In India, in the last few years, the installed capacity of the Captive Power Plants (CPPs) has grown at a faster rate compared to the utilities. This study examines the factors responsible for the growth of the CPPs. For this purpose the case study of the CPPs of Gujarat is undertaken. In 2002, Gujarat had 2.44 GW installed capacity of captive power plants, which represent almost 22% of the total installed capacity. The factors which caused the CPPs in Gujarat grow at a faster rate compared to the utilities are unreliable power supply by the utilities, poor quality of power, higher industrial tariffs, multiple benefits like cogeneration of steam and electricity and lower internal transaction costs for running the CPPs. Due to these varied reasons the CPPs are not a homogeneous group of plants, but are categorized into various segments. These are back-up type CPPs, CPPs for reducing production cost, CPPs for multiple benefits, and CPPs for quality power.