Ministry Of Power Releases Draft Flexible Captive Power Rules To Boost India’s Renewable Energy Growth

The Ministry of Power (MoP) has invited comments from stakeholders on proposed amendments to Rule 3 of the Electricity Rules, 2005, which govern Captive Generating Plants (CGPs) in India. A letter issued on January 2, 2026, requests inputs from state governments, regulatory commissions, and industry associations such as FICCI and CII. Stakeholders are required to submit their suggestions by January 17, 2026. The draft Electricity (Amendment) Rules, 2026, aim to modernize captive power regulations and align them with India’s renewable energy targets, particularly the goal of achieving 500 GW of non-fossil fuel capacity by 2030.

The amendments primarily focus on providing greater flexibility for industrial groups using special-purpose vehicles (SPVs) or subsidiaries to own and operate renewable energy assets. The new rules clarify the definition of “ownership” to include equity share capital held directly or through subsidiaries and holding companies. Under this framework, a company, its subsidiaries, and its holding company will be treated as a single captive user, allowing group entities to consolidate their captive electricity usage.

To qualify as a captive plant, the draft rules retain the existing criteria that at least 26% of ownership must be held by captive users, and a minimum of 51% of the electricity generated should be consumed for captive purposes. A key change in the proposed rules is the introduction of a flexible “assessment period.” Instead of requiring rigid annual verification, companies can choose a financial year or a shorter continuous period within that year to assess their captive status. This flexibility recognizes the seasonal and variable operational patterns of different industries, making compliance easier.

For the Association of Persons (AoP), the amendments simplify the consumption rules. While collective consumption must still meet the 51% threshold, individual users’ consumption is generally limited to their ownership share. However, if an individual user holds at least 26% ownership, this proportionate consumption restriction will no longer apply, giving larger stakeholders more freedom.

The amendments also introduce a more structured verification process. Intra-state captive plants will be verified by a nodal agency appointed by the State Government, whereas inter-state plants will be verified by the National Load Despatch Centre (NLDC). To ensure financial stability, the rules propose that cross-subsidy charges and other additional surcharges should not be levied while verification is pending, provided the user submits a declaration. If a plant fails to meet the captive criteria after verification, these surcharges will become payable along with applicable carrying costs.

Most provisions of the amendments are expected to take effect immediately upon publication in the Official Gazette. However, certain clauses related to proportionate consumption and verification will be enforced from April 1, 2026. Overall, the draft rules aim to modernize captive power regulations, provide operational flexibility for industrial users, and facilitate the growth of renewable energy capacity in line with India’s clean energy targets.

The Ministry of Power’s consultation process reflects a broader effort to streamline captive power regulations and encourage industrial adoption of renewable energy. Stakeholders’ feedback will help refine the rules to balance regulatory compliance, operational flexibility, and India’s renewable energy ambitions. The proposed amendments could have significant implications for industries managing captive plants, especially those investing in renewable assets through subsidiaries or SPVs, making it easier for them to comply with legal requirements while supporting the nation’s energy transition goals.

The draft rules represent a step toward creating a more modern and flexible regulatory environment for captive power in India, ensuring that industrial consumers can effectively contribute to the country’s clean energy targets without facing undue regulatory constraints.