Firms switch off power trading as margins dim

Last Updated: Sun, Oct 06, 2013 22:35 hrs

Rising competition from power exchanges coupled with sharply falling demand is tightening the noose around licensed power trading companies. While 15 traders have got their trading licences revoked since 2010, nine of these cases have occurred in the past one year alone. Also, five companies have surrendered their trading permits.

A Business Standard analysis of the trading market data over the past three years reveals that the survival of companies is threatened like never before. The companies which have given up on the Rs 1,800-crore trading market include Ispat Energy, Greta Power Trading, MMTC Ltd, Indiabulls Power, BGR Energy, Special Blasts, Marquis Energy, Chromatic India, Jain Energy, Kandla Energy & Chemical, Vinergy International, Godawari Power and Righill Electricals Ltd.

A majority of the firms are either surrendering their licences or are willfully defaulting in fee payments, leading to licence revocation by the regulator. Chennai-based Greta Power Trading Ltd, which surrendered its licence last month, told the Central Electricity Regulatory Commission (CERC) that "as the current market is too volatile and uncertain for power trading, it has not been able to take the risk of trading in the present juncture". The company gave up hope within a year of being granted a licence.

A senior executive from one of the actively trading companies confirmed the development and told Business Standard how the depressed market is taking a toll on margins.

"Our margins are shrinking. Power exchanges are posing a stiff competition largely because many entities which are not licensed traders are selling power through the exchange and also because of the dip in demand. In fact, the Association of Power Traders is currently discussing approaching the CERC with specific pleas," he said. He also added the trading lobby may also put up the demand for relaxing the current 7 paise per unit cap on trading margin.

India generates 911 billion units (BUs) of electricity annually. Over 90 per cent of this is bought and sold through long-term power purchase agreements (PPAs) between generation and state distribution companies. The remaining, 91 BUs - worth Rs 3,640 crore at an average price of Rs 4 per unit - is traded in the short-term power market. Around a half of this power is traded through licensed traders, while the rest is traded at the exchanges or through bilateral trade between discoms or through Unscheduled Interchange (UI).

There are as many as 45 licensed traders at present. However, only 20 of these are actively trading electricity, according to CERC's latest market monitoring report for July.

Some of the companies that have given up on the trading market
  • Ispat Energy
  • Greta Power Trading
  • MMTC Ltd
  • Indiabulls Power
  • BGR Energy
  • Special Blasts
  • Marquis Energy
  • Chromatic India
  • Jain Energy
  • Kandla Energy & Chemical
  • Vinergy International
  • Godawari Power

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