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The long pending matter between Securities & Exchange Board of India (SEBI) and power regulator Central Electricity Regulatory Commission (CERC) regarding regulatory jurisdiction of Electricity Derivatives has finally got resolved with the Honble Supreme Court favorably disposing of the matter in terms of the agreement reached upon by SEBI and CERC.
Power Sector has been waiting for the big reforms in the power market for last more than 10 years which was held up due to the jurisdiction issues between SEBI and CERC.
Electricity will now be traded as other commodities with forward contracts and derivatives on exchanges.
This will further deepen the power market from the present level of approx. 5.5 % of the volume to the targeted volume of 25 per cent by 2024-25.
This has opened the gate for introduction of longer duration delivery-based contracts on the power exchanges which has been currently restricted to only 11 days due to the pendency of the case, the ministry informed.
This will enable discoms and other large consumers to plan their short-term power procurement more efficiently. Similarly, the commodity exchanges viz. MCX etc. can now introduce financial products viz. electricity futures etc. which will enable discoms and other large consumers to effectively hedge their risks of power procurement, it stated.
This is a significant development and has the potential to change the landscape of the power market in the country, it added.
This will bring newer products in the power/commodity exchanges and attract increased participation from Genco, Discoms, large consumers etc., the statement said.
The statement said both the regulators, have come to an agreement that CERC will regulate all the physical delivery based forward contracts whereas the financial derivatives will be regulated by SEBI.