Group-captive solar and wind: own-use accounting under amended Ind AS 109

Short answer: The 2026 amendments to Ind AS 109 let you treat a group-captive solar or wind contract as an own-use purchase even when surplus power goes back to the grid, provided you are and expect to remain a net purchaser in that market. Three separate accounting questions still need answering.

The problem the amendment fixes

Ind AS 109 does not apply to a contract to buy a non-financial item that is entered into and held to take delivery for your own use. That is the own-use scope exception, and it is what keeps an ordinary purchase contract off the balance sheet.

Solar and wind break the test in an awkward way. You cannot control how much a wind farm produces on a given day. If you contract for the output of a plant, some of it will arrive when you do not need it, and the arrangement will usually require that surplus to be sold into the grid, with the proceeds netted against your bill. A strict reading of the old text said that net settlement of part of the volume put the whole contract inside Ind AS 109 — a derivative, at fair value, with a mark-to-market line in profit that has nothing to do with running a factory.

The amended standard addresses this directly for electricity whose output depends on nature. Where the contract is designed that way and the buyer is exposed to substantially all the volume produced, selling unused surplus into the same market does not on its own break own use, provided the company has been and expects to remain a net purchaser of electricity in that market over the relevant period.

Where this comes from, and from when

The Companies (Indian Accounting Standards) Amendment Rules, 2026 (G.S.R. 725(E), 12 August 2026) amend Ind AS 101, 107, 109, 110 and 7, and apply to annual reporting periods beginning on or after 1 April 2026 — so FY 2026-27 for a March year end. Renewable power contracts are one of the five substantive changes; the FY 2026-27 checklist lists the rest. The notified text governs the detail of every condition described here.

Why Indian controllers should care more than most

Indian corporates have been buying renewable power through a group-captive structure for years, because the structure avoids cross-subsidy surcharge and additional surcharge. Under the Electricity Rules, a captive user has to consume at least 51 per cent of the power generated and hold at least 26 per cent of the equity in the generating company, with those tests applied on an annual basis.

That structure produces exactly the fact pattern the amendment is about, and it produces two more accounting questions alongside it. Treat them separately, because they have different answers:

1. The equity stake. Taking 26 per cent of an SPV is an investment. Is it control, joint control, significant influence or none of those? Decide it on the shareholders’ agreement — board composition, reserved matters, who directs the plant’s operation — not on the percentage. Many group-captive stakes are non-controlling minority interests with limited rights. Some are not, and a plant on your consolidated balance sheet is a very different outcome. Under Ind AS 118, your share of an associate’s or joint venture’s profit sits in investing, below operating profit.

2. The power purchase agreement itself. The own-use question above.

3. A possible lease. If the agreement gives you the right to substantially all of the output of an identified plant, and you direct how and for what purpose it is used, Ind AS 116 may be in play. A contract for the output of a specific, named wind farm is closer to this than a contract for a quantum of electricity from a portfolio. The amendment to Ind AS 109 does not answer this; it is a separate assessment.

Getting all three written down for each arrangement, entity by entity, is the actual work. See how the group’s entity structure and eliminations are handled in consolidation.

Virtual PPAs and the hedge accounting relief

A virtual PPA has no physical delivery. You keep buying from the discom and settle a contract for difference against a reference price, so it is a derivative and stays one. The problem has never been classification. It has been that the hedged item — forecast electricity purchases — has a volume that moves with the weather, which made a designation that qualifies under the normal rules very hard to construct.

The amendment provides relief so that a variable notional volume can work as the hedged item, aligned with the volume the contract actually references. Two points to note:

• the relief applies prospectively, with the option to re-designate existing relationships; and
• relief on designation is not relief on documentation. Effectiveness still has to be assessed and the hedge documentation still has to be written at inception of the designation.

The new disclosures

The amendment adds disclosure about contracts referencing nature-dependent electricity: what they are, and their effect on financial performance and on the timing and amount of future cash flows. For a group with several arrangements across states and discoms, that note is an aggregation exercise across entities. It belongs in the statement template, filled from the ledger and a controlled set of non-ledger inputs, rather than in a workbook someone rebuilds each quarter.

The half-year checklist

• List every renewable arrangement in the group: physical group captive, open access, rooftop, virtual PPA.
• For each, record the market, the contracted volume and the surplus mechanism.
• Test net-purchaser status per market and per period, on evidence, and state the expectation going forward.
• Write the own-use conclusion for each contract, with the conditions addressed one by one.
• Assess the equity stake in each SPV against Ind AS 110 and Ind AS 28.
• Assess each arrangement for a lease under Ind AS 116.
• Revisit hedge designations for virtual PPAs and decide whether to re-designate.
• Draft the new disclosure note and identify where each number comes from.
• Brief the auditors before the half-year review, not at year end.

More amendments, and what each asks of a close already running, on the Ind AS updates hub.

Where FINAHQ fits

Every item above produces either a number in the statements or a disclosure that has to tie to one. FINAHQ produces the statements and the notes from approved templates on top of a mapped trial balance, with an audit trail from each figure back to the journal entry it came from, so a new note is a change to the template rather than a new side workbook. Calculate what that is worth to your close, or talk to us.

This article is general information, not professional advice. Refer to the notified text and your auditors, and confirm the current Electricity Rules conditions with your energy advisers.