Renewable Purchase Obligation (RPO) and Renewable Consumption Obligation (RCO): Who Must Comply, and How

Few regulatory terms in Indian electricity have changed as much, or as quietly, as the renewable purchase obligation. For nearly two decades it was the main instrument requiring buyers of electricity to take a share from renewables. It was set by each State Commission, and it looked different in every state.

Since 2024, and fully since September 2025, for the entities it matters most to, it has been replaced by a single national obligation under a different law. Much of what is written about RPO today describes the old system. This page sets out the current one: what each obligation is, who carries it, the targets, and how compliance is shown.

What is a renewable purchase obligation?

The rpo full form is Renewable Purchase Obligation. State Commissions applied it through their own regulations to distribution companies, and in many states also to captive users and open access consumers. The Ministry of Power issued national trajectories as guidance, and each Commission decided how closely to follow them. The result was a set of state obligations with different targets, different components and different enforcement.

What is the Renewable Consumption Obligation, and why did it replace RPO?

The rco full form is Renewable Consumption Obligation. It rests on a power Parliament added to the Energy Conservation Act, 2001 in December 2022: the Centre may “specify minimum share of consumption of non-fossil sources by designated consumers as energy or feedstock”.

The Ministry of Power first used that power in a notification of 20 October 2023 (S.O. 4617(E)), in force from 1 April 2024. That notification ran alongside state RPOs. It was replaced by the notification now in force, S.O. 4421(E) of 27 September 2025, which folded state RPO targets into the RCO for designated consumers. The Bureau of Energy Efficiency's operational guidelines state the effect on state RPOs directly: “For all designated consumers under the Act, no additional Renewable Purchase Obligation shall apply under the Electricity Act, 2003 … and the State-level Renewable Purchase Obligation targets shall be subsumed within the RCO targets …”

States are aligning their own regulations accordingly. Madhya Pradesh's Commission, for example, withdrew its pending RPO proceedings after the 2025 notification and adopted the national trajectory in April 2026.

Who has to comply?

Two groups carry the RCO.

• Distribution companies, on their total consumption excluding what open access users in their area buy from other sources.
• Designated consumers that use captive or open access power. Designated consumer is a defined term under the Energy Conservation Act: large energy users in 26 notified sectors, each with an annual energy-use threshold in tonnes of oil equivalent — from hotels and airports at the smaller end to petrochemical plants at the larger. For them, the obligation applies to electricity consumed from sources other than the distribution company. Electricity bought from the distribution company is covered by the distribution company's own obligation.

Generators do not carry the obligation. The Bureau's guidelines say so explicitly even for thermal plants that are designated consumers: “the RCO targets are not applicable on TPPs as the TPPs function as Independent Power Producers and the power generated by them is for sale and not for consumption.” The obligation sits with whoever consumes the electricity, not with independent power producers that generate it.

Electricity consumed from nuclear sources is excluded from the calculation: the notification states that the RCO “shall exclude electricity consumed from Nuclear Power Sources”.

What are the RCO targets?

The trajectory, from S.O. 4421(E), is set as a percentage of consumption. For distribution companies it has four components:

Three rules apply to the components for distribution companies. The wind and hydro components must be met from projects commissioned after 31 March 2024 (with limited exceptions for hydro). The distributed renewable component must come from projects of no more than 10 MW. And a shortfall in distributed renewable energy cannot be offset by surpluses in the other components — only by distributed renewable energy, certificates or buyout — though a surplus in it can count towards the others. For designated consumers using captive or open access power, the components are interchangeable and only the total matters.

How can an obligated entity show compliance?

The Bureau of Energy Efficiency's operational guidelines list the routes. An obligated entity can count:

• renewable electricity from its own captive plant;
• green power supplied by its distribution company under a green tariff;
• renewable electricity bought through green energy open access;
• electricity drawn from stored energy, where the storage was charged from renewable sources, net of losses;
• renewable energy certificates, bought or self-retained, including certificates linked to a virtual power purchase agreement;
• green hydrogen or green ammonia consumed as energy (not as feedstock), converted to its electricity equivalent;
• a buyout, at the price set by the Central Electricity Regulatory Commission.

Compliance can also be shown at corporate level, pooling group companies under a holding company.

Two instruments deserve a closer look. A renewable energy certificate represents one megawatt-hour of renewable electricity, and under CERC's 2022 regulations certificates “shall remain valid until they are redeemed” — they do not expire. The buyout is newer. In an order of 18 February 2026, CERC set the buyout price at ₹347 per MWh for 2024-25 and 2025-26, rising by 5 per cent a year to ₹421 per MWh in 2029-30 — a published regulatory figure, given here as context. The Commission said it “does not intend to create any hierarchy” between buyout and the other routes. Buyout payments go to the Central Energy Conservation Fund.

What happens if an obligated entity falls short?

Under S.O. 4421(E), a shortfall “shall be treated as non-compliance and penalty may be imposed” under Section 26(3) of the Energy Conservation Act, which provides for a penalty that “shall not exceed ten lakh rupees for each such failure”. Penalties are adjudicated by an officer appointed by the State Commission; failure to file returns attracts a separate penalty under Section 26(4). The Bureau of Energy Efficiency monitors and certifies compliance.

The compliance calendar, per the Bureau's guidelines, runs well beyond the year it measures:

For 2024-25, the first year under the new framework, the filing deadline was extended by the Ministry of Power several times, most recently to 31 May 2026, “in view of the challenges faced by obligated entities”. Outcomes of that cycle had not been published when this page was written.

Why does the obligation matter beyond compliance?

For distribution companies and large industrial users, the RCO is a compliance line. For the wider market it is also a demand signal. A trajectory that rises by roughly two to three percentage points a year, from 29.91 per cent in 2024-25 to 43.33 per cent in 2029-30, is a published, legally backed floor under renewable procurement — which is why investors in renewable generation read it closely.

For ESG teams, the RCO and voluntary commitments now overlap. Renewable electricity consumed to meet the obligation is the same electricity a company reports in its sustainability disclosures, so a single procurement decision can serve both — provided the attributes, such as certificates, are not counted twice. The obligation is one of the clearest examples of policy aligning growth, sustainability and energy security in the transition era: it sets the pace of the transition while leaving each obligated entity to choose how to meet it.

What should an obligated business check?

1. Are you a designated consumer? Check your sector and your annual energy use against the Bureau's notified thresholds.
2. Do you use captive or open access power? The obligation applies to consumption from those sources. If all your electricity comes from the distribution company, its obligation covers you.
3. What is your number for the current year? 35.95 per cent of the relevant consumption in 2026-27, rising every year.
4. Which routes fit your supply? Captive or open access renewable supply builds compliance into the electricity itself; certificates and buyout settle any gap.
5. Are your filings on the Bureau's calendar? Returns fall due four months after the year ends.

Frequently asked questions

What is the full form of RPO?

Renewable Purchase Obligation — the requirement, under Section 86(1)(e) of the Electricity Act, 2003, to buy a specified share of electricity from renewable sources, set by each State Commission.

What is the full form of RCO?

Renewable Consumption Obligation — the requirement under the Energy Conservation Act, 2001, as amended in 2022, for distribution companies and designated consumers using captive or open access power to consume a specified share of electricity from non-fossil sources.

Has RCO replaced RPO?

For designated consumers, yes: state RPO targets are subsumed within the RCO. State RPO regulations continue for obligated entities that are not designated consumers.

What is the RCO target for 2026-27?

35.95 per cent of consumption. The trajectory rises to 43.33 per cent in 2029-30.

Is RPO or RCO applicable to captive power plants?

The obligation applies to a designated consumer's consumption from captive and open access sources. The generating plant itself is not obligated.

Do renewable energy certificates expire?

No. Under CERC's REC Regulations, 2022, certificates remain valid until they are redeemed.

Does nuclear power count towards RCO?

No. The notification excludes electricity consumed from nuclear sources from the RCO calculation.

Who enforces the RCO?

Penalties are imposed under Section 26(3) of the Energy Conservation Act and adjudicated by an officer appointed by the State Commission. The Bureau of Energy Efficiency monitors and certifies compliance.