The company was one of several created as a part of efforts towards restructuring of the power sector in the state of Gujarat in India.

The Gujarat Electricity Industry (Re-Organization & Regulation) Act 2003 paved the way for comprehensive reform and restructuring of the State Electricity Board with an aim to restructure the Electricity Industry in a manner that will ensure the long term viability and sustainability of the power sector in the state.

As a part of the reform process, the GEB was disaggregated into several autonomous entities.

The Act also provided for reorganization of the Electricity Boards through appropriate transfer schemes being formulated by the state governments.

Thereby Paschim Gujarat Vij Company Limited became functional on 1 April 2005.