The Captive Power Generation Scenario in India

India accounts for more than 17% of the world’s population i.e., about 1.3 billion people reside only in this nation. In a country like India to meet the demand for energy is a very difficult task. It is challenging to provide sufficient energy supplies to every consumer at an equitable cost. India’s energy consumption has been increasing rapidly in the last six decades, as result, there has been the installation of new power plants to generate electricity to meet the demand. Most of the currently installed electricity plant capacity is based on the thermal power plant coal as a fuel to generate electricity. Electricity production, generation and transmission is among the most critical component of infrastructure and also crucial for the economic growth and welfare of nations.

The newer reforms were made in 1991 by the government of India through a new private power policy which proposed a number of changes, including a large number of private party participation, with a proposal through Independent Power Producer (IPP) route, foreign investments in the power sector, etc. however, these reforms were short-lived. The government passed a new legislative law namely, the Electricity Act of 2003 proposed an alternative route other than private generating company were involve, where the industries or factories themselves will be interested to meet their own power consumption demand by pooling resource together to generate power by themselves. thus, the Captive Power Plant came into the pictures as an alternative.

The word “Captive Generating Plant” defines under section 2(8) of the Electricity Act, 2003 which means a power plant set up by any person, association or any company to generate electricity primarily for his or her own use and includes a power plant set up by any co-operative society or association of persons for generating electricity primarily for use of members of such co-operative society or association. The captive power plants of industries may be allowed to sell their surplus power, if any remains in their storage, to the Grid, on a remunerative tariff rate, as per mutually agreed terms the producer and consumer party.

The benefit of setting up captive power plants would help in quick addition to the current generating capacity in the country. According to section 9 read with section 2(8) of the Electricity Act, 2003 states minimum requirement for a power project is considered ‘captive’ if consuming entity or entities consume at least 51% of the power generated and owns at least 26% of the equity in the entity.

The provision relating to captive power plants in this Act is to be set up by a group of consumers is primarily aimed at enabling small and medium industries or other consumers that may not individually be in a position to set up a plant of optimal size in a cost-effective manner. It also needs to be noted that efficient expansion of small and medium industries across the country would lead to the creation of enormous employment opportunities that benefit the country economy as well as the improved environmental performance of industry resulting from fuel efficiency by establishing captive power plants.


This blog was drafted by Mr. Kartikeya Hundet, BA LL. B, 4th year student, School of Law University of petroleum and energy studies (UPES)

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