Creation of the PAT mechanism comes from the provisions of the Energy Conservation Act, 2001 which also empowers the Central Government to notify energy intensive industries as listed out in the Schedule to the Act, as Designated Consumers (DCs).

Bureau of Energy Efficiency had conducted sector specific studies for setting of energy consumption norms and standards. The studies showed that there is a wide bandwidth of SEC within an industrial sector that indicated large energy-savings potential in the sector. For setting targets for Designated Consumers, BEE had carried out background work to enable designing of a transparent, flexible, efficient and robust system for the PAT mechanism. BEE also consulted key stakeholders like Designated Consumers, Energy Auditors/ Managers, Industry Associations, Academics, etc. and solicited comments while framing the complete mechanism of PAT Scheme.