The Hindu Business Line : Power trading a big draw among private players

Driving factors
Investments in physical infrastructure minimal
Many of the pvt players have diversified into power trading biz
Possibility of more power exchanges adding to the rush

Anil Sasi

New Delhi, Sept 4 Despite allegations of “overregulation”, the fledgling electricity trading business is clearly becoming popular with private players.

While private sector participation in the country’s power sector has been traditionally low-key, as many as 23 players have already bagged licences for inter-state power trading and another six are in the fray. This is despite a cap on trading margins imposed by the regulator early last year and a relatively modest growth in trading volumes over the last few years. Of the 23 players , 21 are private players, many of whom have diversified into the power trading business from completely unrelated businesses.

Players that have got licences, besides established ones such as PTC India, NTPC, Tata Power and Reliance Energy, include real estate firm DLF, Instinct Advertising and Marketing Ltd, trading firms Adani Enterprises and state-owned MMTC Ltd, and Visa Power Ltd. Others with inter-state licences include Lanco Electric, Vinergy International, Chhattisgarh Electricity Company, Jindal Steel and Power, K.C. Thapar and Bros. and JSW Power Trading. GMR Energy is the only player to have surrendered its licence, according to Government data.

In the queue, with applications currently pending before the Central Electricity Regulatory Commission (CERC) are Maharashtra Industrial Development Corporation, Ispat Energy, Patni Projects, Sri Balaji Biomass, Jaypee Powergrid and Kalyani Power Development.

“It has been a fast evolving scenario in the trading business. Unlike the other segments of the power sector, investments in physical infrastructure in case of trading are minimal. While the cap on margins is a setback, most players see value being realised in the long term,” an executive with a private firm said. The possibility of at least a couple of nationwide power exchanges coming up by the end of the year has further added to the rush to bag inter-state licences, according to industry insiders.

The CERC had, in January last year, capped the power trading margin at 4 paise per unit for players engaged in inter-State trading of electricity. This was seen as a setback for a number of trading firms, which had previously been charging much higher margins — weighted average of trading margins during the first half of 2005-06 was as high as 10 paise per unit — and perceived as a “death blow” for interest among new entrants.

The volume of traded power has not exactly been surging to measure up to the growing interest in the sector. Starting with trading volumes of 11,028.96 million units in 2003-04, when the business was opened up, volumes in 2006-07 were recorded at 15,022.74 million units.