A provision for open access was created in The Electricity Act, 2003, enabling private purchase and sale of power for parties with contract demand greater than 1 MW. It requires permission from and payment of infrastructure usage charges, determined by the electricity regulatory commissions, to the respective agencies.
The Group Captive mechanism, created under the Electricity Act, 2003, allows a group of consumers to set up a power plant, together, for captive consumption. The idea was to lower investment burden for a single consumer by facilitating group investments
The base rule: Any individual company or an association of people/entities having at least 26% shares in a generating company and consuming more than 51% of power generated can be treated as captive consumers.
Group Captive mechanism enables exemption from the imposition and risk of cross-subsidy surcharge. Therefore, it is a widely used mechanism for power purchase even though it involves an investment from the consumer.