The group captive model is one of the most powerful — and most misunderstood — structures in Indian power procurement. Done correctly, it lets a group of industrial consumers co-own a power plant and access electricity at close to generation cost, while sidestepping the cross-subsidy surcharge. Done incorrectly, it invites disputes and clawbacks.
What is a group captive plant?
Under the Electricity Rules, a captive generating plant is one set up to generate power primarily for the use of its owners. A group captive extends this to multiple consumers who collectively own the plant through a special purpose vehicle (SPV). Because the consumers are owners, the power is treated as self-consumed — and self-consumption is exempt from the cross-subsidy and additional surcharges that apply to ordinary open access.
The two non-negotiable conditions
To qualify as captive and retain the surcharge exemption, the structure must satisfy two tests on an ongoing basis:
- The 26% equity rule: the captive consumers must collectively hold not less than 26% of the equity (with voting rights) in the SPV that owns the plant.
- The 51% consumption rule: the captive consumers must collectively consume not less than 51% of the energy generated, in proportion to their shareholding (within the permitted variation band).
These are not one-time checks. Captive status is verified — and the proportionality of consumption to ownership must be maintained year on year, or the exemption can be lost retrospectively.
Key Takeaways
- Group captive lets multiple consumers co-own a plant via an SPV.
- Captive power is self-consumed — exempt from cross-subsidy and additional surcharge.
- Consumers must hold ≥26% equity and consume ≥51% of generation, proportionally.
- Compliance is verified annually; lapses can trigger retrospective surcharge demands.
- Savings can be substantial, but structuring and governance are critical.
Why consumers choose it
The appeal is straightforward: by avoiding the cross-subsidy surcharge and accessing power near generation cost, group captive can deliver savings that pure open access cannot match in high-CSS states. It also provides long-term price certainty — valuable for energy-intensive industries exposed to volatile grid tariffs.
The risks to manage
The structure's benefits flow entirely from maintaining valid captive status. The main risks are:
- Consumption drift: if a consumer's actual offtake falls out of proportion with its shareholding, the captive test can fail.
- Equity changes: share transfers or exits that breach the 26% threshold jeopardise the whole group's status.
- Documentation gaps: annual certification and proper records are essential to defend the exemption.
- Exit complexity: a consumer leaving the SPV affects the proportionality for everyone else.
Is it right for you?
Group captive suits consumers with stable, predictable load who can commit to a long-term ownership relationship and disciplined governance. It is less suited to consumers with volatile demand or short planning horizons. The savings are among the best available in Indian power — but they are earned through careful structuring and sustained compliance, not just a signed agreement.
