Twin Market Solution to solve India’s Energy Sector

3 steps for transition to free markets

while honoring current contracts

24th June 2014By Vishal Gupta & Team24/06/14 by Vishal Gupta & team. 1

Indian Power Sector faces $27 blnannual loss – World Bank

Fuel

(mostly Coal) • not available

Generation•big losses

• (Free Market)

Distribution• Can’t buy

• No money

GovernmentControlled

This does not include the resulting GDP loss of the country!24/06/14 by Vishal Gupta & team. 2

Who needs to do What ?

• All natural resources belong to Center including Coal. (Article 297) – Issue right of way to companies (to create free market).

• Promise environment restoration cost NDC

• All coal needs to be traded on electronic exchange and futures.

• All coal cost includes environmental restoration cost.

Ministry of Coal

• Compulsory universal obligation to supply electricity till open access granted.Ministry of

Power

24/06/14 by Vishal Gupta & team. 3

Two Separate Markets for Generators

Old Contracts

• Fixed price fuel (coal)

• Fixed price supply

New Contracts

• Free market fuel

• Open access Supply

24/06/14 by Vishal Gupta & team. 4

USO compensation by discoms to consumersif Open access not made available after 1st April 2015

NDC Agenda – Right of Way (under article 297)

State Benefits

Coal cost to include

all kinds of restoration costs

At-least 50 percent staff has

to be local.State Tax

Blocks to be allocated at no cost on sales contracts in

futures market

24/06/14 by Vishal Gupta & team. 5

MOC Agenda Coal compulsory electronic trading

All future contracts need to adhere to market discovered pricing on exchanges.

All coal needs to be sold thru exchanges.

All electricity sold thru open access needs to purchase fuel only from exchange.

Sunset clause for off market transactions in 3 years.

!st April 2016 IPPs have choice to short close their off-market fuel supply agreements

Op

en A

cces

sR

egulated

Co

ntracts

24/06/14 by Vishal Gupta & team. 6

MOP Agenda – USO Compensation or Give Open Access

Right to paid Power (basic human need)

- universal service obligation (USO)

State to provide open access or compensate (USO) in bill.

1st April 2015 Free Market

24/06/14 by Vishal Gupta & team. 7

Transition to Free Markets

Coal Trading & Futures

Open Access

USO Penalty

Article 297Center own all

Resources

1st April 2015deadline

1st April 2016Transition opportunity for locked IPPs

States save electricity deficitEarn Taxes, generate jobs

24/06/14 by Vishal Gupta & team. 8