Many firms with power trading licence yet to start biz

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. 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. Opposing the move, trading firms later moved the Supreme Court against the decision, where the matter is still pending. 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. Some like DLF Power, Chhattisgarh Electricity Company, Minerals and Metals Trading Corporation, Essar Electric Power Development Corporation (EEPDCL) and Ispat Energy are yet to start trading. Some of these firms have lined up huge investments in setting up power plants for commercial purposes. "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. But, some have already surrendered the inter-state electricity trading license. For instance, GMR Energy received a license in November, 2004, which was formally cancelled by CERC in October 2006. Also, the license given to Naveen Jindal-led Jindal Steel and Power (JSPL) in November, 2004 was revoked in February last year. "Since a firm can claim either a transmission or a trading license, we decided to cancel the latter. But, Jindal Power (JPL), a subsidiary of JSPL, received a license for its newly formed power trading arm in Chattisgarh a quarter ago," said JPL deputy managing director Sushil Maroo. 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.