Ministry Draws Up Blueprint For Power Trading Corp

The power ministry has chalked out a blueprint for setting up Power Trading Corporation an intermediary in power trading. The proposed intermediary would accelerate the formation of a national grid.

The government, Power Finance Corporation (PFC) and PowerGrid Corporation will hold a 20 per cent stake each in the proposed corporation. The balance would be held by the state electricity boards, state utilities, financial institutions venture capital funds and other consumers.

The corporation will chiefly be concerned with buying power from independent power producers and state electricity boards and selling it to bulk consumers. It is expected to annually deal in about 30,000 billion units of power.

At a meeting held recently on the structure and functions of the proposed corporation, the ministry listed out a mix of instruments for financing the debt component of the corporation.

Apart from contributions from the government, PFC and PowerGrid, the corporation could also raise long-term debt from corporate bodies.

The government feels the corporation can meet its working capital requirements by issuing commercial paper and bonds, financing from banks and financial institutions and assistance from international agencies like the World Bank and the Asian Development Bank.

The ministry has anticipated an annual revenue of around Rs 450 crore for the corporation in its first full year of operations with a trading margin of 10 to 15 paise per unit.

In the presentation, the ministry has pointed out the involvement of PFC and PowerGrid would act as an incentive for investments to flow in besides accelerating the formation of the national grid.

The ministry also feels that the government would support the trading company in dealing with power purchases from weak electricity boards.

The ministry has pointed out that the corporation can be created by making some changes in Section 3 of the Electricity Act.

The proposed corporation will not only deal with the purchase and sale of power within the country, but will also source power from neighbouring countries.

The ministry feels the government will have to do some ground work before creating the corporation.

This includes establishing power pools to facilitate exchange of power between surplus and deficient states, plugging missing links within and across the state and supplement existing transmission system on a build, own & maintain basis.

The ministry has pointed out that the proposed corporation could be best put to use for large power projects located at pit-head sites as this will reduce transportation costs and help consumers avail of the economies of scale through reduction of tariffs.