Navigating the Intersection of Waste Management and Energy Law: The MCD vs. Gagan Narang Case


Court: Supreme Court of India.

Case Name: MCD vs. Gagan Narang

Citation: 2025 INSC 2. [PDF]

Introduction

The case of Municipal Corporation of Delhi (MCD) vs. Gagan Narang & Ors. is a landmark ruling by the Supreme Court of India that clarifies the powers of local authorities in setting up Waste-to-Energy (WTE) projects. The dispute centered on whether the MCD, as a local body, could initiate a bidding process for a WTE project and seek tariff adoption under Section 63 of the Electricity Act, 2003.

The Appellate Tribunal for Electricity (APTEL) had previously ruled that only distribution licensees (Discoms) or generating companies could invoke Section 63, thus limiting the scope of local authorities' involvement in WTE projects. The Supreme Court, however, disagreed with this narrow interpretation, emphasizing a literal interpretation of the Electricity Act. This ruling has significant implications for how India manages its waste and promotes renewable energy.

This case also highlights the importance of the Solid Waste Management Rules, 2016 (SWM Rules 2016), which mandate local authorities to manage waste properly and encourage decentralized waste processing. The Supreme Court's judgment underscores the interplay between environmental and energy regulations and confirms the statutory obligations of local bodies in India. The ruling seeks to harmonize the provisions of the Electricity Act with the mandate for renewable energy procurement, in addition to promoting environmental protection.

Case Summary

  1. The Municipal Corporation of Delhi (MCD) organized a meeting on May 14, 2022, with Distribution Licensees and other stakeholders to discuss a tariff-based bidding model for a WTE project. It was decided that the MCD would conduct the bidding process for the WTE project as per Section 63 of the Electricity Act.
  2. On July 15, 2022, the MCD issued a Notice Inviting Tender (NIT) and Request for Proposal (RfP) for a WTE project at Narela Bawana, New Delhi. The tender specified a minimum capacity of 28 MW and processing of 3000 (+/- 20%) tonnes per day of Municipal Solid Waste (MSW). The documents were sent to the Delhi Electricity Regulatory Commission (DERC) for consideration.
  3. The DERC directed the MCD to file a petition for approval of the Power Purchase Agreement (PPA) and RfP on August 24, 2022. An evaluation committee was also constituted to assess the bids.
  4. Bids were received from M/s JITF Urban Infrastructure Ltd. and M/s JBM Renewables Pvt. Ltd. on November 14, 2022. M/s JITF Urban Infrastructure Ltd. was selected as the lowest bidder, with a levelized tariff bid of Rs. 7.380/KWh.
  5. The DERC dismissed a petition by the Waste to Energy Research & Technology Council (WTERT) on March 6, 2023, which challenged the MCD’s authority to conduct the bidding process. On March 7, 2023, the DERC approved the bid tariff of Rs. 7.38/KWh and directed the distribution licensees to negotiate a PPA with the MCD.
  6. The Appellate Tribunal for Electricity (APTEL) set aside the DERC orders on August 31, 2023, stating that DERC lacked jurisdiction to entertain a petition by the MCD. APTEL argued that only Discoms or generating companies could invoke Section 63 of the Electricity Act.
  7. The Supreme Court of India allowed the appeals filed by the MCD on January 2, 2025. The Supreme Court quashed the APTEL’s order and affirmed the DERC’s original orders, effectively validating the tariff and the MCD's right to bid process.

Study guide

  1. Understand the key legal provisions:
    • Section 63 of the Electricity Act, 2003: This section allows the Appropriate Commission to adopt a tariff determined through a transparent bidding process. The core issue is whether this section is limited to Discoms or generating companies.
    • Section 86(1)(b) of the Electricity Act, 2003: This section empowers the State Commission to regulate electricity purchase and procurement, including the price at which electricity is procured.
    • Solid Waste Management Rules, 2016: These rules mandate local authorities to establish solid waste processing facilities, including WTE projects. Rule 15 specifically requires them to construct, operate, and maintain such facilities.
  2. Identify the stakeholders:
    • Municipal Corporation of Delhi (MCD): The appellant and a local authority responsible for waste management. The MCD initiated the bidding process for the WTE project.
    • Gagan Narang & Ors.: The respondents who challenged the MCD’s authority and the DERC's decision.
    • Delhi Electricity Regulatory Commission (DERC): The regulatory body that initially approved the project and tariff. The DERC order was then set aside by the APTEL.
    • Appellate Tribunal for Electricity (APTEL): The tribunal that overturned the DERC's decision, ruling DERC lacked jurisdiction.
    • Waste to Energy Research & Technology Council (WTERT): An entity that challenged MCD's authority to issue the tariff-based bid.
    • Distribution Licensees (Discoms): The electricity distribution companies in Delhi that will purchase the power generated from the WTE project.
  3. Analyze the core dispute:
    • The main issue was whether the MCD, as a local authority, could apply for tariff adoption under Section 63 of the Electricity Act.
    • APTEL ruled that the DERC lacked jurisdiction to entertain MCD’s petition, arguing that Section 63 is only for Discoms or generating companies.
  4. Examine the Supreme Court’s interpretation:
    • The Supreme Court adopted a literal interpretation of Section 63, stating that it does not restrict invocation only to Discoms or generating companies.
    • The Court interpreted Section 63 in conjunction with Section 86(1)(b) to ensure a harmonious construction between the two sections.
    • The Court also highlighted the MCD’s statutory duty under the SWM Rules 2016.
  5. Understand the significance of the judgment:
    • The judgment clarifies the powers of local authorities in setting up WTE projects.
    • It promotes renewable energy and better waste management practices.
    • It emphasizes the importance of a transparent bidding process and regulatory oversight by the State Commissions.

Rationale

  1. Literal Interpretation of Section 63: The Supreme Court emphasized that a plain reading of Section 63 of the Electricity Act does not restrict its application to only Discoms or generating companies. The court stated that to interpret the section as such would be to add words that the legislature did not intend.
  2. Harmonious Construction: The Court held that Section 63 must be read in conjunction with Section 86(1)(b) of the Electricity Act. Section 86(1)(b) empowers the State Commission to regulate electricity purchase and procurement, including prices. This approach ensures that both sections have effect and that the State Commission has broad powers to regulate tariff adoption.
  3. Statutory Duty of MCD: The Court highlighted that the Solid Waste Management Rules, 2016, mandate local authorities, like the MCD, to facilitate the construction and operation of WTE projects. The Court recognized that MCD was fulfilling its statutory obligations by initiating the bidding process.
  4. Public Interest: The Supreme Court acknowledged that the WTE project serves a larger public interest by addressing the increasing volume of unprocessed municipal solid waste and promoting renewable energy generation.
  5. National Tariff Policy 2016: The court emphasized the mandate of the National Tariff Policy 2016, which requires Discoms to procure 100% of power from WTE plants.
  6. Overriding Effect of Electricity Act: The court noted that the Electricity Act is in addition to, and not in derogation of, other laws such as the Environment (Protection) Act, which mandates the use of WTE.

FAQ

Q.1. What was the main issue in the case of Municipal Corporation of Delhi vs. Gagan Narang & Ors.?

Answer: The core issue was whether the Municipal Corporation of Delhi (MCD), as a local authority, had the right to initiate a tariff-based bidding process for a Waste-to-Energy (WTE) project under Section 63 of the Electricity Act, 2003.

Q.2. What is a Waste-to-Energy (WTE) project?

Answer: A Waste-to-Energy (WTE) project is a facility that converts municipal solid waste into usable energy, usually electricity. These projects are important for waste management and renewable energy generation.

Q.3. What role did the Delhi Electricity Regulatory Commission (DERC) play in this case?

Answer: The DERC initially approved the bidding process and the tariff for the WTE project. However, this decision was later overturned by the APTEL before the Supreme Court reinstated it.

Q.4. Why did the Appellate Tribunal for Electricity (APTEL) set aside the DERC's orders?

Answer: The APTEL set aside the DERC’s orders because they believed that DERC lacked the jurisdiction to entertain the petition filed by the MCD. APTEL argued that only distribution licensees (Discoms) or generating companies could invoke Section 63 of the Electricity Act.

Q.5. What was the Supreme Court's reasoning in allowing the MCD's appeal?

Answer: The Supreme Court stated that Section 63 of the Electricity Act does not explicitly restrict the application for tariff adoption only to Discoms or generating companies. The Court adopted a literal interpretation of Section 63, emphasizing that its primary purpose is to ensure a transparent bidding process. The court also cited the statutory duty of the MCD under the SWM Rules, 2016 and Section 86(1)(b) of the Electricity Act.

Q.6. What is Section 86(1)(b) of the Electricity Act, 2003?

Answer: Section 86(1)(b) of the Electricity Act, 2003, empowers the State Commission to regulate the electricity purchase and procurement process of distribution licensees, including the price at which electricity is procured from generating companies or other sources.

Q.7. How do the Solid Waste Management (SWM) Rules, 2016, relate to this case?

Answer: The SWM Rules, 2016, mandate local authorities like the MCD to establish solid waste processing facilities, including WTE projects. This statutory obligation was a key factor in the Supreme Court’s decision.

Q.8. What was the final verdict of the Supreme Court?

Answer: The Supreme Court allowed the MCD's appeals, quashed the APTEL’s order, and affirmed the DERC’s initial orders, thereby validating the tariff for the WTE project.

Q.9. What does ‘harmonious construction’ mean in the context of this case?

Answer: ‘Harmonious construction’ refers to the principle used by the Supreme Court to interpret Section 63 and Section 86(1)(b) of the Electricity Act in such a way that they do not contradict each other, giving effect to both provisions.

Q.10. What are the broader implications of the Supreme Court's judgment?

Answer: The judgment clarifies that local authorities, tasked with waste management, can initiate bidding processes for WTE projects and seek tariff adoption under Section 63 of the Electricity Act. This promotes sustainable waste management and renewable energy generation in India.

Conclusion

The Supreme Court’s ruling in MCD vs. Gagan Narang is a significant step forward in harmonizing environmental protection with energy policy. By affirming the MCD’s authority to initiate bidding for WTE projects, the Court has removed a major hurdle in the promotion of sustainable waste management and renewable energy. This decision supports the statutory obligations of local bodies and empowers them to play a more active role in addressing India's waste issue while contributing to the nation's renewable energy targets. The judgment highlights the importance of a literal and harmonious interpretation of legal provisions, ensuring that the intent of the legislature is upheld and that public interest is served.

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