Two out of every three firms who have received power trading licence are yet to start business, as private power trading firms say the 4 paise cap on their margins imposed by the electricity regulator has made trading business unremunerative. Since the volume trading is high, analysts feels that the trading companies are making huge profits now itself. Any increase in trading margin will will ultimately affect the consumers. Some firms have surrendered their trading licence and many others have postponed the launch of their operations.Central Electricity Regulatory Commission(CERC) had fixed power trading margin at 4 paise per unit in January 2006.
Private trading firms later moved the Supreme Court against the decision of CERC, where the matter is still pending. Although the central Government had initiated trading in power sector sector touting competition in the sector for the benifit of customers, now the traded power become costlier and power generators have benifited at the cost of consumers. Any Increase in trading marging will further aggrevate the situation.
As per the latest data available with CERC, about 42 power trading licenses have been issued to various entities under the licensing guidelines since 2004, but only 12 entities traded power in 2007-08.In 2007-08, the country's electricity generation stood at 666.01 billion units, of which traded power stood at 20.96 billion units, a 40% rise over the previous year. Although 12 firms traded power last financial year, the top five firms together accounted for about 90% of the total traded power.
But private traders are not happy with the situation and want to implement free market environment in power sector so that they will get sufficient profit. "The basic principle of free market economy gets defeated with the CERC's decision," said Ispat Energy CEO Shishir Tamotia."The cap on margins is a setback as most players see value being realised in the long term," he added.
Ispat Energy is setting up three power plants in Maharashtra (2,000 megawatt), Chhattisgarh (1,200 mw) and Jharkhand (1,980 mw) respectively. While the plants in Maharashtra and Chhattisgarh will get commissioned by 2012, unit in Jharkhand will get delayed by a year due to non-availability of suitable coal linkages and over-regulation.
"Though the trading margin is quite low, we are continuously evaluating opportunities for power trading. But, we have no intention to surrender the licence," said a top executive of EEPDCL.
Source - Economic Times