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Regulatory update: Electricity (Amendment) Rules, 2023 - Captive Power Plants

Updated: Sep 4, 2023

Parveen Arora and Suruchi Kotoky


[Update - 01 September 2023] The Ministry of Power has notified the Electricity (Third Amendment) Rules, 2023, inter alia replacing the reference of 'captive user' with 'captive user(s)'. You can download the notification below.

Notification - Ministry of Power
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Recently, the Ministry of Power (‘MoP’) vide its notification dated June 30, 2023, has notified the Electricity (Amendment) Rules, 2023 (“Amendment Rules”) which has inter alia amended the provisions relating to captive generating power plants. The Amendment Rules provide that if a captive generating plant is established by an affiliate company, then the captive user must hold no less than 51% of the ownership in that affiliate company, instead of the earlier 26% for all.

Further, while notifying the recent Amendment Rules, the alphabet ‘s’ was dropped from the word ‘user’, which has caused a lot of confusion among the stakeholders. Earlier Rule 3(1)(a)(i) of the unamended Electricity Rules, 2005 provided that in order to qualify as a captive generating plant, captive users (and not captive ‘user’) have to hold at least 26% of ownership in the power plant. Few articles interpreted that in view of this amendment, henceforth collective holding of 26% by multiple captive users, is being done away with and accordingly each captive user will now have to hold 26%, but most of the articles/views considered this amendment only from the point of view of affiliate shareholding and did not give importance to missing alphabet ‘s’.

We believe that the intention of lawmakers is not to do away with the existing group captive model of collective ownership of 26% by the captive users and dropping of alphabet ‘s’ does not make any difference/significance, primarily due to the following reasons:

  • Firstly, while interpreting whether the usage of a word is for a plural or singular purpose, we need to refer to Clause 13 (2) of the General Clauses Act, 1897, which provides that words in singular shall include the plural, when in conflict to the subject/ context;

  • Secondly, we also understand that this may not be the intention of the lawmakers to do away with multiple captive users holding 26% shareholding;

  • Thirdly, there is no amendment to the proviso and/or illustration of Rule 3, which expressly recognizes collective ownership of 26% by captive users; and

  • Fourthly, we understand the intention of the Amendment Rules was primarily to incorporate provisions relating to shareholding and consumption by an affiliate company in a captive structure.

We expect and positively anticipate that the MoP will soon issue a clarification in this regard and clear the doubts of the energy sector.

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