The Hindu Business Line : Power traders may have to source 50-70 pc from long-term pacts

NEW DELHI: The Government is considering making it mandatory for power trading companies to source a large portion of electricity through long term contracts with a view to reduce the cost of power supply.

"Traded power has become very costly...partly because trading companies source power through short term contracts. This pushes up the cost of power for the buyer, resulting in higher tariffs for consumers," Power Secretary, Mr R V Shahi said here.

The power ministry was planning to make it essential for trading firms to procure 50-70 per cent of electricity through long-term contracts with surplus power utilities, he said.

The contracts could be 10-25 years duration, Mr Shahi said, adding it would ensure that the cost of power remains low for the deficient state, which is purchasing power from the trader.

Short-term contracts also resulted in higher trading margins, which was good from the traders' perspective, he said but added that if this was allowed to happen in a big way it could pose difficulties for the power sector in general.

"This aberration has started and we are very concerned about this," he said. The power ministry's move comes close on the heels of the Central Electricity Regulatory Commission's proposal to fix trading margins at 2 paise per unit, a proposal which is li kely to effect the bottom lines of trading companies.

The trading margins in the country vary from 5 paise per unit to as high as 35 paise per unit in some cases. - PTI

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