Opposing the idea of raising the individual cap on foreign investment in power exchanges to 15% from the current 5% by treating them on a par with stock and commodity exchanges, the finance ministry has said that raising the individual limit of foreign investment up to 15% in power exchanges would be unwise unless a clear business case is established and a strong and adequate regulatory mechanism exists.
The department of economic affairs (DEA) has argued that power exchanges, which primarily deal with spot electricity contracts, can’t be compared with stock or commodity bourses where futures and other derivative products are also traded and are adequately regulated by the Securities and Exchange Board of India.
Earlier there were some demand that any move to raise the ceiling would encourage large global exchanges or institutional investors, who were earlier shy of investing in India due to the low cap for a single foreign entity in power exchanges, to explore the possibilities more seriously now.
Recently the Indian Energy Exchange (IEX), the power trading exchange regulated by Central Electricity Regulatory Commission was listed on the bourses. At present, foreign corporate bodies together hold 22.9% in Indian Energy Exchange, which accounts for over 95% of the exchange-traded electricity market in the country.