Power Exchange India Ltd has started Real Time Market for electricity transactions for the first time in India. Following suit, India also launched a trading exchange for natural gas which will help discover gas price on the basis of real time demand and supply. Increasing number of exchanges in India that too for different financial products holds the potential to enhance India’s financial market.
Crux of the Matter
Gas Trading Petroleum and Natural Gas Regulatory Board (PNGRB) in 2018 had proposed to build a national gas trading exchange, which has been launched after 2 years of the first proposal. Indian Gas Exchange (IGX) will conduct the first auction of natural gas. Moreover, the Government announced a grant of Rs. 5176 crore to GAIL. It will develop a 2655 Km long Jagdishpur-Haldia/Bokaro-Dhamra Gas Pipeline (JHBDPL) project. This Pipeline network will carry natural gas to the industrial, commercial, domestic and transport sectors in Bihar, Jharkhand, Odisha, West Bengal, and Uttar Pradesh. Experts believe that a $150 billion investment is needed in the energy sector annually until 2040 to build up the robust infrastructure. Currently, exchanges are providing six market products — day-ahead, daily, weekly, weekdays, fortnightly, and monthly.
Power Trading Another feat that India’s financial market achieved this month was starting a real-time exchange for trading power. Now power would be traded in the Power Exchange India Limited at maximum price quota of ₹8 (~$0.11)/kWh and a minimum price quote will be ₹0/kWh. Negative price quotes can also be introduced with a minimum price quote of ₹-3 (~$-0.04)/kWh. The auction would be conducted in a double-sided closed auction with the uniform price mechanism – it is a multi-unit auction in which a fixed number of identical units of a similar commodity are sold for the same price. Auctions, consisting of 48 sessions, would be conducted every half-hour, each of 15-minute duration. The delivery of products would be made within 1 hour of the ending of the session. The RTMs would provide the distribution companies (DISCOMs) an opportunity to access the market to meet any last-minute requirements. Moreover, initial auction sessions saw participation from distribution utilities of Telangana, Meghalaya, Manipur, Sikkim, and Jharkhand.
India’s power sector is shifting from long-term generation contracts to a greater reliance on short-term contracts and electricity spot markets. But with development, the power sector is also facing challenges in terms of spot market design, contract regulation, requirements, and incentives for spot market participation and potential risks in ensuring competitive markets. It is expected that the long term deals in electric share transactions may fall 50%-60% in the coming six years. The current electric share transaction stands at 92%. Many experts even feel that competition among specific types of exchanges is low or not there and that there is a scope of building efficient financial markets if more exchanges are set up and compete.
Various Exchanges In India
Multi Commodity Exchange (MCX) – It is India’s largest commodity derivatives exchange and trades in commodities like non-ferrous metals, crude palm oil, etc.
National Commodity and Derivatives Exchange (NCDEX) – It is an online commodity exchange based in India with a client base of about 20 lakh
National Multi Commodity Exchange (NMCE) – India’s first online demutualized commodity exchange trading in commodities like rubber, sacking, raw jute, coffee, isabgol seed, chana, etc.
Indian Commodity Exchange (ICEX) – Indian Commodity Exchange (ICEX) is an online multi-commodity derivative exchange. The exchange offers futures trading for diamonds, steel, etc.
Ace Derivatives Exchange (ACE) – It is India’s fifth national commodities exchange, trading in zinc, nickel, crude oil, natural gas, etc.
Universal Commodity Exchange (UCX) – It was India’s sixth national level commodity exchange but was shut down by the regulator in 2014.
Curiopedia
Premchand Roychand was a 19th-century Indian businessman known as the “Cotton King” and “Bullion King” from Bombay, who was the founder of The Bombay stock exchange.
Dalal Street is a street in downtown Mumbai, India, that houses the Bombay Stock Exchange (BSE), the largest stock exchange in India. It received the name Dalal Street after the Bombay Stock Exchange moved there in 1874 and became the first stock exchange recognized by the Indian government. The literal translation of Dalal in Marathi is a broker or intermediary. Today, Dalal Street is a metonym for the entire Indian financial sector, much like Wall Street is in the United States.
Liquefied natural gas (LNG) is natural gas that has been cooled down to liquid form for ease and safety of non-pressurized storage or transport. It takes up about 1/600th the volume of natural gas in the gaseous state.
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