The Ministry of Power has proposed to revise Rule 3 of the Electricity Rules, 2005, setting out the requirements for qualifying a power project as a captive project.

The draft retains the key thresholds for ownership and consumption but introduces clarifications and additions regarding energy storage, indirect ownership through corporate structures, consumption benefit limits, and verification procedures.

A project will qualify as a captive power project only if captive users collectively hold at least 26% ownership in the generating unit. This ownership refers to proprietary interest and control, or equity share capital with voting rights. It may be held directly or through a holding company, its subsidiaries, or any other subsidiary of the holding company.

In the case of special purpose vehicles, if only certain generating units are identified as captive, the 26% equity ownership applies proportionately to those units.

A special purpose vehicle must be a legal entity that owns, operates, and maintains a generating station, with no other business or activity.

Captive users must consume at least 51% of the electricity generated by the captive project on a financial-year basis. Consumption may be either directly or through an energy storage system. Electricity consumed by a subsidiary or holding company of a captive user will also be counted as captive consumption.

For registered co-operative societies, the 26% ownership and 51% consumption requirements must be collectively satisfied by all members.

For an association of persons, both ownership and consumption conditions are applied collectively. A member’s captive consumption must not exceed 110% of their proportionate entitlement.

Where a captive power project and its users are located in more than one state, the captive status will be verified by the Central Electricity Authority in accordance with procedures approved by the central government.

If the conditions of ownership or consumption are not met in any financial year, the entire electricity generated will be treated as if supplied by a generating company.

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