UPSC Prelims Practice Questions — Government amends Electricity Rules to strengthen captive power framework and support industrial competitiveness

Q1. In the twin qualifying test for a Captive Generating Plant under Rule 3 of the Electricity Rules, 2005, the '51%' threshold refers to which one of the following?

• A. The minimum proportion of the aggregate electricity generated by the plant in a year that must be consumed for captive use
• B. The minimum equity share capital that the captive user must hold in the plant
• C. The minimum voting rights the captive user must hold in the company owning the plant
• D. The maximum proportion of generation that may be supplied to the grid

Q2. With reference to the qualifying conditions for a Captive Generating Plant under Rule 3 of the Electricity Rules, 2005, consider the following: 1. The captive user must hold not less than 26% of the ownership of the plant. 2. Not less than 51% of the aggregate electricity generated in a year must be consumed for captive use. 3. The ownership of the captive user must be in the form of equity share capital. 4. The plant may supply not more than 26% of its annual generation to the grid. Which of the above is/are NOT correct?

1. The captive user must hold not less than 26% of the ownership of the plant.
2. Not less than 51% of the aggregate electricity generated in a year must be consumed for captive use.
3. The ownership of the captive user must be in the form of equity share capital.
4. The plant may supply not more than 26% of its annual generation to the grid.

• A. 1 only
• B. 4 only
• C. 2 and 3
• D. 1, 2 and 3

Q3. With reference to captive generation under Section 9 of the Electricity Act, 2003, consider the following: 1. A person may construct, maintain or operate a captive generating plant and dedicated transmission lines. 2. No licence is required under the Act for supplying captive electricity to a licensee. 3. Supply of captive electricity to a consumer is subject to the regulations made under sub-section (2) of Section 42. 4. Captive generation may be undertaken only after obtaining a generation licence from the Appropriate Commission. Which of the above is/are correctly identified?

1. A person may construct, maintain or operate a captive generating plant and dedicated transmission lines.
2. No licence is required under the Act for supplying captive electricity to a licensee.
3. Supply of captive electricity to a consumer is subject to the regulations made under sub-section (2) of Section 42.
4. Captive generation may be undertaken only after obtaining a generation licence from the Appropriate Commission.

• A. 1, 2 and 3
• B. 1 and 4
• C. 2, 3 and 4
• D. 1, 2, 3 and 4

Q4. The Electricity Act, 2003, which statutorily enabled licence-free captive generation, consolidated the law on electricity by repealing how many pre-existing central electricity laws?

• A. Two
• B. Three
• C. Four
• D. Five

Q5. Under the captive power framework as clarified in 2026, the verification of captive consumption where the consumption is inter-State is carried out by which one of the following?

• A. National Load Despatch Centre (NLDC)
• B. Central Electricity Authority (CEA)
• C. Central Electricity Regulatory Commission (CERC)
• D. Regional Load Despatch Centre (RLDC)

Q6. In the context of captive power, a 'group captive' (Association of Persons) arrangement is best described as which one of the following?

• A. An arrangement in which several captive users collectively hold at least 26% ownership of the plant and collectively consume at least 51% of its generation in proportion to their shareholding
• B. A plant wholly owned and used by a single industrial consumer for its own use
• C. A plant owned by a distribution licensee that supplies bulk power to industrial consumers
• D. A plant set up by a State government to supply power to the public at large

Q7. The recognition of subsidiaries, holding company and fellow subsidiaries within the ownership of a Captive Generating Plant was introduced through which one of the following instruments?

• A. The Electricity (Amendment) Rules, 2026
• B. The Electricity (Amendment) Rules, 2023
• C. The Electricity (Rights of Consumers) Rules, 2020
• D. The Green Energy Open Access Rules, 2022

Q8. The Electricity (Amendment) Rules, 2026 widening the ownership definition for captive generating plants were notified by which one of the following?

• A. Ministry of Power
• B. Ministry of New and Renewable Energy
• C. Ministry of Heavy Industries
• D. Ministry of Commerce and Industry

Q9. With reference to the treatment of SPV/group-held captive ownership before and after the Electricity (Amendment) Rules, 2026, consider the following statements: 1. Before the amendment, equity held through a holding company or SPV was not explicitly recognised toward the 26% captive ownership requirement. 2. The amendment treats the captive user together with its subsidiaries, holding company and fellow subsidiaries as a single person for computing proportionate consumption. 3. Under the amendment, consumption in excess of a user's proportionate entitlement disqualifies the entire plant from captive status. Which of the statements given above is/are correct?

1. Before the amendment, equity held through a holding company or SPV was not explicitly recognised toward the 26% captive ownership requirement.
2. The amendment treats the captive user together with its subsidiaries, holding company and fellow subsidiaries as a single person for computing proportionate consumption.
3. Under the amendment, consumption in excess of a user's proportionate entitlement disqualifies the entire plant from captive status.

• A. 1 only
• B. 1 and 2 only
• C. 2 and 3 only
• D. 1, 2 and 3

Q10. Which one of the following best describes the 'cross-subsidy surcharge' levied under sub-section (2) of Section 42 of the Electricity Act, 2003?

• A. A charge on open-access consumers to compensate the host distribution licensee for loss of the cross-subsidy element built into tariffs
• B. A charge to meet the fixed cost of the distribution licensee arising from its obligation to supply
• C. A charge for use of the licensee's distribution network by an open-access consumer
• D. A charge levied by the Central Transmission Utility for inter-State transmission of electricity

Q11. As an ease-of-doing-business measure, the 2026 captive power rules defer the 'additional surcharge' on captive users pending verification. This additional surcharge, levied to meet the fixed cost of a distribution licensee arising from its obligation to supply, is provided under which provision of the Electricity Act, 2003?

• A. Sub-section (4) of Section 42
• B. Sub-section (2) of Section 42
• C. Section 9
• D. Section 62

Q12. Consistent with the National Electricity Policy, 2005, the open access that permits a captive generating plant to sell its surplus electricity to consumers is granted by which one of the following authorities?

• A. The State Electricity Regulatory Commission
• B. The National Load Despatch Centre
• C. The Central Electricity Authority
• D. The Ministry of Power