The move will benefit captive power generators, improving business operations. As per NITI Aayog, the total captive power capacity in the country is estimated at 80926.3 MW.   

Rule Shift

The new rule of the captive power framework has expanded the definition of captive users to include subsidiaries, holding companies and group entities, allowing them to be treated as a single unit for compliance purposes. 

This addresses a long-standing friction point where corporate groups, despite meeting the 26% ownership and 51% consumption criteria in substance, were often evaluated at the level of individual entities, leading to disputes. 

Manish Dabkara, Chairman & MD of EKI Energy Services Ltd said, “even where a corporate group met the criteria in substance, compliance was often tested at an individual entity level… if one entity’s consumption didn’t align exactly with its proportionate share, it could trigger non-compliance.” The amendment, he added, brought the framework closer to how corporate structures actually function and should reduce avoidable disputes.

According to Piyush Goyal, Co-Founder and CEO of Volks Energie, much of the friction earlier stemmed from “how strictly the rules were being interpreted,” where even well-structured projects faced uncertainty at the time of verification. 

Surcharge Relief

The main provision is the treatment of the cross-subsidy surcharge (CSS) and additional surcharge (AS). Under the amended rules, these surcharges will not be levied while captive status verification is pending. This offers immediate relief to industries by reducing working capital pressures and regulatory uncertainty. 

However, this has caused concerns for the DISCOMs as it delays a key revenue stream for them. 

DISCOM Challenge Rises

Despite the government's focus on the Electricity Bill, 2026, which aims at strengthening and protecting DISCOM finances, the move could hit their revenue stream. 

The Bill has not been tabled in Parliament yet.

Although discoms have seen a historic profit in the financial year 2025, recording a collective ₹2,700 crore profit after a decade of continuous losses, the government has projected it as a milestone, contrasting it with previous losses of ₹60,000 crore in FY 2023 and ₹25,500 crore in FY 2024.  

At the same time, as of June 2025, discoms owed over ₹5.8 lakh crore to power generators, creating a liquidity crunch. Earlier this year, the minister of state for power, Shripad Naik, had informed the Upper House of Parliament that the total outstanding debt of DISCOMs has crossed ₹7 lakh crore. 

Industry View

From an industry perspective, the reforms are being seen as a necessary correction. Faruk G. Patel, Founder, Chairman and MD of KP Group argues that a balanced policy approach is essential to sustain both DISCOMs and captive power adoption. 

He points to the need for rationalised open-access charges, flexible banking provisions and incentives for hybrid renewable solutions, adding that DISCOMs must evolve into “reliable partners through competitive pricing and green power offerings” if they are to retain a share of industrial demand. The broader direction, he suggests, should not be a binary choice between grid supply and captive generation, but a hybrid model where both coexist.

Resolving Structural Issues

Standardising open-access charges, modernising banking provisions and supporting battery storage through policy incentives could allow industries to optimise renewable usage while continuing to rely on DISCOMs for balancing and backup. 

The sector’s persistent losses are rooted in structural issues such as tariff distortions and inefficiencies, and that DISCOMs will need to improve competitiveness, adopt cost-reflective tariffs and enhance operational efficiency to remain viable. 

What emerges is a picture of a sector in transition. On one side is the imperative to make Indian industry globally competitive by lowering energy costs and enabling access to reliable, clean power. On the other is the need to maintain the financial viability of DISCOMs, which remain central to the functioning of the grid and the delivery of electricity to millions of consumers.