National Power Exchange (NPE) is yet to see the light of the day even though it was set up way back in 2008. Its commissioning had repeatedly been postponed due to various reasons, including fulfillment of regulatory requirements. In an exclusive interview with Sanjay Jog, Managing Director and Chief Executive Officer M G Raoot explains NPE’s strategy to take on competitors and consolidate its position in the power trading business. Edited excerpts:
National Power Exchange still remains on paper. Why has there been delays in its commissioning?
The commencement of the National Power Exchange is delayed due to several reasons. The company wanted a full time MD and CEO with good experience in India's fast changing power sector. Besides, NPE was particular about meeting all the mandatory regulatory requirements and bringing together the promoters on a common platform to decide on the policies and business plan of the organisation. NPC’s promoters include NTPC, NHPC, Power Finance Corporation, Tata Consultancy Services, Bombay Stock Exchange, IFCI, Meenakshi Energy and DPSE.
One of the major regulatory requirements for NPE was to have a net worth of Rs 25 crore before commencing operations. The exchange will have to deploy three independent directors and lay out the rules and business plan, which needs to be vetted by the Central Electricity Regulatory Commission (CERC).
I am quite hopeful that the new exchange will come into operation by July-August next year and it will do well in the power market. This is a unique combination of public private partnership and will be the first institutional power exchange in the Indian power market. It will take minimum one year to kick start the operations. There are many activities going on simultaneously, from recruiting staff and their training, setting up of a new office, creating a market management strategy and seeking regulatory clearances.
At present two exchanges, the Indian Energy Exchange & Power Exchange India, are struggling to survive in power trading. What are NPE’s plans in such rough weather?
As of now the two power exchanges have only one day’s product available. However, with the mandatory open access, power purchasers can do advance booking of up to three months. Besides, power exchanges should also be allowed to trade forward trading products. However, this issue is pending in the court as the Forward Market Commission has raised jurisdiction issues. Once the issue is settled the exchanges will have a level-playing field with other traders. This will enable the exchanges to trade with more market share. This will also enable the introduction of other products such as renewable energy certificate and energy saving certificate.
Currently power exchanges are trading at a paltry two per cent of the total power of the country. How will this share be further increased?
It is true. This is because only day’s advance product is available to cater to the short-term requirement of power. Therefore, the percentage is very less when compared to the total power sale across India. However, I strongly feel that once forward trading is available, volume traded on power exchanges will increase. Further, with the addition of more and more merchant capacity in the sector, the power exchanges are likely to get a boost. For this to happen, all power exchanges should come together and convince the CERC that this was the need of the hour.
How is the involvement of TCS as a promoter crucial?
TCS is India’s information technology major. It will be quite helpful in deciding the technology required for the exchange. We are soon going to appoint consultants to take a call on bringing the best trading technology available from prospective vendors. One thing is clear that the trading technology should be robust and flexible to accommodate the dynamic Indian regulatory power norms.
How will BSE contribute as a promoter?
BSE is our promoter. We are in the same line of business. BSE trades equity while NPE will trade power. BSE’s experience will be valuable to the exchange.