FMC bans electricity futures trading

FMC bans electricity futures trading

New Delhi: Commodity market regulator Forward Markets Commission (FMC) has banned futures trading in electricity owing to poor volumes of trade.

“The ban on electricity futures has been made effective from August 23 for an indefinite period," a senior official with the Consumer Affairs Ministry, which overseas the functioning of FMC, told PTI.

At present, MCX is the only commodity exchange which is offering monthly contracts in electricity futures. However, the ban would not extend to spot trading in electricity, which is being offered by Indian Energy Exchange and Power Exchange of India Ltd, the official said.

The government has taken the decision to ban electricity futures after considering views of the Power Ministry, FMC and the Consumer Affairs Ministry.

The Power Ministry has been objecting futures trade in electricity since its launch in 2006, the official said, adding that FMC gave its ascent for ban recently after seeing poor trade volumes.

“The electricity contracts did not attract significant trading interest. Accordingly, no futures contracts would be permitted to be traded in electricity futures for the time being," according the FMC directive issued to the exchanges.

FMC, which regulates 23 commodity exchanges, has said that it would review the ban at a suitable time, with feedback from the ministry and market players.

The country’s total power capacity is over 1.62 lakh mega watts and the average shortage is roughly about 13-14%.