The Centre on Saturday notified the Electricity (Amendment) Rules, 2026, introducing a series of changes aimed at clarifying how captive power plants operate in India. The amendments modify Rule 3 of the Electricity Rules, 2005, which deals with Captive Generating Plants (CGPs).
According to the Ministry of Power, the revisions were finalised after extensive consultations with stakeholders and are intended to remove ambiguity in existing provisions.
In a press release issued on March 14, the ministry said the amendments aim to "remove interpretational ambiguities, improve ease of doing business for industry, and align the captive generation framework with India's energy transition and industrial growth objectives."
The government said the revised rules seek to provide greater clarity in the implementation of captive power provisions while retaining statutory safeguards related to ownership and consumption.
Framework for captive power generation
Captive power plants allow industries to generate electricity for their own use. The ministry said the new amendments will make it easier for companies to produce power for internal consumption.
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"The Electricity (Amendment) Rules, 2026 have been introduced to provide greater clarity and flexibility in the framework governing captive power plants so that industries can more easily generate electricity for their own consumption," the ministry said.
It added that the changes reflect evolving corporate structures and energy needs.
"The amendments seek to align the captive generation regime with modern corporate structures and evolving industrial energy needs, particularly as companies increasingly invest in non-fossil fuel-based captive power projects," the statement added.
The ministry also noted that simplifying certain provisions and clarifying ownership norms could reduce regulatory disputes.
"Many provisions in the Rules have been simplified for ease of compliance. A new provision has been added to avoid imposition of charges on the captive consumers by the Distribution licensees pending verification of the captive status," the statement stated.
Key changes in the amended rules
Clarified ownership norms for captive power plants
One of the key changes relates to ownership definitions. The rules now clarify that ownership can include subsidiaries, holding companies and other subsidiaries of the holding company of the entity establishing the captive plant. This reflects modern corporate structures where power assets are often held through group entities or special purpose vehicles.
Uniform verification period for captive status
The government has also introduced a uniform verification period. Captive status will now be verified for the entire financial year, while partial verification may apply in the first or last year of ownership.
Operational flexibility for group captive projects
The amendments also provide greater operational flexibility for group captive projects set up through an Association of Persons (AoP). Captive users can draw electricity according to their operational needs as long as the overall ownership and consumption requirements are met.
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Nodal agencies to verify captive power status
In addition, nodal agencies will verify captive status. State or Union Territory governments may designate a nodal agency for intra-state captive consumption, while the National Load Despatch Centre (NLDC) will handle inter-state cases. A grievance redressal committee will address disputes arising from such verification decisions.
Cross-subsidy surcharge provisions
The rules also address the treatment of Cross-Subsidy Surcharge (CSS) and Additional Surcharge (AS). These charges will not be levied while captive status verification is pending if users submit the prescribed declaration.
However, if a plant later fails to qualify as a captive generating plant, the applicable CSS and AS will have to be paid along with carrying costs calculated under the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022.
Implementation timeline
The Ministry of Power said some provisions will take effect later.
"To facilitate smooth implementation, certain provisions relating to proportionate consumption in AoP structures, the verification framework, and the treatment of CSS and AS will come into effect from 1st April 2026. Other amendments will take effect immediately," the ministry said.
