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There has been a sharp rise in short-term power traded on exchanges, indicating that various state governments have made efforts to minimise power cuts during the Lok Sabha elections. The price of short-term power rose to a peak of as much as about Rs 15 per unit in April this year, as states tried to breach the gap in power generation by their own utilities.

By comparison, the peak price for short-term power in January was at a mere Rs 8.1 per unit. Moreover, on 25 days in January, the lowest price of short-term power was at zero, showing that there was no trade, most probably because of no demand from any buyers.

During October-December last year, the average peak prices of short-term power traded on Indian Energy Exchange were hovering between Rs 9.75 and Rs 8.87 per unit, before bottoming out to Rs 6.96 per unit in January.

The average peak price kept rising thereafter to reach at Rs 12.8 per unit in April -- the month when polling for selection of a new government at the Centre began -- the data available at the Indian Energy Exchange showed.

The overall average price for the short-term power traded in January was at a low of Rs 4.58 per unit, down from Rs 8.47 per unit in September and Rs 6.13 per unit in December, the data showed.

The overall average price of such power had climbed to a double-digit figure of Rs 10.79 per unit in April.



Experts expect short term prices of power traded through the exchanges to correct back to the normative levels of Rs 3-4 per unit post elections by September.

The correction in prices will likely be driven by new generation capacity coming online, and by availability of 18 metric million standard cubic meters per day of natural gas from Krishna Godavari basin to fuel the existing plants running below capacity, among other factors, Satyam Agarwal and Nalin Bhatt, research analysts with Motilal Oswal Securities said in a recent note.

A decline in prices of imported coal, lowering the power generation cost to Rs 2.5-2.8 per unit, and also a decline in demand of power expected as a result of production cuts across various industries would also lead to lower prices of short term power, the note said.


Source -Mint