Electricity (Amendment) Rules, 2026 on captive power pose serious threat to the financial health of DISCOMs: AIPEF

Electricity (Amendment) Rules, 2026 on captive power pose serious threat to the financial health of DISCOMs: AIPEF

The Chairman of the All India Power Engineers Federation, Shailendra Dubey, has expressed serious concern over the Electricity (Amendment) Rules, 2026 related to captive power, stating that these amendments may have a highly adverse impact on the financial health of power distribution companies (DISCOMs) across the country.

Shailendra Dubey said that the scope of captive power has been significantly expanded through these rules, which may encourage large industrial consumers to increasingly shift from purchasing electricity from DISCOMs to sourcing power from captive generation. This could lead to a substantial decline in electricity sales of DISCOMs.

He stated that industrial consumers constitute the primary revenue base of DISCOMs as they pay relatively higher tariffs, which help provide cross-subsidy to domestic and agricultural consumers. If industries increasingly migrate towards captive power, the entire cross-subsidy framework may weaken, leading to a rapid increase in the financial losses of distribution companies.

The AIPEF Chairman further said that the new rules allow holding companies, their subsidiaries, and other group companies to be treated as captive consumers. This would enable large corporate groups to extensively utilize captive power across their group companies, thereby significantly reducing their electricity procurement from DISCOMs.

Dubey also pointed out that the provisions relating to establishing captive plants through Associations of Persons (AoP) and Special Purpose Vehicles (SPVs) have been made more flexible. This is likely to encourage multiple companies to jointly develop large captive power projects, which could further reduce the industrial consumer base of DISCOMs.

He also noted that the provision of not levying Cross Subsidy Surcharge (CSS) and Additional Surcharge (AS) until the verification of captive status is completed may adversely affect the revenue flow of DISCOMs, thereby putting additional financial pressure on distribution utilities.

Dubey warned that if these rules are implemented in their present form, they may create a serious crisis for the financial stability of electricity distribution companies, which could ultimately impact the overall power sector and electricity supply system in the country.

The All India Power Engineers Federation has urged the Government of India to undertake a comprehensive review of these rules and introduce necessary modifications while keeping in view the financial viability of distribution companies and the need to ensure affordable and reliable electricity supply to consumers.