Power up Trading

Power sector being in the concurrent list has developed through the years with a state level bias and hence the developments vary significantly across the geography of the country. While the need for national level attention and need to frame policies from a national perspective was understood and action was taken as early as the late seventies, it was confined to Power Generation and Transmission of such power generated by these central plants. Only a few years ago, centre has provided funds and intervened directly for implementation of schemes at the distribution level.

This skewed thinking severely affected the Power market developing as a national one till the enactment of Electricity act 2003. The national policy and act of 2003 is an excellent guide and clearly envisages an integrated network where all key players have a choice which is the fundamental for any market driven approach to creation of a national asset.

It is now for the implementing agencies to come out in full force and provide the linkages which will help in interconnecting the grids and develop a national market for Power so that Power Traders can play a more active role.

However these linkages, as is now the practice, terminate at state level power injection / delivery points and from then on, it is the local network that provides the last mile connectivity even for large power consumers / demand centers. To free the market and Power up trading, it is this last mile connectivity which needs to be freed as envisaged under "Open Access".

To attract investments in this sector, the government has provided one major comfort namely a tariff based approach to guarantee investments, backed by a strong regulatory mechanism. There are severe execution risks posed by issues caused by non availability of right of way to environmental issues, which the promoters should grapple with. Such issues delay the project execution and increase the capital costs. These are beyond the reasonable control of the investor. Providing the incentive of long term cheap funds is one way of balancing these risks.

It is therefore essential that to increase cross regional power transfer capacity significantly together with last mile connectivity, government should identify sources of Long term cheap funds. It could be done by way of providing access to these investors to low cost Long term loans through the Infrastructure Funds being created with our foreign exchange reserves so as to reduce the capital costs of these projects.

The government, should do well to take these steps for bringing in the much needed integration of the grid and making the dreams of Electricity act 2003 a reality.