The Ministry of Power has officially notified the Electricity (Amendment) Rules, 2026, introducing targeted changes to Rule 3 of the Electricity Rules, 2005, governing Captive Generating Plants (CGPs). The move is designed to eliminate regulatory ambiguities, simplify compliance, and align captive power generation with India’s goals of industrial growth and clean energy transition.
Captive generation has long served as a critical mechanism under the Electricity Act, 2003, enabling industries to secure reliable and cost-effective electricity while mitigating supply disruptions and price volatility. With industries increasingly shifting toward non-fossil fuel sources to meet sustainability targets, the amendments provide a clearer, more predictable framework that recognises modern corporate structures such as group companies, subsidiaries, and special purpose vehicles.
The changes are expected to promote ease of doing business, reduce disputes, encourage investment in captive and renewable energy projects, and lower transmission losses by supporting generation closer to consumption points. The amendments were finalised following extensive stakeholder consultations.
Key Features of the Amendments
1. Clarified Ownership Criteria
Ownership is now explicitly defined to cover the entity establishing the plant, its subsidiaries, holding companies, and other subsidiaries of the holding company. This ensures legitimate group investments are not disqualified due to organisational structuring.
2. Uniform Annual Verification
Captive status will be verified for the full financial year, with partial-year checks allowed for the first or last year of ownership, bringing uniformity and predictability.
3. Flexible Rules for Group Captive Projects (Association of Persons)
Users can draw power according to operational needs while meeting overall statutory requirements. Excess consumption by any member will not disqualify the plant’s captive status but will be treated as non-captive for that user. Entities holding 26% or more ownership are exempt from proportionate consumption rules. Group entities (user + subsidiaries + holding company) will be treated as a single person for calculations.
4. Dedicated Nodal Agencies and Grievance Mechanism
From April 1, 2026, State/UT governments will designate a nodal agency for intra-state captive verification. The National Load Despatch Centre (NLDC) will handle inter-state cases. A Grievance Redressal Committee will resolve disputes arising from verification decisions.
5. Protection from Surcharges During Verification
Pending verification, Cross-Subsidy Surcharge (CSS) and Additional Surcharge (AS) will not be levied if users submit the prescribed declaration. If the plant later fails verification, charges become payable with carrying cost calculated as per existing late payment rules.
6. Phased Implementation
Most provisions take effect immediately, while rules on proportionate consumption, verification, and surcharge treatment apply from April 1, 2026.
The ministry stated, “By enabling industries to access reliable and cost-competitive electricity through captive generation, the reforms will strengthen industrial competitiveness and support India’s transition towards a sustainable energy future.The reforms also align with the Government’s broader vision of energy self-reliance, while supporting India’s vision of achieving Viksit Bharat @ 2047.”
