Jay Polychem (India) surrenders power trading licence

Second firm to give up on trading within a month

New Delhi-based petrochemicals distributor Jay Polychem (India) Ltd has surrendered its power trading license to the Central Electricity Regulatory Commission (CERC) arguing stiff competition and market uncertainty has made trading unviable.

This is the second such incident of license surrender within a month in the Rs 3,600 crore short-term power market in India.

The company told the electricity regulator that "due to recession and stiff competition and volatility and uncertainty for power trading we are unable to undertake trading activities". Jay Polychem was granted a licence in January 2011.

So far, six companies have given up trading permits while licences of 15 others have been revoked by the regulator after they willfully defaulted in fee payments. Nine such cases have occurred in the past year alone.

Business Standard had reported on Monday how the worrisome trend of firms shunning power trading licences is fast catching up. The new trend, if continued, could pose severe hardships for distribution companies willing to secure short-term power needs at cheaper rates.

The companies which have given up on the trading market include Ispat Energy Ltd, Greta Power Trading, MMTC Ltd, Indiabulls Power, BGR Energy, Special Blasts, Marquis Energy, Chromatic India, Jain Energy, Kandla Energy & Chemical, Vinergy International, Godawari Power and Righill Electricals Ltd.

Of the 45 licensed traders at present, only 20 are actively trading electricity at present. Also, top five traders have captured over 75% of the market volumes. These include – including Power Trading Corp (PTC), JSW Power Trading, Tata Power Trading, NTPC Vidyut Vyapar Nigam (NVVN) and Reliance Energy Trading.

Trading margins have been sinking as average price of power traded through the licensed traders has dropped 40% from a peak of Rs 7.02 per unit in 2008 to Rs 4.27 per unit currently at a time when cost of purchase has been on the rise.