CERC to act tough with firms that have licence but don’t trade

CERC to act tough with firms that have licence but don’t trade
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First Published: Tue, Jan 27 2009. 12 20 AM IST

Updated: Tue, Jan 27 2009. 12 20 AM IST
New Delhi: India’s power sector regulator plans to get tough with companies that haven’t started trading power after obtaining licences, an official said, but at least two companies said the more immediate need was to make the business more “market friendly” because trading margins are currently very low and capped at 4 paise a unit.
The Central Electricity Regulatory Commission, or CERC, said it could scrap the trading licences of some companies after a review. “The review is expected to be completed within three-six months... We can also exercise the option of taking away the licences,” said a senior CERC official who didn’t want to be identified.
Though 42 power trading licences have been issued to various entities under the licensing guidelines since 2004, only 13 entities actually traded in power in 2007-08 according to CERC.
Also See Licensees That Did Not Trade Power In 2007-08 (Graphic)
Of the 42, Jindal Steel and Power Ltd could not trade because the regulator had cancelled its licence in February after the company said it wanted to surrender it. GMR Energy Ltd had done the same earlier and its licence was cancelled in October 2006.
Power trading has also stagnated because of the cap of 4 paise per unit on trading margins stipulated by CERC.
Some firms yet to start trading include Malaxmi Energy Trading Pvt. Ltd, DLF Power Ltd, MMTC Ltd, Essar Electric Power Development Corp. Ltd, RPG Power Trading Co. Ltd, Indiabulls Power Generation Ltd, Indiabulls Power Trading Ltd and Ispat Energy Ltd.
CERC had capped trading margins in January 2006, a decision that is being contested by the licensees in the Supreme Court. Meanwhile, CERC said it plans to announce trading regulations in February and there could be an increase in the licence fee. “We may be increasing the trading licence fee as an attempt to weed out the non-serious players as part of the new trading regulations,” chairman Pramod Deo told Mint.
The licence fee is currently Rs2.5-30 lakh a year, depending on the volume of power traded by the licensee.
According to CERC, of the 666.01 billion units (BUs) of electricity generated in 2007-08, 20.96 BUs, or 3.15% of the total, were traded. PTC India Ltd, NTPC Vidyut Vyapar Nigam Ltd, Adani Enterprise Ltd, Tata Power Trading Co. (P) Ltd and Reliance Energy Trading (P) Ltd are among the companies that were active in the business that year.
PTC India, NTPC Vidyut Vyapar Nigam and Adani Enterprise were the top three power traders with a market share of 45.57%, 15.86% and 6.31%, respectively.
In an email reply, an Essar Group spokesperson said: “Essar Electric Power Development Corp. Ltd is continuously evaluating various opportunities for power trading available today. It intends trading surplus power from Essar’s generating stations as and when the surplus power becomes available. However, there is no intention to surrender the licence.”
“With the power exchanges coming in, the traders will be there but their role will come down. We are trying our best but have not been able to make a dent in the power trading market,” said Y. Harish Chandra Prasad, chairman, Malaxmi Infra Ventures (India) Pvt. Ltd.
While questions emailed last week to DLF Power, MMTC, RPG Power Trading, Indiabulls Power Generation, Indiabulls Power Trading and Ispat Energy went unanswered, an RPG Enterprises spokesperson said that it would only be possible to respond by Tuesday. Monday was a national holiday in India.
However, a senior NTPC Vidyut Vyapar Nigam executive, who did not want to be identified, was not in favour of licences being taken away. “The CERC is not giving the licence free of cost or without a licensee satisfying a qualification criteria. It is for thelicence holder to decide whether he wants to continue or not.”
“If one has to grow the market, market-friendly regulations have to be put in place. Working at 4 paise per unit is not viable and the issue is being contested in the court. However, this particular review may weed out non-serious players,” added a senior executive at a large power trading firm who spoke on condition of anonymity.
PTC India has tried to work around the problem by importing coal and taking stakes in power projects, as reported by Mint on 18 April 2007 and 12 February 2007, respectively.
“There is no need for so many players in the market as the amount of energy traded is very low. Internationally, trading is done by the utility which also generates power,” said Madanagopal R., an equity research analyst at Centrum Broking Pvt. Ltd, Mumbai.
utpal.b@livemint.com
Graphics by Ahmed Raza Khan / Mint
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First Published: Tue, Jan 27 2009. 12 20 AM IST