Govt warns states against selling power at high price on exchanges

India's power ministry has warned states that federal power producers will curtail supplies of electricity to them if their utilities are found selling power on exchanges to take advantage of surging prices.

Asia's third-largest economy is facing large-scale outages as several power plants have low coal inventories amid a sharp spike in global energy prices.

Some states, instead of supplying electricity to their consumers, are imposing rolling power cuts known as load shedding, and selling power at higher prices to energy exchanges, the ministry said in a statement, without giving details.

States that do this risked having federally supplied power, known as unallocated power, cut, it said.

If states are not serving their customers but are "selling power in the power exchanges at higher rate, the unallocated power of such states shall be withdrawn and allocated to other needy states," the ministry said.

Federal government-controlled power producers such as NTPC Ltd and Damodar Valley Corp, sign long-term power purchase agreements with distribution companies for sale of most of their output.

However, 15% of their power is controlled by the federal government, which sells the so-called unallocated power to states.

The ministry said if any state had a surplus of power, it should inform the federal government which would allocate that electricity to states that needed it.

The federal government warning comes after many states have complained of high power prices on exchanges, which have helped Indian Exchange Ltd shares surge to record highs in recent days.

The chief minister of Andhra Pradesh state, Y. S. Jagan Mohan Reddy, wrote to Prime Minister Narendra Modi to complain about the rising prices on exchanges, which he said had trebled to Rs 15 for a unit of power from mid-September to Oct. 8.

Reddy asked for an increase in the supply of coal, according to a copy of his letter, reviewed by Reuters.

Day-ahead prices of power at Indian Exchange have surged to Rs 20 a unit, according to its website on Tuesday.

The chief minister of the capital, New Delhi, warned on Saturday of a power crisis because of the coal shortage that has already brought electricity cuts in some eastern and northern states.

The power ministry directed NTPC and Damodar Valley to ensure supplies to the capital's distribution companies.