India’s transition to clean energy just got a landmark legal development. On 1 December 2025, the Chhattisgarh High Court became the first High Court in the country to grant interim protection against penalties under the newly introduced Renewable Consumption Obligation (RCO) regime. This order marks a turning point in how renewable energy compliance rules are enforced—and how the courts view the interface between regulatory change and industry rights.
This article explains the RCO framework, the High Court’s decision, and why this matter matters to industries, policymakers, and renewable energy stakeholders. We’ll unpack the rules clearly, back them with credible sources, and show how this fits into India’s energy transformation journey.
What Is the Renewable Consumption Obligation (RCO)?
The Renewable Consumption Obligation (RCO) is a policy mechanism that requires certain large energy users and electricity distribution companies to ensure that a defined share of their total energy consumption comes from renewable sources. It is part of India’s broader energy policy to reduce reliance on fossil fuels and accelerate clean energy use.
Unlike the old Renewable Purchase Obligation (RPO)—which focused on buying renewable electricity from the grid—the RCO requires actual consumption of renewable energy, whether generated directly or procured from grid sources or certificates.
The RCO regime is grounded in a 2022 amendment to the Energy Conservation Act, 2001 (effective from 1 January 2023). This amendment enabled the Ministry of Power to issue mandatory targets for renewable energy consumption for designated consumers.
RCO vs. RPO
People often mistake RCO for RPO, but there are important differences:
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RPO was under the Electricity Act, 2003, and focused on purchasing renewable electricity from the grid.
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RCO is under the Energy Conservation Act, 2001, and focuses on actual consumption of renewable energy, not just purchase.
The RCO thus captures renewable energy use more broadly (read more in this article), including on-site generation and other renewable sources.
Why RCO Matters in India’s Clean Energy Agenda
India has set ambitious targets in its national climate strategy, including achieving 500 GW of non-fossil fuel capacity by 2030. To make these targets real, India needed a more robust compliance mechanism than RPOs alone. That’s where RCO comes in.
Under the RCO framework, designated consumers—which include electricity distribution companies, captive power users, and open access consumers- must meet increasing renewable energy consumption targets year by year.
If they fail to meet these targets or do not submit compliance reports, they are liable for penalties under Section 26 of the Energy Conservation Act, including fines of up to ₹10 lakh plus additional charges for continued non-compliance.
The RCO Rule Change: Notification of September 2025
The Ministry of Power issued a Gazette notification dated 27 September 2025, revising and strengthening the RCO regime. This notification expanded the renewable consumption obligations and introduced more stringent compliance requirements.
Critically, this notification removed co-generation (energy from industrial waste heat) as an eligible source for compliance if it did not meet the amended definition under the RCO rules. This change triggered legal challenges from industries that had previously relied on co-gen benefits to meet their regulatory obligations.
Because co-generation had been counted under the RPO regime—and some industries had structured contracts and assets around this—the change felt abrupt and punitive to affected companies. That’s what led to the legal petition before the Chhattisgarh High Court.
The Chhattisgarh High Court Order: What Happened?
On December 1, 2025, the Chhattisgarh High Court granted interim protection to companies challenging the new RCO penalty regime. This means that enforcement authorities cannot impose penalties on these companies for failing to meet the revised RCO compliance requirements—at least until final legal arguments are heard.
This protection is not just a procedural pause. It reflects the Court’s recognition that:
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Sudden regulatory changes affecting accumulated rights of companies should not be enforced without considering legal validity.
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Companies should not be penalized for failing to comply with rules that were introduced without adequate transitional arrangements.
This decision gave immediate relief to the petitioners and sent a message that courts will scrutinize regulatory changes for fairness and procedural soundness.
Legal Argument in Simple Terms
The petitioners argued that the revised RCO compliance framework was:
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Retrospectively applied—meaning it affected past contracts and actions that were lawful under the old RPO regime.
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Legally uncertain—because some crucial definitions and implementation procedures were missing.
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Potentially harsh—as penalties could be imposed unfairly on companies that relied on the old compliance system.
The High Court responded by saying penalties should not be levied until the concerns are fully argued and the rules are clarified. In legal speak, the Court granted interim protection from coercive action. This outcome reflects both legal caution and practical fairness.
What This Means for Industries
For industries affected by the RCO rules—especially those that previously counted co-generation energy for compliance—this interim order is significant. Here’s what it means in practical terms:
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No immediate penalties for non-compliance until further notice.
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Regulatory action must wait until the courts complete hearings on the petitions.
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Companies get time to plan compliance strategies or restructure energy contracts.
This decision prevents sudden enforcement that could have stranded investments or disrupted business plans. It also sets a precedent for judicial review of major policy changes to ensure fairness in implementation.
Broader Policy Implications
The RCO framework remains central to India’s energy policy. By introducing mandatory consumption targets and tying them to heavier penalties for non-compliance, the Government aims to accelerate renewable energy uptake in sectors that consume large amounts of energy.
Yet the Chhattisgarh High Court decision highlights a key lesson: policy change without transitional clarity can lead to legal pushback. For a framework as vital as renewable energy regulation, clear guidelines, transition windows, and stakeholder engagement are not optional—they are essential.
The judiciary’s intervention here reinforces the idea that dynamic policy should be balanced with legal predictability and business confidence.
Industry and Regulatory Perspectives
Experts in law and energy policy have weighed in on the RCO shift, noting that:
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The Bureau of Energy Efficiency will monitor compliance and collect reports from designated consumers.
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Multiple mechanisms for compliance—including direct consumption, renewable energy certificates (RECs), or market buy-out options—are evolving.
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Central and state regulators are working to harmonize RCO with older RPO frameworks to avoid confusion and overlapping requirements.
This suggests that while RCO stays the law of the land, its implementation is still maturing and subject to refinement based on industry feedback and judicial oversight.
What Companies Should Do Now
If your business is a designated consumer under RCO rules or operates a captive power plant:
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Review your current renewable energy mix and compliance documentation.
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Consult legal experts to understand how the interim order affects your compliance timeline.
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Consider renewable energy contracts, rooftop generation, or RECs as part of your broader strategy.
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Stay updated on BEE reporting timelines and data audit requirements.
Given that enforcement is paused for now, this window offers an opportunity to adapt and future-proof compliance.
Conclusion
The Chhattisgarh High Court’s interim protection order under the new RCO regime represents a major legal milestone for renewable energy regulation in India. It underscores the need for clear transition rules, fair notice to stakeholders, and thoughtful implementation of major policy shifts.
India’s renewable energy transition remains on track, and RCO is an essential part of that journey. But real success will come when policy design, industry interests, and legal clarity walk hand in hand. After all, sustainable energy policy isn’t just about ambitious targets— it’s also about fair play and practical enforcement.
Want to read the full judgement and legal context? Find the detailed story here: https://lawbhoomi.com/cg-high-court-becomes-the-first-to-grant-protection-under-the-new-rco-notification/
