INSUBCONTINENT EXCLUSIVE:
New Delhi: India's power sector is poised to open up for forward and derivative contracts trading on exchanges as decade long jurisdictional
issues between the Securities and Exchange Board of India (Sebi) and the electricity regulator are being resolved
distribution companies (discoms) to trade their forward contracts, increase power trading and discourage instances of utilities reneging on
In the long run, this could transform the sector through deepening of the markets with a variety of products
Most western markets have moved to derivatives and spot exchanges, with only a few countries still seeing long-term bilateral power trades,
they said.
The ministries of finance and power persuaded the Central Electricity Regulatory Commission (CERC) and Sebi to settle their
Futures trading will help distribution companies (discoms) lower their power procurement costs and hedge risks
For electricity generation companies, it will mean certainty of payment as is presently the case in spot power markets.
The dispute began in
Forwards Market Commission (FMC)
The commission said it was empowered to regulate all futures contracts
In 2015, the FMC was absorbed by Sebi
CERC had approached the Supreme Court in 2011 against a Bombay High Court order that said the power regulator had no exclusive jurisdiction
over power futures contracts
Once the matter is settled, exchanges can trade forward contracts, said Rohit Bajaj, senior vice president, business development.
Currently,
contracts for up to 11 days are available
This will go up to 365 days and the exchange can provide end-to-end solutions such as settlement, clearing and delivery
Also, settlement will pave way for the introduction of derivatives