Sunil Jain: Electrifying

Popular wisdom has it short-term electricity trades account for just 2-3 per cent of the total generation in the country, and so there is little need to regulate their prices. Whatever the view on whether price caps exacerbate the shortage or not (especially if, as is the case right now, the price cap of Rs 8 is higher than the cost of production), it is useful to get some perspective on the numbers.

Data from the Central Electricity Regulatory Commission (CERC) website show the amounts traded add up to around 8 per cent of the total generation — around 40 per cent of this takes place through the Unscheduled Interchange (UI) route which doesn’t even require a formal trading licence.
 

Trading the future (short-term electricity contracts as a proportion of total generation, units in million)
Month	Bilateral contracts	Power exchanges	UI route	Total  traded	% to total generation
8-Aug	2,731	240	1,861	4,832	8.6
8-Sep	1,971	279	1,890	4,140	7.0
8-Oct	2,029	377	1,826	4,232	6.8
8-Nov	2,547	470	1,686	4,703	8.1
8-Dec	2,699	369	1,765	4,833	8.1
9-Jan	2,121	316	1,911	4,348	7.1
9-Feb	2,149	218	1,569	3,936	6.9
9-Mar	1,942	429	1,878	4,249	6.6
9-Apr	2,210	406	1,816	4,432	7.1
9-May	2,317	342	1,997	4,656	7.3
9-Jun	2,418	530	2,110	5,058	8.1
Source: CERC
In terms of value, this works out to 19 per cent of all electricity sold in the country

So trading volumes are significantly more than what is generally believed. Take the value of the traded power, and the number is even more astounding. If you take an average price of Rs 7 for power that is either traded bilaterally or through various power exchanges, and Rs 5 for UI power, that’s a total revenue earning of Rs 30,500 crore in the period August 2008 to June 2009 for which data is available — that translates to a revenue of Rs 33,000 crore for a full year.

There is no authentic data on what this electricity costs, but use the average of Rs 2.76 per unit for the country as a whole, and we’re talking of a cost of Rs 14,000 crore or a net profit of Rs 19,000 crore. As for the total electricity produced in the country, at an average realisation of Rs 2.27 per unit, this fetches a revenue of around Rs 180,000 crore, so we’re talking about traded electricity amounting to around 18.6 per cent of the total — that’s a pretty significant amount by any standard.