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Journalism of Courage
The risk-reward imbalance of Indian power traders,given their heavy reliance on state power utilities (SPUs) which currently face deteriorating financial conditions,delays and even risk of defaulting,has come under the spotlight.
Despite Central Electricity Regulatory Commission freeing long-term contracts from margin cap and raising the margin to Rs 0.07 per unit on short-term contracts in FY10,competition for volumes has led to lower-than-expected improvement in margins,with small traders reducing their trading margins to Rs 0.01- Rs 0.02 per unit in some instances, said Salil Garg,Director in Fitchs Asia Pacific Utilities team.
The dominance of the bigger power traders should continue, said Vivek Jain,Analyst,Fitch. Over the past four years,the top five trading licenses have controlled over 80 per cent of the market in terms of volumes.
The annual loss book of SPUs has nearly quadrupled between FY 2006 and FY 2010 from Rs 7,000 crore to Rs 25,900 crore.
