Mumbai: Aashir Valia, a commodity trader who has just set up his own namesake trading business, Valia Commodities Ltd, is planning to enter India’s nascent energy trade.
Valia says he is talking to a slew of captive power generators in India who can be his customers, both as suppliers as well as buyers of power.
Valia is one of many who are exploring the possibility of trading on power through the online power trading platform, the Indian Energy Exchange (IEX), being set up by Financial Technologies Ltd under the aegis of the Central Electricity Regulatory Commission. It is expected to begin trading in next fiscal year.
“Many of them (captive generators) are not even utilizing the additional capacity they have because they are not in the business of trading power,” said Vaila. “Independent traders are negotiating with them to sell their additional power.”
Until recently, captive units could sell power only to the state-owned power transmission grid. Even that did not excite them as there were issues related to delayed payments and pricing. An amendment to the act that regulates the sector has deregulated the sale of captive capacity and now a captive generator can sell excess power in the market.
According to figures from the ministry of power, India has around 21,500MW of captive generation capacity, of which around 14,500MW is connected to the state-run grid. Of this, around 15-20% is not utilized. In other words, between 3,000MW and 4,000MM of power is not generated as the firms that own the units do not produce the power as there is no consumer for it. The traders are expected to tap this unutilized capacity. Some of the prominent players with captive capacity are ACC Ltd, Ambuja Cement Ltd, India Cement Ltd, Hindustan Petroleum Corp. Ltd and Ashok Leyland Ltd.
Prashant Dugar, a power analyst at Infraline Energy, an energy consultancy firm, said: “The recent amendment in the Electricity Act deregulating the sale of captive power, the transparent price discovery process that will become available once the exchange becomes operational, and payments guarantee by the exchange will give the captive generators the confidence to put their excess capacity on the market.”
Among other commodity broking houses, Anagram Comtrade Ltd, Kunvarji Commodities Brokers Pvt. Ltd and Dynamic Commodities Ltd are exploring the opportunity. Nayan Thakkar, managing director of Kunvarji Commodities, which recently took a membership of the exchange, said: “IEX will provide a market for the electricity in India which will revolutionize the way Indian industry looks at accessing electricity. The transparent price discovery would attract major corporate participation.”
Anagram Comtrade’s chief executive Unopam Kausik said his firm would wait and watch how the market develops. “At this point, this is a very illiquid market with the generation and distribution companies dominating the trade,” he said. “But, the real value additions will come when the intermediaries come in and start offering longer-term—three- or six-months—contracts.”
IEX director Joseph Massey expects independent power brokers will come as traders once it is operational. IEX has registered more than 50 members so far.