Power trading will boost production: MCX Chief

MUMBAI: Trading of power on an independent exchange will become a reality soon and encourage producers to generate more power, a top Multi Commodity Exchange (MCX) official said on Thursday.

MCX has received permission to set up a power exchange which is expected to become functional in the first half of next year, and for the first time power will be traded like a share or a commodity on an exchange in the country.

MCX Deputy Managing Director Joseph Massey said, "With the exchange in place, the capacity utilisation of various power plants will improve. There is lot of underutilised captive capacity at present which will get unlocked."

Price signals from the exchange will encourage producers to sell surplus power or produce it specifically for selling it on the exchange. Besides, the power exchange will make investors and financial institutions more comfortable in funding new projects, Massey said.

On the cost of power that would be bought through the mechanism of the power exchange, he said it will depend on demand and supply situation, which will get reflected in the bids submitted by participants. It will determine the price at which power would be bought or sold, he said.

On the possible quantum of power likely to be traded on the exchange, Massey said, "It is for the first time a power exchange is being set up and we know that over long term it has large potential. As India grows and power situation improves, there would be significant short term market for power like in developed countries and the exchange will be the most important institution to trade short term power."