By Bhaskar Subramanian, Partner, S&S Co. Advocates & Solicitors and Subhradip Roy, Partner, S&S Co. Advocates & Solicitors
Published 24 October 2026 · Law stated as on 21 October 2026 · Informational content, not legal advice: see our disclaimer
Change in law litigation under India's power purchase agreements has moved past the basic question of whether a given government measure qualifies as a change in law at all, and into the harder question of what full restitution actually requires once it does. The Supreme Court and the Appellate Tribunal for Electricity decided several disputes through 2025 and 2026 that push that restitution principle further than before, while a separate line of rulings has drawn tighter boundaries around who can claim deemed distribution licensee status and which forum, the regulatory commission or an arbitrator, actually has the first word on a generator's non-tariff grievance.
Key points
- The Supreme Court held in May 2025 that a new statutory levy imposed by a government entity, there a Coal India evacuation facility charge, qualifies as a change in law and that compensation must restore the generator to the economic position it would otherwise have occupied, rejecting a Rajasthan discom's appeal against Adani Power Rajasthan.
- APTEL ruled in April 2026 that entry tax imposed on a solar developer after PPA execution, following the Supreme Court's Jindal Stainless judgment on compensatory taxes, is itself a change in law event, even where the PPA's quoted tariff clause suggested taxes were already priced in.
- Carrying cost is now treated as inherent to restitutionary change in law relief rather than a separate claim requiring its own contractual hook, a position APTEL has applied consistently from 2022 through an August 2026 Adani Power Tiroda ruling that again set aside the Maharashtra regulator's coal-shortfall compensation cap.
- The Supreme Court narrowed deemed distribution licensee status twice in two years: in 2024 it held an SEZ developer does not become a deemed licensee automatically and remains subject to regulatory scrutiny, and in May 2026 it held the Indian Railways is a consumer, not a deemed licensee, despite operating its own distribution infrastructure.
- Whether a non-tariff PPA dispute must go to the regulatory commission under Section 79 or 86, or can instead go to arbitration under the contract's own clause, remains genuinely contested, with commissions and tribunals still working through specific disputes rather than applying one settled rule.
- Curtailment compensation continues to turn on whether the curtailment was grid-security driven, with APTEL ordering compensation, sometimes at a fraction of the PPA tariff, where it was not, and regulators rejecting claims tied to ordinary transmission-capacity constraints.
From 'does this qualify' to 'what does full restitution require'
Change in law clauses in Indian power purchase agreements exist to rebalance a contract when a government measure, enacted after the PPA was signed, changes the generator's cost of supplying power on terms neither side priced in at the outset. For years, the main battleground in this area was the threshold question of whether a particular measure, a new tax, a duty, a regulatory charge, actually met the contract's own definition of a qualifying change in law. That question has not disappeared, but 2025 and 2026 have shifted the centre of gravity toward a harder and more consequential question: once a change in law is established, what does restoring the generator to its original economic position actually require, in full.
The clearest statement of where that restitution principle now stands comes from the Supreme Court's dismissal, on 23 May 2025, of an appeal by Rajasthan's distribution companies against Adani Power Rajasthan Ltd. A bench of Justices M.M. Sundresh and Rajesh Bindal upheld APTEL's finding that a December 2017 Coal India notification imposing an evacuation facility charge of Rs 50 per tonne was a change in law event, and the Court went further than simply confirming the characterisation. Justice Sundresh's judgment held that a new statutory levy imposed by a government entity qualifies as a change in law, and that compensation must restore the generator to the same economic position it would have occupied but for that change, language that reads the restitution obligation as a genuine make-whole standard rather than a notional or capped adjustment.
That make-whole framing matters because discoms and state regulators have repeatedly tried to cabin change in law compensation through caps, formulas, or restrictive readings of what the PPA's restitution language actually covers. The 2025 ruling gives generators a Supreme Court-level anchor for resisting that kind of narrowing, and tribunals and commissions deciding change in law quantum disputes since then have had to reckon with a restitution standard the apex court has now described in unambiguous, generator-favourable terms.
Carrying cost as inherent relief, not a separate ask
A related and, for many generators, more immediately valuable development concerns carrying cost, the compensation for the time value of money a generator loses between incurring a change in law cost and actually being paid for it through a supplementary bill or tariff adjustment. APTEL's reasoning on this point has matured steadily since a 2022 ruling that reversed CERC's refusal to grant carrying cost on a GST-related change in law claim, through a subsequent case involving a renewable developer where the Tribunal read even a PPA silent on restitution as implicitly supporting carrying cost once the broader change in law article used restitutionary language, and an April 2024 Adani Power ruling that allowed carrying cost at the late payment surcharge rate on a compounding basis, rejecting the argument that it should run only from the date a supplementary bill is actually raised rather than from the date the underlying cost was incurred.
That line continued into 2026. Adani Power disclosed in August 2026 that APTEL had again set aside a Maharashtra Electricity Regulatory Commission order on change in law compensation for coal shortfall at the company's Tiroda plant, directing MERC to issue fresh consequential orders using the operational parameters the Tribunal itself had already prescribed in an earlier round. The underlying dispute traces back to a 2020 APTEL ruling that rejected MERC's 25 percent cap on coal-shortfall compensation as inconsistent with the basic principles of restitution, and the 2026 order suggests the regulator's compliance with that direction has itself taken years rather than months, with APTEL having to intervene again to make the earlier ruling actually bite.
The practical upshot for a generator pursuing a change in law claim today is that carrying cost should be pleaded as part of the restitution the PPA's change in law article already promises, not as an additional, separately justified head of relief that depends on the contract containing an explicit restitution clause. Tribunals have consistently read the broader restitutionary purpose of these clauses as carrying that specific consequence with it. What the Tiroda saga also shows, less happily for generators, is that winning the principle at APTEL does not guarantee prompt compliance from the regulator on remand, and a generator should expect to budget for the possibility of a second or third round before full compensation actually reaches its account.
Entry tax, Jindal Stainless, and reading a tariff clause against a change in law clause
APTEL's decision in Appeal No. 322 of 2021, pronounced in April 2026, illustrates how far the change in law doctrine now reaches into measures that predate the Supreme Court's own final word on their validity. The dispute involved a solar developer that had agreed, under a PPA executed in March 2015, to a quoted tariff described in one clause as fixed, while a separate clause provided that the tariff payable would include taxes applicable from time to time. The Telangana regulator had denied change in law relief when the state later imposed entry tax under its 2001 entry tax legislation, reasoning that the developer's fixed, inclusive tariff already accounted for all taxes.
APTEL disagreed, and its reasoning turned on timing rather than on the general desirability of relief for the developer. When the developer submitted its bid in 2014, the Andhra Pradesh High Court had already struck down the entry tax legislation as unconstitutional, in a ruling later tagged with the lead matter that became Jindal Stainless Ltd v. State of Haryana, (2017) 12 SCC 1. The Supreme Court's eventual decision in that batch of appeals, delivered in November 2016 by a nine-judge bench, rejected the compensatory tax theory that had previously shielded such entry taxes and held that only discriminatory taxes offend Article 304(a) of the Constitution, which meant the entry tax regime survived in a form the developer could not have priced into its 2014 bid, since the relevant law was, as far as the developer could tell at the time, already a dead letter. APTEL held that the subsequent revival of the entry tax through that constitutional litigation, occurring after the PPA's execution, was itself a change in law event under Article 1.12 of the agreement, regardless of the tariff clause's general language about taxes being included.
The lesson for drafting and for litigating these claims is the same: a quoted or inclusive tariff clause does not automatically defeat a change in law claim over a tax that was, as a matter of settled legal position at the time of bidding, not actually in force. Tribunals are willing to look past an inclusive-tariff clause's apparent breadth where the specific measure being claimed for was genuinely outside what a bidder could have accounted for when it quoted its price, and a developer resisting a regulator's reliance on a tariff-inclusivity clause should focus the argument on exactly what the legal position was, and reasonably knowable to be, at the time of the bid.
Deemed distribution licensee status gets narrower, not wider
A separate and, in effect, opposite trend runs through recent Supreme Court rulings on who actually qualifies as a deemed distribution licensee under the Electricity Act, a status that excuses certain entities from needing a conventional distribution licence while subjecting them to lighter-touch regulatory oversight. In Sundew Properties Limited v. Telangana State Electricity Regulatory Commission, 2024 INSC 439, decided on 17 May 2024, the Court held that the proviso Parliament added to Section 14(b) giving SEZ developers a path to deemed licensee status does not make that status automatic. An SEZ developer still has to apply for recognition and remains subject to regulatory scrutiny within the specific provisions that govern deemed licensees, though the Court did set aside a capital-infusion condition the Telangana regulator had separately imposed on the developer involved as going beyond the statutory scheme.
The Court narrowed the category further in May 2026, in Indian Railways v. West Bengal State Electricity Distribution Company Ltd, 2026 INSC 464. A bench of Justices Dipankar Datta and Satish Chandra Sharma held that the Railways, despite owning and operating its own distribution infrastructure for its traction and other needs, is a consumer rather than a deemed distribution licensee, because its use of that infrastructure is confined to its own operations rather than extended to supplying third parties. The practical consequence, which the ruling makes explicit, is that the Railways must pay cross-subsidy surcharge and additional surcharge when it procures power through open access, exactly as any other large consumer would, rather than enjoying the lighter treatment a licensee might expect.
Read together, these two rulings establish that owning or operating distribution infrastructure, even infrastructure of considerable scale, is not by itself enough to confer deemed licensee status, and that an entity seeking that status, or a regulator assessing a claim to it, should expect genuine scrutiny of both the statutory basis for the claim and the entity's actual function, rather than treating the category as a formality once an entity's infrastructure crosses some practical threshold. Any large consumer with its own captive distribution network, industrial estates and similar campus-style operators among them, should read the Railways ruling as a caution against assuming deemed licensee treatment without a clear statutory hook specific to its category.
Section 79, Section 86, and who decides a non-tariff dispute
A persistent, unresolved friction point in Indian power litigation is which forum has jurisdiction over a dispute between a generator and a distribution licensee that does not turn on tariff determination itself, a termination dispute or a broader contractual grievance, for instance, where the PPA also contains its own arbitration clause. The foundational authority remains the Supreme Court's 2008 decision in Gujarat Urja Vikas Nigam Ltd v. Essar Power Ltd, (2008) 4 SCC 755, which read Section 86(1)(f) of the Electricity Act as giving the state regulatory commission itself the power to adjudicate disputes between a generating company and a licensee, including through its own choice to refer a dispute to arbitration, rather than treating a PPA's private arbitration clause as automatically ousting the commission's jurisdiction.
That principle continues to generate live disputes rather than settled, uncontroversial application. Proceedings between Essar Power Gujarat Ltd and Gujarat Urja Vikas Nigam Ltd before the Gujarat Electricity Regulatory Commission, concerning the same long-running Salaya-I project PPA, were still working through hearings as recently as mid-2025, with the commission's own Section 86(1)(f) jurisdiction over the dispute an active point of contention between the parties rather than a closed question. Separately, CERC petitions in 2025 continued to see respondents argue that Section 79(1)(f), the Central Commission's equivalent adjudicatory power, does not extend to disputes that are, in substance, ordinary breach-of-contract claims rather than matters the Commission itself is suited to adjudicate, with Essar Power cited on both sides of that argument depending on which outcome a party wants.
What this means practically is that a generator or distribution licensee cannot assume that a PPA's arbitration clause will automatically carry a non-tariff dispute to arbitration, nor can it assume the regulatory commission's adjudicatory jurisdiction under Section 79 or 86 will automatically swallow every contractual grievance regardless of how far it strays from tariff-related subject matter. The characterisation exercise, whether a given claim is genuinely a dispute the Commission's statutory jurisdiction reaches versus an ordinary contractual dispute better suited to arbitration, remains fact-specific and contested in live proceedings, and a party should expect to litigate that threshold question itself before reaching the merits of its underlying claim, rather than treating either forum as a given.
Finality cuts both ways: the Siwana Solar res judicata ruling
A September 2026 APTEL ruling involving a small 5 MW solar project in Bhiwani, Haryana, is a useful corrective to the impression that every tariff dispute in this sector stays open indefinitely while a generator keeps pressing a favourable earlier result. Siwana Solar Power Projects had won a 2019 APTEL order supporting a tariff of Rs 6.44 per unit under its 2014 PPA, but the procuring agency, Haryana Power Purchase Centre, continued paying a reduced rate of Rs 5.68 per unit that it had applied in 2018 based on a CERC order concerning other solar developers entirely, not Siwana itself. When Siwana petitioned the Haryana regulator again in 2024 seeking restoration of the higher rate, the regulator directed payment of Rs 6.44, and HPPC appealed.
APTEL set aside that 2024 direction in a ruling delivered on 18 September 2026, holding that the question of which rate actually governed the disputed period had already been finally decided in earlier proceedings and could not be reopened through a fresh petition years later. Because an earlier Haryana Commission order fixing the Rs 5.68 rate had itself gone unchallenged at the time, that figure had become binding for the relevant period regardless of what the 2019 APTEL order had separately said about the tariff principle.
The ruling cuts against generators as much as it protects procurers, and that even-handedness is the point. A party on either side of a tariff or change in law dispute that lets an adverse order lapse without appeal, intending to revisit the underlying question later through a fresh petition once circumstances or sympathies shift, should not expect a tribunal to entertain that later attempt simply because the party can point to a different, more favourable ruling obtained in parallel proceedings. Pressing every adverse order to a final, appealed conclusion at the time it is made remains the only reliable way to keep a disputed issue genuinely open, a lesson that echoes the finality point the Supreme Court made in the unrelated Jabalpur Corridor infrastructure dispute discussed elsewhere in this publication's coverage of 2026 rulings.
Curtailment, deemed generation and the grid-security line
Outside change in law and jurisdiction, 2026 has produced a steady stream of disputes over who bears the cost when a generator's output is curtailed, and the pattern that emerges from recent rulings is a consistent willingness to compensate curtailment that was not driven by genuine grid security concerns, while declining to compensate curtailment tied to ordinary transmission constraints. APTEL ordered compensation at 75 percent of the PPA tariff for Tamil Nadu solar developers where curtailment instructions during a specified period were found to have been issued for reasons other than grid security, a result that treats the grid-security justification as the dividing line the regulator actually has to establish, not merely assert, before shifting the economic loss onto the generator.
Andhra Pradesh's regulator reached the opposite result on different facts, rejecting a wind developer's deemed generation claim where the curtailment was attributable to insufficient transmission capacity rather than to a discretionary grid-security instruction, while APTEL separately and partly upheld a Rajasthan wind developer's deemed generation claim on its own facts, remanding the remaining issues to the state commission for further consideration. A Ministry of Power proposal that surfaced in commentary during this period would formalise this distinction further, compensating fifty percent of contracted energy value for transmission-constrained curtailment above a two percent threshold while leaving genuine grid-security curtailment uncompensated, though this research found no confirmation that the proposal has actually been notified as a binding framework, and it should be treated as a policy direction rather than current law.
For a generator negotiating risk allocation in a new PPA, or pursuing an existing curtailment claim, the operative distinction that regulators and APTEL are actually applying is not curtailment versus no curtailment, but grid-security curtailment versus every other kind. A claim built around demonstrating that a specific curtailment instruction lacked a genuine grid-security basis, rather than simply quantifying lost generation, is the argument that has been succeeding in recent rulings, and a PPA's own curtailment clause should be drafted, or read, with that distinction placed at its centre rather than left to a general compensation formula.
What this means for generators, discoms and PPAs now being negotiated
For a generator negotiating a new PPA, or managing an existing portfolio through this run of rulings, the first practical step is to treat the change in law and restitution article as the single most consequential clause in the agreement, worth negotiating with the same care as the tariff itself. A clause that expressly addresses carrying cost, rather than leaving it to be inferred from general restitutionary language, removes an entire category of argument the discom side will otherwise raise, even though tribunals have so far been willing to read carrying cost into silent clauses. A clause that defines what counts as a qualifying change in law with reference to the legal position actually in force and reasonably known at the time of bidding, rather than only to measures formally enacted after signing, will also sit more comfortably with the reasoning APTEL used in the entry tax ruling discussed above.
Discoms and procuring agencies, for their part, should treat the deemed distribution licensee rulings as confirmation that regulatory scrutiny of that status is not a formality to be waved through, and should expect large consumers with their own infrastructure, from SEZ developers to industrial estates, to keep testing the boundary the Railways ruling has now drawn. On jurisdiction, any party drafting a PPA today should assume that neither an arbitration clause nor a reference to Section 79 or 86 will, by itself, resolve which forum hears a future non-tariff dispute, and should expect to argue that threshold question on the specific facts if a dispute actually arises, rather than relying on the clause's wording to settle it in advance.
Finally, every party on either side of a live dispute should treat an adverse order, however minor it looks against the backdrop of a larger ongoing fight, as something to appeal immediately rather than to let lapse while attention stays on the main battle. The Siwana Solar ruling shows that an unchallenged order from years earlier can quietly become the binding position for an entire disputed period, regardless of what a more prominent, later ruling says about the underlying principle.
The thread running through this year and a half of power sector rulings is a doctrine of change in law that has stopped asking only whether a measure qualifies and started insisting, with real teeth, on what full restitution for a qualifying measure actually costs, carrying cost and all. That same period has narrowed, rather than widened, who can claim the comparatively favourable deemed distribution licensee status, and has left the question of which forum, commission or arbitrator, gets to hear a non-tariff dispute as unsettled in practice as it has been for over a decade, notwithstanding a clear 2008 Supreme Court statement of principle that later disputes keep testing at the margins.
A generator, discom or large consumer operating in this sector should treat each of these threads as live rather than settled: the restitution standard is now generator-favourable in principle but can still take years to translate into an actual payment on remand, deemed licensee status requires a specific statutory hook rather than mere infrastructure ownership, and the forum for a non-tariff dispute is worth arguing about early, since neither an arbitration clause nor a regulator's adjudicatory power under Sections 79 or 86 can be assumed to control automatically.
Frequently Asked Questions
My PPA's tariff clause says the quoted tariff includes all applicable taxes. Can I still claim change in law relief for a new tax?
Possibly, particularly if the tax was not actually in legal force, or was under genuine constitutional challenge, at the time you quoted your tariff. APTEL's 2026 entry tax ruling held that a tax revived by later Supreme Court litigation was a change in law event despite an inclusive tariff clause, because the developer could not have priced in a tax that was, as far as it reasonably knew, a dead letter when it bid.
Do I need a specific contractual clause to claim carrying cost on top of a change in law adjustment?
Generally no. APTEL has consistently treated carrying cost as inherent to the restitution a change in law clause already promises, even reading PPAs that lack an explicit restitution clause as supporting it, provided the broader change in law article uses restitutionary language.
I operate my own distribution network inside an industrial estate or SEZ. Am I automatically a deemed distribution licensee?
No. The Supreme Court held in 2024 that SEZ developers do not become deemed licensees automatically and remain subject to regulatory scrutiny, and in 2026 held that even an entity operating substantial distribution infrastructure, there the Indian Railways, is a consumer rather than a licensee if its use is confined to its own operations. Owning infrastructure alone does not establish the status.
My PPA has an arbitration clause. Does that mean a contractual dispute with my distribution licensee must go to arbitration rather than the regulatory commission?
Not necessarily. Since Gujarat Urja Vikas Nigam v. Essar Power in 2008, the regulatory commission's own adjudicatory jurisdiction under Section 79 or 86 can extend to disputes between a generator and a licensee regardless of a private arbitration clause, and ongoing 2025-2026 proceedings show this characterisation question is still actively contested rather than settled.
My generation was curtailed and I want compensation. What matters most to my claim?
Whether the curtailment was genuinely driven by grid security. Recent rulings compensate curtailment shown to lack a real grid-security basis, including at a share of the PPA tariff, while declining to compensate curtailment tied to ordinary transmission capacity constraints. Build your claim around that distinction rather than around the volume of lost generation alone.
I won a change in law ruling at APTEL. Does that mean the regulator will pay promptly?
Not necessarily. The Adani Power Tiroda dispute shows a regulator can take years and require a second APTEL intervention to actually comply with an earlier ruling's directions on remand. Budget for a longer compliance timeline even after winning the underlying principle.
References & Further Reading
The provisions, rulings and official documents below were relied on for this article, which states the law as on 21 October 2026. The position can change with amendments, rules and later decisions, so check the current text before acting on any of it.
- Electricity Act, 2003, Sections 14(b) proviso, 79(1)(f), 86(1)(f)
- Gujarat Urja Vikas Nigam Ltd v. Essar Power Ltd, (2008) 4 SCC 755
- Jindal Stainless Ltd v. State of Haryana, (2017) 12 SCC 1 (nine-judge bench, decided November 2016)
- Sundew Properties Limited v. Telangana State Electricity Regulatory Commission & Anr, 2024 INSC 439 / [2024] 5 S.C.R. 739 (Civil Appeal No. 8978 of 2019, decided 17 May 2024)
- Indian Railways v. West Bengal State Electricity Distribution Company Limited, 2026 INSC 464 (decided May 2026)
- Supreme Court order dated 23 May 2025 dismissing Jaipur Vidyut Vitran Nigam Ltd and Rajasthan discoms' appeal against the APTEL ruling in favour of Adani Power Rajasthan Ltd (coal evacuation facility charge change in law)
- APTEL, Appeal No. 322 of 2021 (entry tax as change in law, decided April 2026)
- APTEL rulings on carrying cost as inherent to change in law restitution (2022 GST ruling; April 2024 Adani Power late-payment-surcharge ruling; August 2026 Adani Power Tiroda coal-shortfall remand)
- APTEL ruling on Tamil Nadu solar curtailment compensation at 75 percent of PPA tariff for non-grid-security curtailment
- APTEL ruling on Siwana Solar Power Projects v. Haryana Power Purchase Centre, res judicata and finality of an unchallenged 2018 tariff order (decided 18 September 2026)
Related reading on this site
- Change in law ppa compensation guide
- Electricity dispute arbitration vs regulatory commission section 79 guide
- Electricity tariff true up serc guide
- Distribution licensee universal service obligations guide
- Ppa disputes curtailment compensation guide
- Open access power procurement guide
- Aptel true up petition carrying cost delay
- Aptel piccadily captive power status 26 percent ownership rule
- Aptel siwana solar haryana res judicata tariff
- Adani power tiroda aptel sets aside merc coal shortfall compensation cap
- Southern power distribution ap green infra wind gbi tariff