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Government Revises Captive Power Rules to Clarify Ownership and Improve Compliance

The Government of India has introduced amendments to the Electricity Rules, 2005 to bring greater clarity to regulations governing captive power plants. The changes aim to resolve past interpretational challenges, strengthen verification processes, and provide enhanced operational flexibility for industrial consumers.

Captive power plants—set up by companies primarily for their own electricity needs—will now have a broader definition of ownership. Under the revised provisions, subsidiaries owning such plants will also be recognized, reflecting modern corporate structures where projects are often developed through special purpose vehicles or group entities.

The updated rules establish a uniform verification framework, with captive status to be assessed over the entire financial year. This is expected to streamline compliance and reduce ambiguity in determining eligibility.

For group captive projects formed through associations, the amendments introduce greater operational flexibility. Users can now draw power based on actual requirements, even if consumption temporarily exceeds their proportionate share. While such excess usage will not count toward individual captive consumption, it will not lead to disqualification of the plant’s captive status.

Starting April 1, state governments and Union Territories may appoint nodal agencies to verify captive status for intra-state projects, while the National Load Despatch Centre will oversee inter-state cases. A formal grievance redressal mechanism will also be introduced to handle disputes arising during verification.

Additionally, the rules provide interim relief to captive users by exempting them from cross-subsidy and additional surcharges while verification is underway, subject to required declarations. However, if a project is later found ineligible, the applicable charges will be levied along with carrying costs.