Power sector lender Rural Electrification Corporation (REC) is looking at the option of funding power purchases on the IEX, the country's largest power exchange.

The move by the state-owned lending institution, which has predominantly restricted itself to financing generation projects and distribution utilities so far, comes in the wake of a power shortage situation that has forced renewed interest in spot electricity market deals.

During the last couple of years, spurred by the cheap electricity tariffs quoted on the Power Exchanges (PXs), industrial consumers and some of the more price-savvy distribution utilities have been crowding the bourses to strike short-term deals.

In 2010-11, the value of deals on the PXs surged to Rs 5,389 crore, a 51 per cent growth (or Rs 1,826 crore in absolute terms) over the deal values clocked during the previous fiscal. Volumes had more than doubled on the bourses last fiscal.

One factor limiting higher growth in spot market deals is that transactions on the bourses require payment by ready cash, something that State Electricity Boards (SEBs) are desperately short of. Lenders such as REC hope to tap in on this opportunity. “REC is looking at financing power purchase on the IEX. There is tremendous scope as the short-term market acquires more depth and volumes in the coming years,” an official involved in the exercise said.

Thanks to the surge in business on the bourses, cumulative value of short-term deals struck on the bourses and through traders surged to Rs 18,657 crore in 2010-11. The short-term power market, involving trades spanning a time-frame of one year, comprises slightly over 10 per cent of the total energy generated in the country.

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