The new rules, proposed last September, clarify ownership provisions, simplify rules for group captive arrangements and establish a clear verification mechanism.
Last week, the government notified the Electricity (Amendment) Rules, 2026, to align the captive power generation framework with corporate groups and ensure they can legitimately access captive power benefits while maintaining compliance, accountability and clarity in captive status.
The ministry of power said the narrow interpretation of the existing rules prevents legitimate entities from availing the benefits of captive power, despite having made substantial investments.
Companies establish dedicated subsidiaries or special purpose vehicles (SPVs) to own non-fossil fuel based captive power assets, while consumption occurs across multiple groups of companies.
According to the ministry, the rules were amended to extend the benefits of captive consumption to groups of companies by permitting greater flexibility in capital structures in June 2023, but interpretational issues remained.
Also, there were challenges related to the proportionality requirements applicable to Associations of Persons (AoPs), an SPV established for owning, operating and maintaining a generating station.
Calling the amendment a positive step, Rupal Gupta, founder, MD and CEO, TrueRE Oriana Power, said that it will make group captive renewable projects more practical and scalable.
“Allowing 51 per cent consumption requirement to be met collectively rather than individually will help reduce compliance risk and provide greater flexibility for developers and consumers. It can also help improve the financial viability and bankability of such projects,” he said.
The verification of captive status will now be carried out for the entire financial year to ensure uniformity in operational implementation. Moreover, companies will not have to pay cross-subsidy surcharge and additional surcharge during the verification period. “The shift to an operational-period compliance window and the removal of surcharges during the verification phase will also help reduce regulatory uncertainty,” Gupta said.
Streamlining the approval process and implementing uniform practices across the country is expected to enable seamless execution.
“These rules will enable more commercial and industrial (C&I) consumers to participate in group captive RE projects, encourage the development of larger captive renewable parks and accelerate the adoption of clean energy by the C&I sector,” Gupta added.
The amendments gain significance because electricity tariffs for industries are much higher than those in emerging economies like China, Vietnam and Indonesia. Indian industries face constraints in accessing affordable non-fossil fuel-based energy, including through captive and open access routes.
Captive power generation ensures reliable, quality and cost-effective electricity supply to the industry. Simplifying the rules makes it easy for the industries to adopt renewable energy.
The provisions relating to proportionate consumption by an AoP, verification procedure and treatment of surcharges will come into effect from April 1, 2026. All other amendments will come into force with immediate effect.
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