The Ministry of Power has notified the Electricity (Amendment) Rules, 2026, introducing important changes to the regulatory framework for captive generating plants in India. The amendments aim to modernize existing provisions under the Electricity Rules, 2005, while supporting industrial growth and promoting the use of affordable, non-fossil fuel-based energy. The government also intends to reduce regulatory disputes and simplify compliance for industries relying on captive power.
One of the key changes relates to the definition of “ownership” and “captive user.” Under the new rules, if the captive user is a company, its holding company, subsidiaries, and other subsidiaries of that holding company will be treated as a single captive user. This clarification reflects current corporate structures where companies often operate through multiple entities for financial and operational efficiency. By recognizing group companies as one unit, the rules are expected to ease compliance and reduce litigation.
The basic eligibility criteria for a captive generating plant remain unchanged. Captive users must hold at least 26 percent ownership in the plant, and they must consume at least 51 percent of the electricity generated on an annual basis. These conditions ensure that the primary purpose of such plants remains self-consumption rather than commercial sale.
For plants set up by an Association of Persons (AoP), the rules introduce a more flexible approach to electricity consumption. Users can draw power based on their operational requirements, but their recognized captive consumption will be limited to their ownership share. Any consumption beyond this limit will be treated as supply from a generating company and will attract applicable cross-subsidy and additional surcharges. However, this restriction does not apply to members holding 26 percent or more ownership, giving larger stakeholders more flexibility. The rules also clarify that Special Purpose Vehicles (SPVs) will be treated as AoPs, bringing greater consistency in regulation.
Another important change is related to the verification of captive status. The process will now be carried out annually. For projects where power is consumed within a state, verification will be handled by the designated state nodal agency. In cases involving inter-state power consumption, the National Load Despatch Centre (NLDC) will take over the responsibility from the financial year 2026–27.
To ease financial pressure on industries, the rules provide relief during the verification process. Cross-subsidy and additional surcharges will not be levied while verification is pending, as long as users submit a formal declaration confirming compliance. If a plant is later found to be non-compliant, the applicable charges will be recovered along with a carrying cost.
Most of the amendments came into effect on March 13, 2026. However, provisions related to proportionate consumption and the new verification mechanism will be implemented from April 1, 2026. The updated rules are expected to improve clarity, support clean energy adoption, and create a more business-friendly environment for captive power generation in India.
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