New Delhi: The Union government has amended the captive power rules under the Electricity Rules, 2005 to strengthen the framework for captive generating plants and support industrial competitiveness.
The Electricity (Amendment) Rules, 2026 revise Rule 3 governing captive generation. Officials said the changes aim to remove regulatory ambiguities and improve ease of doing business for industries.
Captive power generation has played a key role under the Electricity Act, 2003. It allows industries to produce electricity for their own use and reduce dependence on external supply.
According to the government, the revised captive power rules will align the sector with India’s energy transition and industrial growth goals.
Officials said industries increasingly adopt non-fossil energy sources to cut costs and meet sustainability targets. Therefore, a predictable regulatory framework is necessary for long-term investment.
Encouraging electricity generation closer to consumption centres also reduces transmission losses. As a result, it improves system efficiency and strengthens grid resilience.
Captive power rules clarify ownership and verification process
The amendments clarify ownership requirements for captive plants. The rules now recognise subsidiaries, holding companies and group entities within the ownership definition.
This change reflects modern corporate structures where companies often develop power projects through group entities or special purpose vehicles.
The captive power rules also introduce a uniform verification period. Authorities will verify captive status for the entire financial year to ensure consistency.
In cases of the first or final year of ownership, officials may verify the plant for the relevant portion of the financial year.
The amendments also provide flexibility for group captive projects established through an Association of Persons. Users may draw electricity according to operational needs while still meeting statutory ownership and consumption conditions.
To strengthen oversight, governments may appoint nodal agencies for captive status verification in intra-state cases from April 1, 2026.
For inter-state consumption, the National Load Despatch Centre will carry out verification.
The rules also address cross-subsidy surcharge and additional surcharge issues. Pending verification, these charges will not apply if users submit required declarations.
However, plants that fail captive status verification must pay applicable charges with carrying costs.
The government said the reforms followed extensive stakeholder consultations. Officials expect the changes to reduce disputes and encourage investment in captive and non-fossil fuel power projects.
