Group Captive Power Plant in India: A Structuring Guide for C&I Consumers

A group captive power plant is a generating station, often solar or wind, shared by two or more commercial and industrial (C&I) consumers who collectively hold at least 26% of its equity and consume at least 51% of its annual generation. Structured correctly under the Electricity Rules, 2005 (amended 2026), it delivers electricity exempt from cross-subsidy surcharge and additional surcharges.

For India’s commercial and industrial consumers, the group captive power plant has become the most popular route to cheaper, greener, more predictable electricity. It lets several businesses pool into a single renewable project, qualify for captive status together, and lawfully sidestep the surcharges that ordinary open-access consumers pay.

This guide explains how the structure works, how to build it, what the 2026 changes mean, and the decisions that matter most to C&I buyers, developers and lenders.

• A group captive power plant lets multiple C&I consumers share one plant and each claim captive benefits.
• The eligibility test is collective: captive users together must hold ≥26% equity and consume ≥51% of annual generation.
• An SPV that owns the plant is treated as an association of persons (AoP) under the rules.
• Under the 2026 framework, the 51% consumption test is met collectively, not user-by-user.
• A user holding 26% or more equity is exempt from the individual proportionate-consumption cap (the “anchor tenant” advantage).
• The core commercial driver is exemption from cross-subsidy surcharge (CSS) and additional surcharge (AS).

What is a group captive power plant?

A group captive power plant is a generating station set up so that two or more consumers can use its electricity for their own consumption while together meeting the legal thresholds for captive status. Instead of one company building a plant solely for itself, a group of C&I consumers invests in a shared project, and each draws power for its own use.

The appeal of the group captive structure is that it spreads the capital cost and the consumption obligation across several users, making a renewable project viable for businesses that individually could not justify a captive plant. A well-designed group captive structure also lets each participant size its equity to its own demand. For the underlying definitions, our explainer on what a captive generating plant is sets out the basis in full.

Why C&I consumers choose group captive

Three forces have pushed the group captive to the front of the C&I procurement toolkit:

• Captive consumption is exempt from cross-subsidy surcharge and additional surcharge, which can be a substantial share of an industrial consumer’s landed power cost. That single exemption is usually the deciding factor.
• A group captive solar or wind project lets a business meet renewable-energy and ESG targets while procuring power that is cheaper than grid supply.
• Reliability and price certainty. A long-term equity stake in a generating plant gives more predictable tariffs than market-linked grid power.

The 2026 reforms have added a fourth: regulatory certainty. By codifying how group structures, fellow subsidiaries and SPVs are treated, the rules have made the financial model far easier to underwrite. This is why developers and lenders are now actively building associations of persons’ captive structures at scale.

Group captive vs open access

The most common question from a C&I buyer is group captive vs open access savings, which structure delivers more value?

Both use the open-access network to wheel power from a remote renewable plant to the consumer’s premises. The decisive difference is surcharge treatment. A pure open-access consumer buying from a third-party generator pays a cross-subsidy surcharge and, often, an an additional surcharge. A genuine captive user, including a member of a group captive open access arrangement, is exempt from both on its captive consumption. Because a group captive open access structure keeps the surcharge exemption intact while still using the grid to wheel power, it is, over a 20–25 year project life, the option that typically outweighs the equity commitment and the compliance overhead a group captive demands.

How to structure a group captive power project in India

At a high level, building a compliant group captive power plant follows a recognisable path. The steps below are the backbone of any structuring exercise:

1. Identify the participating C&I consumers and map their annual electricity demand against the plant’s expected generation, so the group can comfortably clear the 51% collective consumption threshold.
2. Decide between an SPV (treated as an AoP), a cooperative society, or a direct AoP. The SPV route dominates the market.
3. Allocate at least 26% of the plant’s ownership to the captive users, aligning each user’s equity with its intended consumption and deciding whether any user will take a 26%+ anchor stake.
4. Execute the share subscription and shareholders’ agreement, the power supply / usage agreements, and the EPC and O&M contracts.
5. Secure connectivity, open access and the wheeling / banking arrangements with the transmission utility and the relevant load despatch centre.
6. Put in place metering, generation and consumption tracking, and the annual declaration and verification process.

An equity allocation that ignores the proportionate-consumption rule, or a shareholders’ agreement that does not lock in the 26% discipline, can quietly disqualify the plant. This is the heart of what group captive structuring lawyers in India add, designing the equity-and-consumption architecture so it survives annual verification.

SPV vs AoP: choosing the ownership vehicle

The group captive AoP vs SPV question is now largely settled by the rules themselves. An SPV (a company set up solely to own, operate and maintain the generating station) is expressly treated as an association of persons for captive purposes. An SPV captive power vehicle is the most common choice precisely because the rules now tell you how it will be treated, removing years of interpretational doubt.

What follows from AoP treatment is the proportionate-consumption framework. For a plant set up by an AoP (including an SPV):

• The 26% ownership and 51% consumption conditions are tested collectively across all captive users.
• Each individual user’s recognised captive consumption is capped at 100% of its proportionate share (its ownership percentage of generation).
• A user holding 26% or more ownership is exempt from that individual cap and can consume any amount as captive power.
• Where ownership changes mid-year, each user’s proportionate entitlement is set on a weighted-average shareholding basis.

What the Electricity (Amendment) Rules, 2026 changed

The Electricity (Amendment) Rules, 2026 have fully substituted Rule 3, bringing key clarity for group captive power plants. Captive consumption will now be assessed collectively across all captive users, reducing the risk of disqualification due to an individual minority user’s shortfall. Users holding 26% or more ownership are exempt from the individual proportionate-consumption cap, enabling promoter and lead-subsidiary structures. Companies within the same group, including holding companies, subsidiaries and fellow subsidiaries, are treated as a single captive user, with lateral ownership recognition. The amendment also resolves the long-standing dispute on whether an SPV constitutes an association of persons and recognises electricity consumed through plant-connected energy storage systems as valid captive consumption. Verification will be handled by the State-designated nodal agency for intra-state plants and by NLDC for inter-state plants, with appeals before a Grievance Redressal Committee. Pending verification, CSS and AS will not apply if the prescribed declaration is filed, though failure in verification will trigger surcharge liability with carrying cost. The proportionate consumption and verification provisions apply from 1 April 2026, while the remaining provisions took effect from 13 March 2026.

Group captive solar and wind projects

Most new group captive capacity is renewable. A group captive solar project is the textbook modern structure: a developer builds the plant through an SPV, C&I consumers take at least 26% equity collectively, and each draws power under a usage agreement while the group clears the 51% collective consumption test.

The 2026 recognition of energy-storage consumption as captive consumption directly supports group captive solar project legal structure design, because it lets solar-plus-storage configurations count stored-then-consumed energy toward captive use. Wind and hybrid wind-solar-storage projects work on the same principles. The structuring discipline is identical to any group captive: align equity with consumption, decide on an anchor tenant, and build the annual compliance engine from day one.

Conclusion

A group captive power plant rewards careful design and punishes loose structuring. R Associates advises C&I consumers, developers and lenders on equity architecture, documentation, open access and annual compliance. To structure or review a project with our captive power lawyers in India, get in touch with our team.