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Section 7: Generating company and requirement for setting up of generating station

Electricity Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 2003
Section 6 All 185 Sections of Electricity Act Section 8

Legal Commentary & Landmark Judgments: Section 7

Section 7 of the Electricity Act, 2003 establishes the foundational principle of delicensed power generation, permitting any generating company to establish, operate, and maintain a generating station without requiring a statutory licence, conditioned solely upon compliance with technical grid connectivity standards.

  • Unconditional Delicensing of Non-Hydro Generation: Abolishes the historical licensing requirement for setting up thermal, gas, solar, wind, and biomass power stations, establishing an open-market commercial regime for electricity generation.
  • Mandatory Adherence to CEA Technical Standards: Conditions the right to establish and operate generating stations upon strict compliance with technical standards for grid connectivity specified by the Central Electricity Authority under Section 73(b).
  • Carve-Out for Hydro-Electric Stations: Expressly isolates hydro-electric power stations from absolute delicensing, subjecting them to mandatory prior concurrence of the Central Electricity Authority under Section 8.
Key Landmark Precedents:
  • Tata Power Co. Ltd. v. Reliance Energy Ltd. (2009) 16 SCC 659: The Supreme Court held that delicensing of generation under Section 7 is a primary pillar of the 2003 Act, dismantling the monopolistic grip of distribution utilities and permitting generators to sell power freely in open markets.
  • Energy Watchdog v. Central Electricity Regulatory Commission (2017) 14 SCC 80: The Supreme Court held that power generation operates as a competitive commercial activity where generators assume contractual market risks under PPAs, precluding regulatory commissions from rewriting tariffs under the guise of general regulatory powers outside contract terms.
Courtroom Practice & Strategic Litigation Guidance:

When defending independent power producers against restrictive state-level generation restrictions, local cess impositions, or arbitrary grid-access denials, invoke Section 7 to establish that power generation is an unfettered statutory right governed exclusively by CEA safety and grid-code standards.

Section 6 All 185 Sections of Electricity Act Section 8