The Government of India has notified the Electricity (Amendment) Rules, 2026, revising Rule 3 of the Electricity Rules, 2005, relating to Captive Generating Plants (CGPs). The amendments aim to remove interpretational ambiguities, simplify compliance, and align the captive generation framework with India’s energy transition and industrial growth objectives.
Captive power generation has long been a key provision under the Electricity Act, 2003. The National Electricity Policy, 2005, recognised it as an essential mechanism to ensure reliable and cost-effective electricity supply for industry. Captive generation has supported industrial growth by helping industries mitigate power supply constraints and manage electricity cost volatility.
With Indian industries increasingly adopting non-fossil fuel-based energy to meet sustainability targets and reduce costs, the new amendments seek to provide a clear, predictable, and implementable framework for captive power generation. This is expected to enhance industrial competitiveness and support long-term economic growth.
The amendments also encourage generation closer to the point of consumption, which reduces transmission losses, improves system efficiency, and strengthens grid resilience. By providing clarity in implementation while retaining statutory safeguards for ownership and consumption, the rules aim to balance flexibility with regulatory integrity.
Key provisions in the Electricity (Amendment) Rules, 2026, include clarifying ownership requirements to cover subsidiaries, holding companies, and other group entities, aligning with modern corporate structures. Verification of captive status will now be conducted for the entire financial year, with partial-year verification allowed for first or last years of ownership.
Group captive projects established through an Association of Persons (AoP) will gain operational flexibility. Individual consumption exceeding proportionate entitlement will not disqualify captive status, though such excess will not count as individual captive consumption. Entities holding 26% or more ownership will have all their consumption treated as captive. For proportionate calculations, a captive user together with its subsidiaries and holding company entities will be treated as a single entity.
State and Union Territory governments may designate nodal agencies to verify intra-state captive consumption from 1st April 2026, while inter-state verification will be conducted by the National Load Despatch Centre (NLDC). A Grievance Redressal Committee will handle disputes arising from verification decisions.
Regarding Cross-Subsidy Surcharge (CSS) and Additional Surcharge (AS), these will not be levied pending verification if the captive users submit prescribed declarations to the nodal agency or NLDC. If a plant fails to qualify as captive after verification, CSS and AS will be payable along with carrying costs calculated at the base rate of the Late Payment Surcharge under the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022.
Certain provisions related to AoP consumption, verification framework, and surcharge treatment will take effect from 1st April 2026, while other amendments are effective immediately.
The reforms are expected to promote ease of doing business, enhance access to reliable and cost-competitive electricity, reduce regulatory ambiguities, and encourage greater investment in both captive and non-fossil fuel-based energy projects. They also support India’s energy self-reliance and the broader vision of achieving Viksit Bharat @ 2047.
