BharatNotes What is Captive Power?
Captive power is electricity generated primarily for one's own consumption rather than for sale to third parties. Section 2(8) of the Electricity Act, 2003 defines a captive generating plant (CGP) as "a power plant set up by any person to generate electricity primarily for his own use", including plants set up by a co-operative society or an association of persons for the use of its members. Typical users are energy-intensive industries — steel, aluminium, cement, fertilisers, chemicals and textiles — that need uninterrupted, competitively priced power.
Legal and Regulatory Framework
| Provision | What it says |
|---|---|
| Section 2(8), Electricity Act 2003 | Defines a captive generating plant |
| Section 9, Electricity Act 2003 | Permits any person to construct, maintain and operate a CGP and dedicated transmission lines without a licence |
| Rule 3, Electricity Rules 2005 | Twin criteria: captive users must hold not less than 26% ownership and consume not less than 51% of aggregate generation annually |
| Section 42, Electricity Act 2003 | Open access for carrying electricity from a CGP to the destination of own use is exempt from cross-subsidy surcharge |
In Dakshin Gujarat Vij Company Ltd v. Gayatri Shakti Paper and Board Ltd (Supreme Court, 9 October 2023), the Court settled long-standing disputes: it upheld the proportionality test for group captive plants (each shareholder's consumption must broadly match its shareholding, with a permissible variation of about 10%) and held that captive users are not liable to pay the additional surcharge under Section 42(4).
Significance
- Energy security for industry: assured supply shields manufacturers from grid failures and load-shedding.
- Cost competitiveness: exemption from cross-subsidy and additional surcharges lowers effective power costs, since industrial consumers otherwise cross-subsidise other categories.
- Green captive boom: renewable and group-captive models (solar/wind) are increasingly used by corporates to meet decarbonisation goals while qualifying for captive benefits.
- DISCOM tension: migration of high-paying industrial consumers to captive routes erodes distribution companies' revenue, a recurring theme in power-sector reform debates.
Current Status
India's installed captive power capacity was about 80,926 MW (roughly 80.9 GW), as per the Central Electricity Authority's General Review 2025, having crossed 80 GW around end-March 2024. In 2025, the Ministry of Power circulated draft amendments to Rule 3 of the Electricity Rules, 2005 proposing that ownership and consumption requirements for an association of persons be satisfied collectively, easing the proportionality rule (draft stage as of 2025).
UPSC Angle
For Prelims, remember the 26% ownership/51% consumption rule, Section 9's licence-free status, and the cross-subsidy surcharge exemption. For Mains (GS3), captive power links to industrial competitiveness, DISCOM financial distress, open access reforms and India's energy transition — a useful example when discussing electricity pricing distortions or private participation in the power sector.
