Department of Industrial Policy & Promotion to Design FDI Policy for Power Exchanges

Union finance ministry urged the department of industrial policy and promotion to design a FDI policy for power exchanges on the lines of commodity exchanges.

The ministry strssed upon the urgent need for clear FDI regime for power exchanges. since power exchanges are akin to commodity exchanges, a similar structure is to be followed while designing the FDI policy for power exchange.

Currently, FDI in power exchanges is not explicitly banned but the rules don’t provide for foreign investment on the lines of commodity exchanges. FDI is permitted in power exchanges up to 49%.

Experts opined that a clarification is required to provide certainty and also emphasised on the need to relook at the negative list concept followed in the FDI policy as the foreign exchange management act works on positive list concept.

A recent FDI proposal from Multiples Private Equity, promoted by Renuka Ramnath, to pick up minority stake in Financial Technologies-promoted Indian Energy Exchange (IEX) prompted the ministry’s direction in this respect. The proposal was put on hold.

Trading on the exchange is 100% physical delivery based and only 2% of the total generation is traded through any exchange.
Currently, India has two power exchanges- Indian Energy Exchange, National Stock Exchange-promoted Power Exchange India.
Policymakers are of the view that FDI policy should be rationalised and simplified to encourage overseas investment in sectors as the country needs foreign capital to support a 9% growth.

Central Electricity and Regulatory Commission were till date supervising the inflows in the power sector.