Captive power generation: India notifies Electricity Amendment Rules, 2026 for clearer industry norms

The government announced changes to electricity norms on Saturday to clarify rules for captive power generation. The Ministry of Power said the move supports India’s energy transition goals. The ministry said power made near where it is used can cut transmission losses. It also said the change can improve system efficiency and help grid resilience.

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The Ministry of Power said it finalised the changes after extensive stakeholder consultations. It notified the Electricity Amendment Rules, 2026, to reduce interpretational disputes. The ministry said the rules also aim to improve ease of doing business. It added that the framework aligns captive generation with industrial growth objectives.

Electricity Amendment Rules, 2026 and captive power generation compliance

The ministry said several provisions were simplified to make compliance easier for industry. It said the changes clarify ownership provisions and group captive arrangements. The amendments also set out a clear verification mechanism. The ministry said these steps are meant to reduce regulatory ambiguity and limit disputes around captive power generation status.

A new provision aims to stop distribution licensees from imposing charges on captive consumers during verification. The ministry said this protection applies while captive status is being checked. The intent is to avoid charges before a final decision. The ministry said this adds certainty for users during the captive power generation verification process.

Electricity Amendment Rules, 2026 ownership definition for captive power generation

The amendments broaden the ownership definition to include subsidiaries and holding companies. It also covers other subsidiaries of the holding company of the entity. The ministry said this reflects modern corporate structures. It said power assets are often built through group entities or special purpose vehicles for captive power generation projects.

The ministry said the clarification prevents valid investments from losing captive status due to structure. It said corporate groups often place assets under different entities. The amendment aims to ensure such arrangements remain eligible. The ministry said the change supports captive power generation planning where corporate ownership is layered or shared.

Electricity Amendment Rules, 2026 and CSS, AS for captive power generation users

Under the new norms, Cross-Subsidy Surcharge CSS and Additional Surcharge AS will not be levied. This applies if captive users submit the prescribed declaration. For inter-state cases, procedures will be issued by the NLDC. For intra-state cases, the declaration follows the State nodal agency process.

If a plant does not qualify as a captive generating plant after verification, charges will apply. The applicable CSS and AS will become payable, along with carrying costs. Carrying cost will be calculated at the base rate. The base rate is the Late Payment Surcharge under the Electricity Late Payment Surcharge and Related Matters Rules, 2022.

Electricity Amendment Rules, 2026 verification timeline for captive power generation

The new rules allow captive status verification for the entire financial year. The amendments also provide flexibility for group captive projects set up through an Association of Persons AoP. Captive users can draw power based on operational needs. This is subject to meeting statutory ownership and consumption conditions across the year.

The ministry noted that Indian industries are increasingly using non-fossil fuel-based energy. It linked this shift to sustainability commitments and cost reduction. It said clearer rules for captive power generation were needed for predictability. The ministry added that an implementable framework can support industrial competitiveness and long-term economic growth.

With inputs from PTI