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Daily News Wrap-Up: Government Announces Changes to Captive Power Policy

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					</table>The Ministry of Power’s (<a href="https://powermin.gov.in/" target="_blank" rel="noopener">MoP</a>) relaxations, <a href="https://www.mercomindia.com/government-notifies-amendments-to-captive-power-project-framework" target="_blank" rel="noopener">allowing</a> group captive projects to meet the 51% consumption requirement collectively rather than based on the individual proportionality requirement, have raised hopes of increased open access adoption by commercial and industrial (C&amp;I) consumers.
Under the old rules, a power project qualifies as a captive generating project only if captive users hold at least 26% ownership in the project and consume at least 51% of the electricity generated. These rules also mandated that individual captive users meet the consumption requirement in proportion to their ownership in the group captive project.
Although the proportionate consumption thresholds are clear in principle, enforcing individual compliance was seen as challenging in practice. Even minor deviations by individual captive consumers led to the denial of captive status, triggering the levy of a cross-subsidy surcharge and an additional surcharge.
However, the revised regulations also state that if an individual captive user consumes electricity beyond its proportionate entitlement, the excess consumption will be treated as electricity supplied by a generating company and will attract a cross-subsidy surcharge and an additional surcharge.
It also rejected the proposal to assess compliance with captive criteria on an operational-period basis, as set out in the draft amendments, and retained the assessment on a financial-year basis.
The amendments treat a holding company, its subsidiaries, and step-down subsidiaries collectively as a single captive user.
The changes underscore the strong demand for open access in India from the commercial and industrial segments.
According to the Q4 &amp; Annual 2025 Solar Open Access Market Report, solar open access demand <a href="https://www.mercomindia.com/india-adds-7-8-gw-of-solar-open-access-capacity-in-2025" target="_blank" rel="noopener">remains</a> strong in India, particularly from large industrial users and data centers seeking long-term tariff certainty while meeting sustainability goals.
India’s cumulative installed solar open access capacity exceeded 30 GW as of December 2025.
Uptick in Participation
Open access project developers say the changes would improve the financial viability and bankability of group captive projects.
Despite regulatory limitations, group captive projects remain the most viable open access model, given their lower capital expenditure and shorter payback periods, even before these amendments.
Abhijeet Rajendra, Head of Project Regulatory and Compliance at <a href="https://www.candi.solar/" target="_blank" rel="noopener">Candi Solar India</a>, said these relaxations will likely lead to an uptick in participation, particularly from large industrial houses.
However, he noted that smaller micro, small, and medium enterprises (MSMEs) may still face challenges due to limits on their tariff benefits if their consumption exceeds the proportionality requirements for each user.
Rupal Gupta, Managing Director and Chief Executive Officer at <a href="https://orianapower.com/" target="_blank" rel="noopener">TrueRE Oriana Power</a>, concurred. He said the changes will encourage more C&amp;I units to participate in group captive renewable energy projects and spur the development of large captive renewable energy parks.
Open access developers like Shashank Sharma, Founder, Chairman, and CEO at <a href="https://sunsure-energy.com/" target="_blank" rel="noopener">Sunsure Energy</a>, feel a more flexible framework will make it easier for companies with varying load profiles or seasonal demand to embrace the captive model.
Sharma said that the shift recognizes the practical realities of how industries actually consume electricity. “In a group captive structure, multiple consumers offtake power from the project, and their electricity demand naturally fluctuates due to operational cycles, production variations, or maintenance schedules.”
Improved Investor Confidence
Developers said investors and lenders were previously wary of the “all-or-nothing” risk, in which a single participant’s consumption variation could jeopardize the project’s economics.
Sonam Chandwani, Managing Partner at <a href="https://www.kslegal.co.in/" target="_blank" rel="noopener">KS Legal &amp; Associates</a>, said the amendments could enhance lender confidence and make it easier to structure financing arrangements for captive and group captive projects, particularly in renewable energy sectors such as solar and wind, where generation variability already introduces operational complexity.
Sharma said that with reduced and predictable regulatory risks, financing institutions and investors become more comfortable supporting such projects.
Supreme Court Order 2023
Developers highlighted that the shift to collective consumption (checking the 51% threshold for the group rather than for each individual) is a direct response to the risk created by the 2023 Supreme Court ruling, which mandated 51% annual consumption thresholds and that individual captive users must consume electricity in proportion to their ownership shares, within the permitted 10% variation.
The Supreme Court had <a href="https://www.mercomindia.com/supreme-court-ownership-consumption-captive-power-projects" target="_blank" rel="noopener">ruled</a> that each user must have a minimum electricity consumption of 1.96% of the electricity generated from the group captive project. However, it allowed a variation of up to 10%, making the individual qualifying ratio within the range of 1.76% and 2.16%.
Developers say the relaxations offer operational flexibility for captive users, wherein if one consumer slows down, the others can pick up the slack to keep the captive status intact.
Protection Against Surcharges
The Ministry has also amended the rules to protect captive consumers from paying surcharges during the verification process.
Rajendra said that the new provision benefits the captive consumers and project developers by keeping the industry’s working capital free while the regulator verifies captive status, rather than assuming liability before verification.
He added that the amendment also provides protection in cases where the verification process gets delayed, as is the case in some states.
Sharma also added that verifying captive status often entails procedural timelines inherent to the regulatory process, especially in cases involving multiple agencies. “Allowing these surcharges to be deferred during the verification process would relieve consumers from financial burden.”
Developers say that these relaxations, combined with the national load dispatch center acting as a central authority for interstate projects, reduce regulatory uncertainties and allow developers to focus on power generation rather than constant litigation with state utilities.
They also emphasize that, in addition to these changes, captive projects face several challenges that could affect their financial viability, including variations in open access regulations across states, shifts in banking provisions over the project lifespan, delays in open access approval timelines, and risks related to grid integration and curtailment.
While they welcome the changes and foresee greater uptake of power procurement under a group captive arrangement, developers maintain that streamlining the approval process for captive projects and implementing uniform practices across the country will be crucial to the seamless execution and success of the amended rules.

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