this rule to show the mandate for Discoms to procure power from WTE projects.

The Court quoted the following from the judgment in Punjab State Power Corporation Limited and another vs. Emta Coal Limited (2022) 2 SCC 1:

“23. The principle of giving a plain and literal meaning to the words in a statute is well-recognised for ages… The cardinal rule of construction of statutes is to read the statute literally, that is by giving to the words used by the legislature their ordinary, natural and grammatical meaning. If, however, such a reading leads to absurdity and the words are susceptible of another meaning the Court may adopt the same. But if no such alternative construction is possible, the Court must adopt the ordinary rule of literal interpretation.”

The Court also quoted the following from the judgment in Sanjay Ramdas Patil v. Sanjay and others (2021) 10 SCC 306:

“27. In Sultana Begum v. Prem Chand Jain [(1997) 1 SCC 373], this Court observed thus : (SCC pp. 381-82, para 15)
“15. On a conspectus of the case-law indicated above, the following principles are clearly discernible:
(1) It is the duty of the courts to avoid a head-on clash between two sections of the Act and to construe the provisions which appear to be in conflict with each other in such a manner as to harmonise them.
(2) The provisions of one section of a statute cannot be used to defeat the other provisions unless the court, in spite of its efforts, finds it impossible to effect reconciliation between them.
(3) It has to be borne in mind by all the courts all the time that when there are two conflicting provisions in an Act, which cannot be reconciled with each other, they should be so interpreted that, if possible, effect should be given to both. This is the essence of the rule of “harmonious construction”.
(4) The courts have also to keep in mind that an interpretation which reduces one of the provisions as a “dead letter” or “useless lumber” is not harmonious construction.
(5) To harmonise is not to destroy any statutory provision or to render it otiose.”

The Court further quoted the following from the judgment in CIT v. Hindustan Bulk Carriers [(2003) 3 SCC 57]:

“17. If the choice is between two interpretations, the narrower of which would fail to achieve the manifest purpose of the legislation, we should avoid a construction which would reduce the legislation to futility, and should rather accept the bolder construction, based on the view that Parliament would legislate only for the purpose of bringing about an effective result.”

What weighed in the mind of the Court?

The Supreme Court emphasized several points in its reasoning. The Court prioritized the literal interpretation of Section 63 of the Electricity Act, 2003. It noted that the section does not explicitly restrict its application to only distribution licensees or generating companies. The Court also highlighted the need for a harmonious construction of different sections of the Electricity Act. It emphasized that the statute should be read as a whole, and no provision should be rendered useless or redundant.

The Court considered the statutory obligations of the MCD under the Solid Waste Management Rules, 2016. It also took into account the public interest aspect of the waste-to-energy project. The Court also emphasized the need to promote renewable energy and ensure the proper disposal of municipal solid waste. The Court also noted that the DERChad previously approved a similar bidding process for another waste-to-energy project, indicating that it had the necessary regulatory powers.

The Court was also influenced by the fact that the Ministry of Power had not yet provided a mechanism for tariff adoption for waste-to-energy projects. It held that the DERC could exercise its regulatory powers under Section 86(1)(b) of the Electricity Act, 2003, to approve the bidding process and adopt the tariff.

The Court was keen to avoid a situation where the laudable objectives of the Solid Waste Management Rules, 2016, would be frustrated. It also emphasized the need to balance the interests of all stakeholders, including the municipal corporation, distribution licensees, and consumers.

Ratio Decidendi

The ratio decidendi of the case is that a “local authority” like the Municipal Corporation of Delhi, which is statutorily obligated to set up waste-to-energy projects, can apply for tariff adoption under Section 63 of the Electricity Act, 2003. This provision is not limited to distribution licensees or generating companies. The State Electricity Regulatory Commission has the power to regulate electricity purchase and procurement processes, including the price at which electricity is procured from various sources, under Section 86(1)(b) of the Act.

The Court also held that when no specific guidelines exist for bidding on waste-to-energy projects, the State Electricity Regulatory Commission can exercise its regulatory powers under Section 86(1)(b) to approve the bidding process and adopt the tariff. The provisions of the Electricity Act, 2003, are in addition to, and not in derogation of, other laws, including environmental laws.

The ratio decidendi of the case can be summarized in the following points:

• Section 63 of the Electricity Act, 2003, does not restrict its application to only distribution licensees or generating companies.
• A local authority, such as a Municipal Corporation, which is statutorily obligated to set up waste-to-energy projects, can apply for tariff adoption under Section 63.
• Section 86(1)(b) of the Electricity Act, 2003, grants wide powers to the State Commission to regulate electricity purchase and procurement processes, including the price at which electricity is procured from various sources.
• When no specific guidelines exist for bidding on waste-to-energy projects, the State Commission can exercise its regulatory powers under Section 86(1)(b) to approve the bidding process and adopt the tariff.
• The provisions of the Electricity Act, 2003, are in addition to, and not in derogation of, other laws, including environmental laws.

Obiter Dicta

While the main focus of the judgment was on the interpretation of Section 63 and Section 86(1)(b) of the Electricity Act, the Supreme Court also made some observations that can be considered as obiter dicta. These include:

• The Court emphasized the importance of promoting renewable energy and ensuring the proper disposal of municipal solid waste.
• The Court noted that waste-to-energy projects are essential for managing municipal solid waste and serve a larger public interest.
• The Court observed that the Ministry of Power should provide a mechanism for tariff adoption for waste-to-energy projects to avoid regulatory gaps.
• The Court emphasized the need to balance the interests of all stakeholders, including the municipal corporation, distribution licensees, and consumers.

The obiter dicta of the case can be summarized in the following points:

• Waste-to-energy projects are essential for managing municipal solid waste and serve a larger public interest.
• The Ministry of Power should provide a mechanism for tariff adoption for waste-to-energy projects.
• The interests of all stakeholders, including the municipal corporation, distribution licensees, and consumers, should be balanced.
• The promotion of renewable energy and proper disposal of municipal solid waste are important objectives.

Implications

The Supreme Court’s judgment has significant implications for the development of waste-to-energy projects in India. The judgment clarifies that municipal corporations and other local authorities can approach the State Electricity Regulatory Commission for tariff adoption of waste-to-energy projects. This will encourage more local bodies to set up such projects and help in the proper disposal of municipal solid waste.

The judgment also clarifies the powers of the State Electricity Regulatory Commission to regulate electricity purchase and procurement processes. This will ensure that the bidding process for waste-to-energy projects is transparent and competitive. The judgment also promotes the use of renewable energy and helps in reducing the dependence on fossil fuels.

The judgment also highlights the need for the Ministry of Power to provide a mechanism for tariff adoption for waste-to-energy projects. This will help in streamlining the process and avoiding regulatory gaps. The judgment also emphasizes the need to balance the interests of all stakeholders, including the municipal corporation, distribution licensees, and consumers. This will ensure that the tariff for waste-to-energy projects is fair and reasonable.

The implications of the judgment can be summarized as follows:

• Municipal corporations and other local authorities can approach the State Electricity Regulatory Commission for tariff adoption of waste-to-energy projects.
• The State Electricity Regulatory Commission has the power to regulate electricity purchase and procurement processes.
• The judgment promotes the use of renewable energy and helps in the proper disposal of municipal solid waste.
• The Ministry of Power should provide a mechanism for tariff adoption for waste-to-energy projects.
• The interests of all stakeholders, including the municipal corporation, distribution licensees, and consumers, should be balanced.

The judgment has the following practical impacts:

• Increased Investment in WTE Projects: Local authorities will be encouraged to invest in WTE projects, knowing that the tariff adoption process is clarified.
• Streamlined Regulatory Process: The judgment clarifies the powers of the State Electricity Regulatory Commission, leading to a more streamlined regulatory process.
• Promotion of Renewable Energy: The judgment promotes the use of renewable energy and helps in reducing the dependence on fossil fuels.
• Better Waste Management: The judgment will lead to better management of municipal solid waste, as WTE projects become more viable.
• Balanced Interests: The judgment ensures that the interests of all stakeholders are balanced, leading to a more equitable outcome.

Flowchart of the Case