Draft Amendments to Qualify for Captive Power Generation Project Released

These draft guidelines will apply to all captive projects regardless of the source of energy


The Ministry of Power has amended the guidelines relating to captive generation projects in India.

The Under Secretary to the Government of India, has penned a letter addressed to the Central Electricity Authority (CEA), the Central Electricity Regulatory Commission (CERC), principle secretaries of power in all states and union territories, distribution companies (DISCOMs), generation companies (GENCOMs), and public sector units under the Ministry of Power, informing them of the draft amendments and inviting their comments on the same. The comments and objections can be submitted until June 6, 2018.

The amended guidelines are called the draft Electricity (Amendment) Rules, 2018 and will come into effect from the date of publication in the Official Gazette (except sub-clause c of clause 2 of Rule 3). This sub-clause will come into force with effect from April 1, 2019 and will apply to all power projects seeking captive status.

When contacted, an official at the Ministry of Power told Mercom, “These draft amended guidelines will apply to all projects planning to go captive irrespective of the source of energy. It means even captive renewable energy projects will also come under the ambit of the amended guidelines”.

The draft has set requirements for captive generation projects as follows:

  • For a project to be considered captive, minimum 26 percent of the project ownership should be from the captive user, and at least 51 percent of power generated must be utilized for captive use.
  • In such a scenario, aggregate energy generated will be computed as the total electricity generated in the power plant minus the auxiliary consumption (consumption of energy to keep the project running, by various components).
  • In case of a hydro project, any free power supplied by the hydro generating station to the state government will be excluded from calculating the aggregate electricity generated.
  • In case of renewable generators, banking of power which is redeemed for consumption for use by the captive users, will be included to determine aggregate electricity consumption on an annual basis. The redemption of banked energy will be permitted within the same financial year.
  • Variation in consumption in proportion of shares in ownership of the solar and wind power project exceeding 15 percent and up to 30 percent will be agreed and allowed by the state government.
  • In case of a generating station owned by a company formed as special purpose vehicle for such generating station, a unit or units of such generating station identified for captive use, electricity required to be consumed by captive users will be determined with reference to such generating unit or units in aggregate identified for captive use and not with reference to generating station as a whole, and share capital in the form of equity shares to be held by the captive users in the generating station will not be less than 26 percent of the proportionate of the equity share capital of the company related to the generating unit or units identified as the captive generating project.
  • It will be the obligation of the captive users to ensure that the consumption by the captive users at the above-mentioned percentages is maintained. In case the minimum percentage of captive use is not complied within any year, the entire electricity generated will be treated as if it is a supply of electricity by a generating company.
  • The appropriate state commission will certify whether a generating station or power project is captive generating. The generating station or power project will file the annual statement of generation and consumption to the appropriate commission.
  • Distribution licensees (DISCOMs) where captive consumers are connected with the grid will collect the consumption data and submit it to the DISCOM where generating station or power project is located for compilation and submission to appropriate commission for approval of status of captive generating project.
  • Any generating station setup as an Independent Power Project (IPP) will not be considered for benefits of a captive generating project on or after the commencement of Electricity (Amendment) Rules 2018.
  • If a generating station, set up as an IPP, has been taken over by the lenders or its consortium due to non-performance and is likely to be declared as a non-performing asset (NPA), it may be considered for benefits as a captive generating project, if it is applied for by the developer.
  • An IPP, not availing any benefit as an IPP and which does not have a PPA, can be considered for benefits as a captive generating project, if it satisfies the criteria for being a captive power project (CPP) as per the Electricity (Amendment) Rules 2018. Such conversion of status will be allowed only once.
  • Group captive generating project will be allowed to claim the status of captive generating project up to the period during which the shareholding pattern by captive users is maintained with two changes only, during a financial year. The status of captive generating projects in such cases will cease to exist from the third change in the shareholding pattern in the financial year.
  • In case of a captive generating project to be included as part of the integrated business of a company, the generating station will have to be carved out as an independent legal entity in the form of a SPV to qualify as a group captive generating project.

When asked about the reason behind the issuance of amended guidelines, the Ministry of Power official said, “Many states had complained and raised questions regarding the misuse of group captive projects, hence, the central government has obliged.”