Cap on electricity pricing a retrograde step, against consumers interest

Written by Sanjay Jog | Updated: Sep 25 2009, 05:44am hrs
PTC India, which has inked power purchase agreements for 13,000 mw and MoUs for 25,000 mw, faces stiff competition from traders as well as power exchanges. In an exclusive interview with FEs Sanjay Jog, PTC India chairman and managing director TN Thakur spells out the companys strategy to consolidate its position. Excerpts:

What is PTC Indias current market share

PTCs market share during 2008-09 was about 44%. The company recorded an all-time high trading volume of 13.825 BU in 2008-09. According to CERC data, PTCs market share during the quarter ended June 2009 was about 47%.

How is PTC India geared to face competition from other traders who are aggressively increasing their share in the trading market

The power trading segment has seen intense competition and other traders have been gaining ground by aggressively increasing their share in the market. However, PTC has continued to maintain its market leadership by taking a number of pro-active measures such as understanding the customers needs and designing solutions suited for them, along with providing trading support to our clients in the power exchange. Such steps have helped us in taking on competition.

What are your views on CERCs recent imposition of a cap on electricity pricing Do you feel that even though the move is only for 45 days, it will hamper the growth of the power market

Though the range of the cap on pricing in CERCs order seems to be reasonable, such an imposition of a cap on electricity pricing is a retrograde step and against the long-term interest of the consumers. This kind of regulatory intervention will hamper the growth of the power market. Globally, price caps are set as a last resort and at very high levels. The Indian electricity market is completely voluntary and voluntary markets do not feature a cap. A price cap on the sale of power, put at a level at which buyers are willing to buy on a voluntary basis, may send wrong signals to investors in generation/particularly merchant power. Price caps blur market signals and slow market responses in short-term operation and long-term investment, according to a study carried out by the International Energy Agency in 2005.

The caps cover bilateral trade and transactions through power exchanges. Since PTC India holds equity in the Indian Energy Exchange, how do you think the move will impact trade

The volume of trade may not be affected, since in an overall shortage situation, people buy power even at higher prices. As I have said earlier, the price cap in the CERC order seems reasonable and therefore, sellers may also be willing to sell within this price range.

What is the status on the dispute between PTC India and CERC on the charging of margin

The issue of trading margin between PTC and CERC is currently in the Supreme Court. The petitioners, PTC, Tata Power and REL, along with the respondents, including CERC, have presented their arguments before the Supreme Court on September 17, 2009 and the parties have also made written submissions and a decision is awaited.

What are your views on the import of power

PTC continues to be the Centres authorised agency to import power from the neighbouring countries, including Bhutan . PTC has traded 5,932 MUs during 2008-09.

What are PTC Indias plans on PPAs, acquiring equity in power projects and mobilisation of funds Are you planning any follow up issue

We have adopted a multi-pronged strategy towards the development of efficient power market: (a) to sensitise the Centre, policy makers, regulators, intelligentsia, media and the public-at-large, about the fundamental strength of market-based operations, the need for adequate infrastructure and a light-handed regulation with full freedom to trade (b) to enter into fuel intermediation and address the issue of long-term fuel linkage and fuel-risk mitigation (c) to develop RE projectswind, small hydro, biomass and cogeneration, and help facilitate their trade across states towards a green power market (d) to become a credible player on the national power exchange and increase liquidity and encourage market participants, including merchant generators. PTC will also be playing a crucial role by advising its clients as a total energy solution provider, investing in strategic energy related infrastructure and enhancing regional cooperation in energy among neighbouring countries. PTC also provides holistic services for linkages in a proactive manner for any stakeholder in the power sector.

The company has raised Rs 500 crore in May 2009 through the QIP route in order to reinforce the earlier raised capital of Rs 1,200 crore in January 2008, the combined proceeds of which are being utilised to fund business expansion and also to provide anchor money to an equity fund to meet the gap in equity funding of power projects. PTC currently has no plans for a follow up issue. PTC group is also strengthening its various activities, including advisory services, financial services and joint ventures, besides short-term and long-term trading, including PPAs.

PTC Indias financial arm recently aimed to raise Rs 100 crore through private placement. Where far has the plan progressed Also, what are the future plans of the company

PTC Indias financial subsidiary is raising Rs 100 crore through private placement and hopefully, it will be fully subscribed in a day or so. PTC would also be exploring possibilities to invest in energy value chain through its subsidiary, PTC Financial Services Ltd and undertake the development of power distribution, import of coal, power tolling arrangement through PTC Energy Ltd. Our efforts have been to continuously innovate, understand customers needs and design our products and services around them. This has given us good business and we aim to continue doing so. We are also closely pursuing energy efficiency projects into our field of business, both by promoting such projects as well as by marketing the power from such projects. These projects, though small, will turn lucrative in the years to come. I am sure PTC will be able to help bring more private investment in the power sector which will supplement public sector investment and meet the objective of reducing the gap between demand and supply.