. Excerpts. In a largely power deficient country like ours, how viable is the concept of an energy exchange as a business model?
The exchange is largely an infrastructure project. We have not taken a short- term approach towards this business. As the power sector will improve "� with the generation and transmission facilities proposed to be doubled in 5 years and more private players participating on the raw material side "� a lot of surplus will soon become available for us to leverage upon. People have realised that there's a market even on a short-term and medium-term basis.
Also, users are now getting choice of sourcing power through open access regulation which is today available for up to 5 mw of power for a user. The exchange gives a counter-party guarantee, so people are coming with more confidence to trade. Also, the demand-supply mismatch and seasonal variables of power availability will be leveraged on.
But even after a power trading contract gets executed at the exchange, when it comes to actual delivery of power, customers find it difficult to get clearances from the Regional Load Dispatch Centres (RLDCs). How does the exchange provide delivery security to the customers?
Whatever trading of power is done at the exchange, we don't deal with it at the regional or state level. We only talk to a national agency (clearance house) and convey the data of total power traded to the agency, which then schedules power supply to RLDCs. After the scheduling has been done, power is delivered. The central regulator will ensure transmission through RLDCs with the exchange.
Do you discard all the speculations over transmission capacity for the exchange?
We have not felt any constraints till now. Though as we work further, there might develop separate prices for the constraint (referring to regions where transmission capacity is inadequate) and non-constraint areas.
When is the proposed initial public offering (IPO) of MCX expected to hit the market? Do you think you will get expected valuations for the offer, given the prevailing weak market sentiments?
We still have some compliances, which we're working on. But it will be announced shortly. We know that markets are bad these days. But the market feedback we have received is very positive and I don't think there should be any cause of concern. We are confident of the uniqueness of our market position.
How will the Commodity Transaction Tax (CTT) affect your profitability?
CTT has implications both on volatility and market efficiency. We can't have a distorted price in India when the rest of the world has different prices. We are waiting for the government decision.
What are MCX's plans for further product development in energy complex?
In addition to our existing products, we want to introduce more crude derivative futures to enable the industry to manage price risk. Once introduced, producers will be able to manage refinery margins better through speedy contracts and the consumers will be able to manage their product risk.
We are launching new commodities, but some of them will be launched only when the enabling legislation on commodity tax comes.
How has the ban on futures on certain commodities affected your volumes?
The general market sentiment is that it takes 5-7 years for a commodity to stabilise and grow. Now with this interruption, the entire supply chain of certain important commodities has dissipated. People now will participate half-heartedly and what could take 5 years will now take 10 years for completion.
Are you witnessing more institutions pulling out from equity markets and investing in commodities?
No. These are two independent markets. While functioning in equity markets depend on the returns on investments one gets there, here it depends on the risks that the user faces. So there is no correlation between crude oil futures going up and equity markets going down.
